Real shops close down, e-commerce in-stores are set up: the pressure applied by digital commerce onto physical retail points is getting heavier and heavier; however, although the first has reached up to 17,5% of the global retail budget, physical shops are indispensable. Today they still account for 70% of global sales. And it is no coincidence that the most famous online retailer, Amazon, has opened several physical sales points for selling their products . Read this article in Italian.
Enders Analysis has painted a portrait of the current retailing scenario, analyzing the situation in the United States (“Retailing in the material world”). The definition that best describes such trend, with 54 million square meters of physical retail spaces closed in 2017 and a forecast of further 20-25% of closures by 2012, is “’retail apocalypse ‘ (Major Wall Street Firm Expects 25% of U.S. Malls to Close by 2022). A formula which provides a faithful representation of the anxiety which is consuming the sector.
But, is the situation so serious, indeed? The answer is both yes and no. Despite the growth of e-commerce and the consequent shutters down, in 2017 physical retail sales increased by 2,5%.
The issue, then, is not linked to e-commerce itself, but to the fact that the US are an over-retail market. Compared to Europe, physical retailers in the USA have benefited from lower real estate prices and frequent consumption bubbles featuring higher pro capite budget for retail shopping. Furthermore, there is the fact that debts, needed to expand retail chains, may become fatal when things stop going well. And we should also take into consideration a certain propensity to standardization of stores, especially affecting big chains: when their technology and image become obsolete the collapse altogether. Such was the case of Toys R Us (The giant of the toys market,Toys ‘R’ Us, closes down in the US: 33 thousand jobs at risk).
Nevertheless, no-one would benefit from the death of in-store retail, simply because it is a fundamental element of our economy accounting for almost one third of household consumptions, which equals 60-70% of GDP. In addition to being one of the indicators of socio-financial wellbeing of cities.
The experience of in-store shopping cannot be compared to the virtual one, and it is still the favorite among consumers. However, the difference between a physical store made of bricks and mortar and one made of pixels ( see Amazon ) lies only in the fact that digital retailers aim to sell goods to their customers in the most efficient way and therefore, they are willing to experiment mixed retail formulas, starting from the web to be optimized in the real world.
It is about time that shops and retail chains woke up and took advantage of technology to cut down on costs and improve performance, blending on and off line elements in the purchasing experience they offer. Indeed, they can count on a big competitive advantage: they can rely on an integrated view of online and offline customers’ behaviours. So they will just have to exploit Rfid, virtual reality and mobile geolocation – which offers better data than cookies since clients’ movements outside the shop are tracked. But, especially, they should adopt some mobile solutions for the collection of data to be analyzed to better target marketing campaigns and efficient online/offline purchasing paths. Last year, the British pub chain Wetherspoons issued an app allowing diners to order and pay through their smartphones, without leaving their table. No queuing and waiting at the counter for customers, and a good lot of data concerning their habits for marketers (Wetherspoon’s ‘Order & Pay’ app is the future).
Technology is both the problem and the solution for the survival of retailers.
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To find out more about the digital world, you may read my latest book: “People Are Media”
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