The Store is Dead! Long Live the Store!

Discussion
May 06, 2015

Through a special arrangement, presented here for discussion is a summary of a current article from Tenser’s Tirades.

The distinction between online and off-line retail sales grows blurrier by the minute, as shoppers meld their consideration and purchasing behaviors into an "all-line" shopping continuum that spans brick, web and mobile.

"The war for store traffic will be won or lost on digital," said Margo Georgiades, president of Americas, Google, who spoke April 23 at the 19th Global Retailing Conference sponsored by the Terry J. Lundgren Center for retailing at the University of Arizona.

In 2010, U.S. retail stores recorded 39 billion "footsteps" in November-December, she reported. By the same period in 2014 that number had declined to 18 billion. Despite that huge drop-off in store traffic, store revenues grew for the same periods from $641B in 2010 to $737B in 2014.

"Smart phones are changing everything," Ms. Georgiades said, arguing that they create an imperative for brick and mortar retailers who want to keep their customers engaged and buying. She shared three key propositions:

In-store tech all-line

Photo: Whole Foods

Own your tribe. "Are you winning your fair share of traffic before the store? Do you obsess about all their life moments and present in an authentic way, with messaging focused on content, versus product?"

Commit to all-line. "There is no off-line or online. Making omnichannel real is not easy. Mobile forces you to think about the seamless experience."

Deliver surprise and delight. "Go from demand to suggest. Are you truly using data to understand your customers and their context? Are you delivering curated experiences and magic moments?"

Ms. Geordiades was joined by C-level executives from retailers including Macy’s, REI, PetSmart, Teavana, Whole Foods, Sephora, Gilt and The Container Store. Many made reference to the impact of digital on their businesses.

The digital proposition is so important to Macy’s, now recognized as the seventh largest digital retail business globally in addition to its 800 stores, that it has invested in its own Bay-area Idea Lab, said Terry Lundgren, CEO. It recently introduced an image-search extension to the Macy’s app to help shoppers locate desired items by taking digital snapshots.

"Where does the sale belong?" Lundgren asked, then answered, "I’m agnostic about whether it’s in-store or online. Let the consumer choose where."

Walter Robb, co-CEO of Whole Foods, conceded his company had made its move to digital technology a little late, but stepped forward last year to embrace what he prefers to call "extended experience." He offered as proof: "We are the largest Apple Pay retailer so far."

Is the proportion of online versus offline retail transactions approaching equilibrium? In an “all-line” marketplace, how vigorously should retailers compete for digital traffic? Can pure play, all-digital competitors expect to stay competitive without expansion into brick and mortar?

Braintrust
"A store is a store, is a web site, is an app ... is wherever a customer buys your product. Not to oversimplify things (however, lately retail loves to over-complicate them), but it comes down, in my mind, to execution. It’s not about the idea, the format or the glitz of technology."
"As long as retailers think about foot traffic as a business metric, they will be missing the key — sell the products and don’t care where that sale comes from. With regard to the proportion of online versus offline transactions approaching equilibrium, I would say we may be approaching the tipping point to online."
"As others have said, the optimal balance between online and in-store sales should be whatever combination makes the customer the most loyal to your particular store or brand."

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21 Comments on "The Store is Dead! Long Live the Store!"

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Chris Petersen, PhD.
Guest
2 years 7 months ago

It is not a question of either/or — the imperative is to do BOTH.

As consumers now shop anytime and everywhere, the “e” in e-commerce now means “everywhere,” especially on smartphones.

It’s not a question of “competing” for traffic, but one of how to engage consumers when, where and how they want to engage 24/7/365.

Max Goldberg
Guest
2 years 7 months ago

Retailers should compete for digital traffic with the same gusto they devote to brick-and-mortar traffic. Consumers see a retailer as being one entity, online and offline. They expect an omnichannel experience and retailers need to meet those expectations or risk falling behind.

Amazon has shown us that all digital retailers can be competitive. This has to worry brick-and-mortar stores.

It’s no longer necessary to have an actual footprint, but it is necessary to be online.

Tom Redd
Guest
2 years 7 months ago
First, hope you all enjoyed the Global Retailing Conference at Lundgren Retail Center at the University of Arizona. Oh, you did not go? Bad, bad. Great event that does not allow vendors to go pitch their products or technology or we cut them from the next year. MasterCard’s session, which Tenser references, was very good and told the story that many of us have been preaching for years — the store means MORE! Brick-and-mortar stores are not gone and never will be. They extend the relationship with the consumer. Online, catalogs and more bring the retailer and the shopper’s relationships in… Read more »
J. Kent Smith
Guest
2 years 7 months ago

I think you have to look beyond share of purchase by channel to understand the significance of the interaction on the overall brand. So even if online sales are still a small share, perhaps the right metric is simply browsing traffic — it’s all hits, it’s all interaction, it’s all opportunities to deepen the connection with the customer.

Ron Margulis
Guest
2 years 7 months ago

In some categories the proportion of online transactions is approaching or even surpassing offline retail transactions, like music and consumer electronics. There are many categories, like cars and furniture, which still have fewer than 10 percent of sales going through digital channels.

For the all-line marketplace, Terry Lundgren of Macy’s put it best: he doesn’t care how or where they make the sale as long as it’s their sale.

On whether digital pure-plays need physical stores, the answer is no.

Kevin Graff
Guest
2 years 7 months ago
A store is a store, is a web site, is an app … is wherever a customer buys your product. Not to oversimplify things (however, lately retail loves to over-complicate them), but it comes down, in my mind, to execution. It’s not about the idea, the format or the glitz of technology. It’s about (and has always been about) who can take it and run with it the best. For stores to survive (they’re not going anywhere, by the way) they need to execute the store experience at a higher level. And for all-digital competitors to stay competitive without expanding… Read more »
Gene Detroyer
Guest
2 years 7 months ago
As long as retailers think about foot traffic as a business metric, they will be missing the key — sell the products and don’t care where that sale comes from. With regard to the proportion of online versus offline transactions approaching equilibrium, I would say we may be approaching the tipping point to online. Brick-and-mortar will have its place in the future, but not as a place to sell and, more importantly, not as a place to move merchandise. It is and will continue to be at a greater and greater disadvantage to online. Both consumer behavior and the business… Read more »
Joan Treistman
Guest
2 years 7 months ago
I keep wondering why executives are holding on to thoughts of yesterday’s shopping behavior. Perhaps there is a major investment in a particular channel or media format. Let it go. We talk about understanding consumer needs and desires when it comes to products and brands. We are not as likely to think of transaction access in the same way. But indeed it is part of how a consumer moves along the path to purchase. It’s up to them to choose how that journey will begin and smart retailers will create the points of intersection online, in the store, and through… Read more »
Mark Heckman
Guest
2 years 7 months ago
As others have said, the optimal balance between online and in-store sales should be whatever combination makes the customer the most loyal to your particular store or brand. As retailers provide more and better online alternatives to a store visit, the balance will intuitively flow towards online, relegating the physical store to a new role as showroom, customer service center and (for certain categories that do not lend themselves to be delivered via drone or Fed Ex truck) a retail sales outlet likely with reduced SKUs. However, if retailers are selling categories that lend themselves to a visceral shopping experience,… Read more »
Richard J. George, Ph.D.
Guest
2 years 7 months ago
There is no doubt about the meteoric rise of online and its related impact on offline. Whether it will reach equilibrium or surpass offline ironically depends on actions taken offline. Offline as part of an omnichannel experience can provide a point of significant difference for online retailers. Omnichannel is not about channels, it is about your customers and how they interact and access your products and services. Offline retailers have three potential advantages: Proximity (advantage fading), service (also fading) and the sensory experience. Offline needs to heighten the sensory experience as a significant point of differentiation. In doing so, this… Read more »
Ralph Jacobson
Guest
2 years 7 months ago
In a word, yes. Shoppers will continue to enjoy visiting brick-and-mortar stores forever, in my humble opinion. There is already a groundswell of revolt against technology in mature markets around the globe and I feel that will only help the drive to physical stores. In the mean time, e-commerce is exploding overall and 30 percent-plus of all transactions are via e-commerce globally, depending upon which data you believe. So merchants and brands cannot ignore that tsunami of shoppers. Do pure-play online merchants have to go into brick-and-mortar stores? I don’t believe so. However if they have a loyal following of… Read more »
Herb Sorensen
Guest
2 years 7 months ago
Glad to see recognition of the Convergence of Online, Mobile and Bricks (COMB) retailing. Since I first began touting that concept a number of years ago, my views of the role of mobile have dropped substantially, and the massive success of mobile in brick-and-mortar really is largely a techie fiction since mobile is still, after years of shouting and pushing it, largely a marginal activity, important to less than 10 percent of the population. However, online IS moving into stores — at least to the extent that sales of certain classes of goods are steadily moving away from brick-and-mortar stores. BOPIS,… Read more »
Lee Kent
Guest
2 years 7 months ago

First off, let’s separate transactions from experience. Whether you are a pure-play or not, it is important that the right experience is created for your customer.

While entertaining and interacting with “your tribe” is key, there are reasons they may need and/or want to make the trip to a store. And it is up to the retailer to give them that experience.

The key is to engage them every step of the way on their path, and that does not mean trying to sell them. The transactions will come if the customer stays on the journey.

For my two cents.

Kenneth Leung
Guest
2 years 7 months ago

The challenge for retailers is that ultimately, they get paid for transaction, not interaction. Media companies can monetize eye-balls through view and click through ads, retailers are paid on moving goods. Retailers should compete for the right demographics of digital traffic and focus on conversion as much as conversation in order to make their numbers.

Vahe Katros
Guest
2 years 7 months ago
Great article Jamie—thanks for the write-up from this great gathering. Bringing up the rear in this thread, I’ll try to add something new because so far the takeaways are converging to some undeniable truths, namely: technology is driving changes to where certain shopping activities happen and this shift is a call to action to adapt. Discussions about the hows and whys of these shifts are category and audience specific and knowing your customer base and your swing voters has always been a retail concern. The issue now is we have a new form of competition that is not bound to… Read more »
Arie Shpanya
Guest
2 years 7 months ago
Brick and mortar and online shops can and should compliment one another. They have what the other one lacks: access to the products and quick delivery. Foot traffic might be dropping, but eCommerce sales still only make up a fraction of retail sales. Despite this, retailers should still work hard to get shoppers onto their site. For pure play retailers, it’s a sink or swim issue. For multichannel retailers, it’s a matter of educating shoppers and getting them to check out on at least one of their channels. I think that pure play retailers should consider expanding to brick and… Read more »
James Tenser
Guest
2 years 7 months ago

Some fantastic thoughts in the comments here today. Thanks to all who have elevated the discussion.

I believe the transaction is a moment, but the sale is a sequence. In an all-line retail world, the store extends right into our living rooms and our pockets. The more remote aspects of the shopping experience, however, lack the immediacy, intensity and focus of the physical emporium.

The perfect balance of these experience elements will vary by individual, by purchase objective and with each moment. I feel certain that stores remain essential in this scenario, even if the total experience continues to evolve.

Martin Mehalchin
Guest
2 years 7 months ago

We are closer to equilibrium now than we were a few years ago, but we’re all guessing as to where the point of equilibrium will end up being. I do want to give credit to Google who has been pushing forward thinking on these topics ever since they came out with the “Zero Moment of Truth” eBook a few years ago. Now they are introducing tools to help marketers figure out mobile –> in-store ROI.

Gordon Arnold
Guest
2 years 7 months ago

Let’s take a moment to discuss the elephant, or two, in the room where we celebrate the end of brick and mortar retail. There has been, is, and will be an unreported retail sales market that makes e-commerce dollars and profits look so much like peanut-ville. The focus should never be the death of one kind but rather the inclusion of a new one.

Kai Clarke
Guest
2 years 7 months ago

Online retail transactions still are not equal to offline transaction…however, they are rapidly approaching this and retailers should be planning, competing, and expanding their growth strategies to embrace the leading position of pure digital retailing in the market.

Brian Kelly
Guest
2 years 7 months ago

“The war for store traffic will be won or lost on digital.”

This is a silly skewed hyperbole, especially when “take advantage of those magic moments in the store” follows.

Retail has never been binary, and it is not now because consumer behavior has neither been linear nor binary.

Consumers have always sought choice based upon their needs. Digital increases the options.

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Braintrust
"A store is a store, is a web site, is an app ... is wherever a customer buys your product. Not to oversimplify things (however, lately retail loves to over-complicate them), but it comes down, in my mind, to execution. It’s not about the idea, the format or the glitz of technology."
"As long as retailers think about foot traffic as a business metric, they will be missing the key — sell the products and don’t care where that sale comes from. With regard to the proportion of online versus offline transactions approaching equilibrium, I would say we may be approaching the tipping point to online."
"As others have said, the optimal balance between online and in-store sales should be whatever combination makes the customer the most loyal to your particular store or brand."

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