The new role of stores in the digital age

How to remain relevant if stores have played out their role in the retail customer experience


May 2020


Martin Lyngaa Simonsen

Is physical retail dead?

The numbers have sent a clear message to retailers in the physical space with footfall down between 10-20% and e-commerce increasing by 20-30%, depending on sector, meaning that the non-store retailers’ share of total sales is now above 20% in most sectors. And on top of that, smartphone shopping is +50% and increasing.

Have the Alibabas and Amazons won the war and left physical retail outside the scope of distribution of products? If the answer is yes, then what is in fact the role, if any, for the physical store?

As Lee Peterson, WD Partners, has stated over the past 5 years:

People don’t have to go to stores anymore; they have to want to go to stores.

Meaning that stores need to add something to the brand and customer experience to stay relevant.

So, we need to design the future of retail in a way that makes brick-and-mortar stores about experiencing brands vs simply purchasing goods as in the past. As your online sales grow, consider the physical role of your brand to be the place where the customer can sense what you are all about.

How to draw the consumer to physical spaces in the digital age

At Implement Consulting Group, we believe it starts with understanding each of the potential touchpoints in the customer journey across channels and understanding where the physical channel is important to keep shoppers on the path to purchase by enriching the customer experience with either:

  • Inspiration, touch and feel as well as trial opportunities
  • The need for instant fulfilment
  • A service point for click and collect, BOPIS or managing returns
  • Considering a form of food and beverage

The physical retail customer journey starts online, and more than 50% of shoppers today (global average) do online research before buying in store. Meaning that for half of the retail customers, the first touchpoints occur online. So, to drive traffic to stores and to win in physical retail, online retail channels must deliver on superior customer touchpoints. However, we also know that more than 50% of online customers turn to physical channels before making their purchase. Meaning that all the online and SoMe efforts can be wasted and the customer lost to competition if we as a brand are not able to cater to the physical needs of the shopper.

The first conclusion of knowing who your customers are is key in an integrated retail world, where physical and online retail channel integration is a prerequisite to meet customer expectations. More than half of the new “digital” customer segment requires a seamless cross-channel experience, where they are able to start and end in any channel of their choice. Moreover, more than half of customers in both the physical and online channels want personalisation and a shopping experience relevant to the consumer.

The second conclusion is that we need physical stores. However, the role is changing, and the format that it used to be needs to change. Retailers will need to carefully plan their store footprint to remain close to their customers, but they will need to think much more about the role of the stores and develop stronger and modular concepts for:

  1. Pop-up stores to stay close to customers and to move the value closer to the customer and to stay more agile and mobile, where the full-year business case is too weak.
  2. Showroom stores to build brand awareness but at the same time reduce the amount of square metres needed.
  3. Experience stores to allow shoppers and consumers to connect with the brand and create conversations about the products.
  4. Fulfillment stores to bring distribution closer to the consumer and provide instant delivery where and if needed as well as be a service centre for click and collect as well as BOPIS to drive down costs.
  5. Social playgrounds, where the natural flow and traffic of your consumers will bring visits more often with the integration of quality food halls and cafés, space for in-door activities and co-working spaces and dialogue.
  6. Food and beverage services, which have now come into play as a draw, especially for younger consumers. The idea of having lunch and browsing brands is starting to mean more than the actual act of buying.

The role of the store can then be one or more of the above, and the customer experience and the role within the touchpoints need to be carefully planned to deliver commercial impact, and the supply chain needs to be designed in a way that makes products available across stores at the right time and at the right place.

However, the point about relevance of the physical touchpoints needs to be seen in connection with the need to offer an omnicommerce experience. A few facts to support this:

  • Companies with omnichannel customer engagement strategies retain on average 89% of their customers compared to 33% for companies with weak omnichannel engagement.
  • +50% of the population did research online before buying in store.
  • +70% of digital shoppers consider in-store experience as the most important channel when making a purchase.
  • +50% growth in online sales when a physical store opens.
  • +70% of online shoppers have used “buy-online-pick-up-in-store” services.
  • +60% of customers expect to receive a seamless customer service regardless of which channel they are using.

Call for action in retail

If you are closing stores or are unsure of whether you should open new stores, you need to consider your full store footprint and formats, which will enable you to remain close and relevant.

If you do not bring a closeness (as part of a great customer experience) into your customers everyday path of living and movements, your customers are leaving your stores to go somewhere else. You should therefore:

  • Make brick-and-mortar retail about experiencing brands.
  • Make brick-and-mortar retail the place where the customer can sense what you are all about.
  • Make brick-and-mortar retail a core part of the customer journey.
  • Make brick-and-mortar retail the reason why customers also shop your brands in other channels.
“We need to change the way we think about what our consumers and shoppers want from the physical retail experience and design the physical footprint to keep customers on the path to purchase towards our brand.”