Recent moves by native eCommerce retailers to establish bricks and mortar propositions indicates ‘clicks & bricks’ isn’t simply a fad. It’s the beginning of a seismic shift in retail.
In recent years traditional bricks and mortar retailers have been challenged to adopt ‘bricks & clicks’ strategies, whereby online and physical propositions are integrated. This has been a core element of the evolution of multi & omni-channel retail. Notable success stories from retail giants such as John Lewis perpetuated the trend. In 2014 the department store chain credited it’s ‘bricks and clicks’ success for ‘decisive’ market share gain.
Whilst establishing ecommerce channels initially presented retail opportunity, it’s now a given. A ‘hygiene factor’, if you will. With this comes an array of challenges for traditional retailers.
How to deliver seamless customer experience for customers interacting physically and digitally?
How to address the problem of ‘the final mile’, when supply chain and logistics have been designed to serve a bricks and mortar proposition?
How to mitigate investment pressure by sweating existing infrastructure and assets?
How to retain in store footfall when online presents an evolution in customer experience?
My mind was turned to this by Amazon’s recent purchase of Whole Foods (my mind is evidently never far from Amazon!), and what the move actually means. The LA Times reported statistics which were astonishing and telling in equal measure. By acquiring Whole Foods, Amazon is buying not just an established, upscale supermarket brand, but also a vast distribution network of warehouses and more than 440 refrigerated warehouses within 10 miles of approximately 80% of the US population.
In conjunction with recent introduction of the AI (Alexa) enabled Dash Wand (a significant step forward in the initial ‘Dash’ concept) for prime customers, this illustrates absolute vertical integration. The move drives same hour delivery to prime customers, 95% of whom live within 10 miles of a Whole Food store. Remarkable.
Clearly, for traditional bricks and mortar retailers with multichannel propositions, non-organic expansion strategy isn’t universally feasible, and re-purposing increasingly expensive floor space is the most viable solution. Moving to a complete ‘dark store’ model may be cost and operationally prohibitive, and the ability to retain customer service / experience when utilising a single location for dual purpose will clearly be a challenge.
So is there a middle ground? Possibly. In early 2016 Walmart opened its first hybrid ‘Seiyu’ store in Tokyo, Japan, designed to satisfy digital and physical shopping needs in one location. Whilst a convenience retail outlet operates on the first floor, a dark store space dedicated to fulfilling online orders exists on the second. The dual operation delivers distribution system efficiencies which preventing online fulfilment from interrupting physical shoppers.
This re-purposing of existing assets now extends beyond the realms of grocery retail. Indeed recently ‘Deliveroo kicked off a 'dark restaurant’ initiative, enabling participant restaurants to utilise Deliveroo provided kitchen space to fulfil purely online orders, away from the primary restaurant locations. Increasing online demand is more readily met, without impacting the patron dining experience.
So if traditional retailers are evolving to compete in a multi-channel world, why is the tide turning? Amazon arguably started the ‘clicks to bricks’ movement in opening a physical bookstores – but why? Well, there are now several examples of the potential in this strategy. Specifically the ‘Guideshop’ or ‘Showroom’ strategy.
Only last month, Retail Gazette published an article discussing the emerging concept of physical stores evolving to become showrooms rather than pure selling spaces. It suggests the growth in this area reflects not only the challenges in buying and maintaining retail floor space, but equally, in light of the continued growth of ecommerce channels, retail floor space could be better utilised to drive customers online – offering commercial parity with online propositions.
As my colleague, Matt Pyle, recently commented, AI is beginning to play an increasing role in the delivery of customer experiences. Repurposing retail floor space is a conduit to further growth in AI and AR offerings as technology and personal service continue to align.
There can be few better examples of the changing tide than Bonobos, an online menswear retail which launched in 2007. They’ve diversified their online proposition with the introduction of ‘Guideshops’. The concept is startlingly simple, and yet delivers where it matters – customer experience. A customer books a 1-2-1 appointment with a Bonobo ‘guide’. The guide presents the range, and fits the customer. The customer is then able to purchase products from the range, knowing everything will fit perfectly. An online order is placed and the goods are delivered directly to the customer’s home. Personalised service, human touch and guaranteed satisfaction. A recipe for success, surely.
Will the tide ever fully ‘go out’ on bricks and mortar retail? No. Does the changing tide reflect a whole new raft of proposition challenges? Yes, certainly. Who will inevitably benefit? We will!
In our next insight we’ll be looking at how AI can be used behind the scenes for operational efficiencies. Can’t wait that long and want to talk about how we can improve your retail operation? Great, we can’t wait to hear from you.
Get in touch with our Head of Retail, Rich Ellis, by emailing him or phoning him on 0113 201 0621.