The Future of Brick-and-Mortar Retail

Stephen DeAngelis

April 04, 2019

The list of brick-and-mortar retail store bankruptcies continues to grow as the so-called Retail Apocalypse deepens. It has been estimated more than 20,000 storefronts have closed over the past couple of years. The problem is not that consumers aren’t buying. According to the National Retail Federation (NRF), “U.S. retail sales are expected to rise between 3.8 percent and 4.4 percent to more than $3.8 trillion in 2019.”[1] The Federation cites “high consumer confidence, low unemployment and rising wages” as the drivers behind its optimistic prediction. As one might expect, the challenge for brick-and-mortar retailers is that e-commerce is growing fast. The NRF predicts, “Online and other non-store sales, which are included in the overall number, are expected to increase between 10 percent and 12 percent.”

Many brick-and-mortar retailers feel like they are trying to hold back the tide using dikes made from sand. Although there is reason for concern, there is no reason for panic. Jason Goldberg (@retailgeek), Chief Commerce Strategy Officer at Publicis, cites a Forrester report that “estimates 86% of U.S. retail sales still happen in brick-and-mortar stores.”[2] As a side note, he explains there are variations on this stat depending on whether things like gas stations and restaurants are included in the research. The NRF prediction, for example, does not include them. There is little doubt, however, that the percentage of sales completed in traditional stores will continue to decrease as the digital path to purchase matures. Nevertheless, traditional retailers continue to search for ways to attract shoppers into their stores.

Experiential stores

Over two decades ago, B. Joseph Pine II (@joepine) and James H. Gilmore, co-founders of Strategic Horizons LLP, wrote about the emerging experience economy.[3] They wrote, “The question isn’t whether, but when and how — to enter the emerging experience economy.” Retailers were slow to accept this trend but, after two decades, many of them are starting to come around. Ariel Foxman reports, “Despite this very real reckoning [of the Retail Apocalypse], countless retailers are not only surviving, but also thriving. The secret to their adaptive success? Almost anything, it seems, that keeps shoppers on their toes is viable. That includes exclusive merchandise (will this location carry that handbag?), pop-up shops (will this store be here next week?) and experiences (can I eat or drink or post as well as shop?). Innovations that offer intrigue, if not necessarily inspiration, seem to be winning.”[4] Corinne Ruff (@corinnesusan) bluntly states, “The future of stores — the ones that will still exist — will be highly experiential.”[5] She adds, “They’ll engage the customer’s senses, cater to convenience and let customers shop on their own terms.”

Creating in-store experiences

Two decades ago Pine and Gilmore assumed retailers would slip easily into the experience economy. They predicted, “In the full-fledged experience economy, retail stores and even entire shopping malls will charge admission before they let a consumer even set foot in them.” Today’s reality is that retailers are desperately trying to entice shoppers into their stores and malls are closing in record numbers. To reverse this trend, brick-and-mortar retailers and mall owners are hoping an inviting experiential environment will bring consumers back. Ruff explains, “These days in brick-and-mortar retail circles, it seems all anyone can talk about is experiential retail. Immersive, interactive, technology-enhanced — these are all adjectives that get tossed around when executives are talking about what the store of the future needs to look and feel like.”[6] She then asks the million dollar question, “What does experiential retail really mean?”

It comes as no surprise a single answer to that question doesn’t exist. Ruff explains, “Humans are all different and they don’t all want the same experience. That means retailers can’t just pick one model and expect it to work in every real estate opportunity. Big stores, small stores, pop-up shops, express stores, kiosks — all of them are essential to a retail fleet that complements all the ways in which customers can and want to interact with brands today.” Although no single approach will be right for every situation, Goldberg asserts one technology is demonstrating ubiquitous usefulness — smartphones. He explains, “Forrester now estimates that 53% of all purchase decisions are digitally influenced. As a result of online experiences, in-store shoppers now expect to get detailed product information in the store, read ratings and reviews, get help physically finding products, get access to the best price, and be able to skip the cashier line on the way out.” To underscore the fact that experiential solutions are only limited by the imagination, members of the Forbes Communications Council shared 16 creative digital strategies to prompt in-store visits.[7] They are:

1. Promote in-person incentives
2. Use product and location data for in-store digital deals
3. Invite consumers to live events
4. Encourage online reviews
5. Offer check-in and tagging discounts
6. Use content marketing to promote store visits
7. Convert consumers at competitors’ locations
8. Offer promotional codes on social media
9. Encourage in-store donations to a local cause
10. Target Zip Codes with Facebook ads
11. Offer online ordering with pick up options
12. Leverage pop culture trends
13. Launch an email marketing campaign
14. Try a pop-up experience
15. Make every Friday ‘Black Friday’
16. Share the in-store experience on social media

Some banks are now boasting about cafes inside their branches and supermarkets are advertising the availability of bank branches, dining experiences, food demonstrations, and myriad other services inside their stores. Of course, before a retailer embarks on a transformation journey to create a more experiential environment, they need to master the fundamentals of retailing. A bad business model can’t be saved by gimmicks. Bloomberg journalists suggest, “Retailers might want to ditch the VR goggles and focus instead on the stark reality that many aren’t even getting the basics right.”[8] Brick-and-mortar retailers who have mastered the fundamentals know providing consumers with a good shopping experience (even without dramatic bells-and-whistles) will likely bring them back through their doors.

Concluding thoughts

Ruff concludes, “While experiential store concepts may be the new table stakes in an area like Los Angeles, New York or other major metropolitan areas, there are few brands that have designed all of their stores in a highly experiential way. Some of that is because certain communities prioritize speed and convenience over inspiration and experience.” Retailers should not forget that speed and convenience can provide consumers with a good shopping experience. Pine and Gilmore break down experiences into four types: entertainment; educational; escapist; and aesthetic. I would add a fifth type of experience: essential — no nonsense, speed and convenience experiences. Retailers will have to decide for themselves which kind of experiences they think their customers want and how best to provide it for them.

Footnotes
[1] Melissa Fares, “U.S. retail sales expected to top $3.8 trillion in 2019: NRF,” Reuters, 5 February 2019.
[2] Jason Goldberg, “The Future Of Brick-And-Mortar Retail Is Mobile,” Forbes, 26 November 2018.
[3] B. Joseph Pine II and James H. Gilmore, “Welcome to the Experience Economy,” Harvard Business Review, July/August 1998.
[4] Ariel Foxman, “Getting Shoppers Into Stores Takes More Than Inventory,” The New York Times, 25 October 2018.
[5] Corinne Ruff, “6 key components of the store of the future,” Retail Dive, 12 February 2019.
[6] Corinne Ruff, “What does experiential retail even mean these days?Retail Dive, 19 February 2019.
[7] Forbes Communications Council, “16 Creative Digital Strategies To Draw Traffic To Your Brick-And-Mortar Store,” Forbes, 16 January 2019.
[8] Bloomberg, “The Latest Tech Won’t Save Stores Failing Retail 101,” SupplyChainBrain, 14 January 2019.