When it comes to retail, the most important battle in the war of man-versus-machine will be decided by a single question: which are we? Are we chiefly mathematical, like some retail analysts argue, programmed to upgrade to online shopping efficiencies while driving physical stores out of business?
While many onlookers think that increased comparison shopping, faster and cheaper delivery options like drones, and the convenience of shopping at home equal doom for physical stores, the reality is that the economy (like the people behind it) is largely driven by the irrational. Habit, boredom, and the need for human interaction all contribute to the continued patronage of physical stores, giving them more than a fighting chance at gaining a sustainable foothold in the tech-driven future. Here is a look at the changing physical storefront and how it’s winning over online shopping. It’s an evolution in mind, body, and spirit.
The relationship between physical stores and their digital counterparts is similar to that between people and mobile phones. According to Darrell Rigby, “about half of … e-commerce sales are actually going to retailers with physical stores.” In other words, just as phones are the tools of man, online stores are weapons used by, not against, physical stores. Also, like smartphones, online storefronts form a second brain that collects and retains data while facilitating relationship-building, in this case by helping brands connect to shoppers who respond by researching the brand and its products online.
The merging of physical and digital will continue with the integration of beacon-based marketing. According to Juniper Research, stores sent millions of beacon/location-based coupons to in-store customers via mobile this year; by 2020, it will be 1.6 billion. Macy’s, Lord & Taylor, and Target are already using or testing the technology. The next frontier for location-based mobile marketing is personalization, e.g., recommendations based on the customer’s personal data as well as their buying and search history. So, ultimately, the foundation of tomorrow’s brick and mortar retailers will be made of silicone in an Internet of Places revolution.
The 2015 TimeTrade State of Retail Report found that 85% of consumers prefer to shop in physical stores over shopping online. In fact, the very advantages that online retail enjoys over physical stores — smaller staff, lower upfront shipping and inventory costs, shop-at-home convenience, and lower business real estate costs — are, in some ways, antithetical to a strong sense of community. Online shoppers don’t fill up at the local gas station, eat out, and visit the local attraction while they’re on their way to or from their digital shopping cart. Storefront closings have tragic impacts on local economies; and states could use the lost billions in sales taxes from untaxed Internet purchases.
It’s enough to inspire local governments to invest more in local infrastructure to strengthen an incentivize local business investment and creation. In fact, in a bid that ultimately failed, South Carolina offered free land and other incentives to be the home of Amazon’s first physical storefront — an honor that ultimately went to Seattle. Amazon is one of the biggest, but not the only, online retailer materializing on sidewalks near you. Rent-the-Runway is in 5 major cities and Warby Parker recently opened its 17th physical store since launching online in 2010. Consumer preferences and desperate governments are pulling digital retail into the physical world.
Of course, the sheer physicality of a store isn’t enough to inspire loyalty and convince customers that buying in person is worth paying higher prices. Customers may prefer being able to touch and see products in person, but they can still walk out of the door to buy it at a lower cost online — a phenomenon called the “Showrooming Effect.”
Big box stores and malls that feel soullessly cookie-cutter and interchangeable don’t do enough to reward consumers who pull away from their devices and show up. In order to make shopping feel more worthwhile, stores need to evoke a sense of place, culture, eccentricity, and personality. Many retail districts are leading the way here by shifting away from boxy malls and department stores designed by the same architect. Even franchises are working with local artisans to make their various stores feel more unique in terms of architecture, locally curated decor, and an overall locally rooted aesthetic.
Rather than kill the physical store, digital has challenged stores to evolve and show what they’re made of: brick, mortar and silicone. Through big data and mobile-based innovations, physical storefronts are getting smarter. Even online retailers, for all of their so-called advantages, are realizing that the retail game is pay-(a lease)-to-play. Plus, retailers are winning the hearts of their customers by creating an authentic environment that online stores can’t match. So, the storefront isn’t going anywhere but to the forefront of the information age.
Manpreet Singh is Founder and President of TalkLocal, a local startup with apps on iPhone and Android which help consumers find and speak to high-quality local professionals in minutes. Follow him @MSinghCFA.