Today, many retailers run their online and brick-and-mortar operations as two completely separate divisions. And the truth is that there is a fierce competition (not coopetition!) between them both for the share of customer wallet and for internal resources.
Online ecommerce platforms provide cost savings and convenience for consumers that threaten to cannibalize in-store sales, despite retailers’ attempts to practice price matching. As a result foot traffic in brick-and-mortar stores has been consistently declining. ShopTrack, a retail data firm tracking foot traffic in 70,000 stores, reported that holiday traffic declined 28.2 percent in 2011, 16.3 percent in 2012 and 14.6 percent in 2013, according to a recent article in The Wall Street Journal.
Is this cannibalization evolving into a death spiral for brick-and-mortar retailers?
Marc Andreessen, a renowned investor and entrepreneur, predicted two years ago that traditional brick-and-mortar would become extinct, stating, “Retail guys are going to go out of business and ecommerce will become the place everyone buys. You are not going to have a choice. …. Software eats retail.”
Imagine a world without physical stores? That may sound extreme but virtual fitting rooms aim to eliminate altogether the need for visiting a retailer store. The debate whether the digital will eliminate the physical channel is most pronounced in the publishing industry where ebooks have threatened the existence of bookstores. Imagine if all the books disappear from the shelves of libraries? What will happen to the curiosity that overwhelms library visitors when they stand in front of towering rows of books that cannot be read in one’s lifetime? The digitization of books is attractive thanks to its reduced publication costs. But as Walter Benjamin once wrote—a reader becomes a collector when he realizes that books have value, not economic, but as vessels of memories of people, places, and situations.
Similarly, shopping is a familiar, often socially driven, experience that for many people transcends pure economic value. As Adam Smith said in The Wealth of Nations: ”Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.” It’s not only the price and the efficiency of the transactions that makes an exchange valuable; it is the interaction and the social learning. So, rather than using technologies and software “to eat” brick-and-mortar retailing, it’s incumbent upon us use them to enhance further the in-store experience and make it more human and personal.
To accomplish this, I see three necessary steps for retailers:
- First, encourage shoppers to involve their peers and friends in the process of making in-store purchasing decisions by leveraging mobile devices. Most people are hesitant to make choices. Socializing decision-making opens a three-way conversation between the customer, her friends, and the sales associate. To clarify, this doesn’t mean a two-way communication such as a shopper making a phone call to ask a friend whether to purchase something. The customer and the sales associate need to converse and simultaneously engage remote friends via new UX forms of interactions on mobile devices.
- Second, turn every shopping assistant into a personal shopper who remains socially connected with the customer even after the sale. We have dehumanized many big stores by increasing the shelf space and reducing the number of sales associates helping customers. In fact, Mark Andreessen’s argument makes sense in this light, as more stores increase inventory to offer more product and compete with ecommerce—but at the expense of store associates that provide human interaction. Therefore, we can only gain by making retail employees more cost effective and efficient. Smartphones and tablets offer a unique opportunity for brick-and-mortar to remain the “kings” of retail whereby every sales associate is personal shopper who can curate content and offers for the customer. Two examples of this phenomenon already exist: Apple, which markets its associates as “geniuses” able to offer expert guidance, and Whole Foods, which also boasts its reputation as having a knowledgeable employee force.
- Finally, why not gamify the in-store experience? Why is gamification reserved only for online? Why not fuse the online gamification with the in-store experience? This is next frontier that offers the most opportunities for making in-store visits fun and thus brings consumers back to the stores. Of course, this type of gamification will be completely different from the simplistic “likes” buttons and vanity badges currently seen in many ecommerce sites. It has to be more value-driven gamification – but this topic deserves more attention and which I will discuss in a future blog post.
The focus on these three areas will change the digital ecommerce vs in-store game from a zero-sum game into a win/win situation where both consumers and retailers would benefit by forming deeper, more loyal, and more meaningful relationships.
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