You don’t have to be involved in the retail business to know that online shopping and mobile devices have changed the retail store landscape forever. Shelly Banjo and Drew Fitzgerald report, “E-commerce not only siphons off sales, but changes shopping habits.” [“Stores Confront New World of Reduced Shopper Traffic,” Wall Street Journal, 16 January 2014] They explain:
“A long-term change in shopper habits has reduced store traffic — perhaps permanently — and shifted pricing power away from malls and big-box retailers. Consumers’ rush to e-commerce is a challenge that brick-and-mortar retailers have wrestled with for years. Across a number of retailers, their defensive strategies don’t seem to be panning out. Best Buy, for example, overhauled its store layouts and marketing in the past year, even inviting shoppers to ‘showroom’ the electronics retailer — co-opting the term for people who try out products in stores and then buy them for less online.”
Despite the negative trend, writing the eulogy for brick-and-mortar stores would be premature. As I pointed out in a previous post, “Many consumers use a hybrid approach to shopping (that is, they mix and match online shopping and research with in-store experiences). According to IPSOS MEDIACT and Google research, ‘44% research online and buy products online’; ‘51% research online and visit the store to purchase’; and ‘32% research online, visit the store to view the product, and buy it online.’ Each of those journeys is part of the digital path to purchase experience.” Jon Thomas believes that the best hope for traditional retailers is to stop fighting the digital path to purchase and learn how to embrace it. “Traditional brick-and-mortars,” he writes, “have been too slow to adapt to the changing ways in which consumers shop, providing anxiety-ridden, confusing and often unsatisfying shopping experiences. But I don’t think it signals the end of brick-and-mortar retail. Actually, digital might just be its savior.” [“Can Digital Save Retail?” Post Advertising, 17 July 2013] Thomas recommends listening to “Mitch Joel’s ‘Six Pixels of Separation’ podcast in which he interviews Doug Stephens, founder of Retail Prophet and author of The Retail Revival, about the future of retail. In case you didn’t hear it, take a listen here. It’s fascinating.” Thomas continues:
“In the episode Stephens and Joel discussed shopper marketing, how mobile has changed retail, Amazon’s effect on retail, and lot more. But toward the end of the interview, Stephens hit on a point that had me saying ‘Yes! Yes!’ … [That point was:] It’s not about price! Most of the discussion about why online retailers, led by Amazon, are putting many brick-and-mortars out of business revolves around price. With lower overhead costs, it makes sense that online retailers can always beat a brick-and-mortar on price, and for certain items, that may be true. But that isn’t always the case. A study conducted last summer by Kanar Retail, a London-based research firm, found that on average Amazon’s prices are 20 percent higher than Wal-Mart’s in-store prices. Not only that, but Target is cheaper than Wal-Mart, and Best Buy’s prices are only marginally (about 4 percent) higher on average (though you don’t have to wait for shipping, so often it is a wash). Best Buy has also instituted its ‘Low Price Guarantee,’ which will match prices both from other brick-and-mortars as well as online retailers, including Amazon.com and Apple.com. Target has done the same as well.”
If price isn’t the big differentiator between brick-and-mortar and online retailers, what is? Thomas’ answer is “information.” He writes, “Take note, brick-and-mortars. Consumers are most often going online to make their purchases because that’s where the information is.” During his interview with Joel, Stephens asserts that one reason that consumers still like brick-and-mortar stores is that they provide them with context. He believes that as brick-and-mortar stores implement a digital strategy, they should do their best to keep the in-store experience (i.e., the context) part of the virtual experience. Stephens believes that whatever hunter/gatherer DNA remains in our genes almost compels us to go shopping in a physical environment. That’s why he believes that brick-and-mortar stores will survive, but not in the format in which they exist today. He believes that the brick-and-mortar stores that survive the current disruption in retail will be better, stronger, and more inviting for consumers. They will either sell something unique (i.e., something that can’t be purchased elsewhere) or, if they sell items that can be bought elsewhere, will differentiate themselves so completely that comparisons won’t be made. I agree with Thomas that you should listen to the entire podcast.
Because implementing a good digital strategy is going to be an imperative for survival in the retail sector, more and more businesses are probably going to hire a Chief Digital Officer. “The Chief Digital Officer will prove to be the most exciting strategic role in the decade ahead,” predicts Gartner VP David Willis. “The Chief Digital Officer plays in the place where the enterprise meets the customer, where the revenue is generated, and the mission accomplished. They’re in charge of digital business strategy.” [“A CMO, a CIO, and a chief digital officer walk into a bar…,” by Scott Brinker, Chief Marketing Technologist Blog, 24 March 2013] As a marketing technologist, Brinker openly wonders what the rise of the CDO is going to mean for the CMO. He wonders if the CMO is going to be demoted to “overseeing the sundowning of traditional marketing channels to a winnowing number of non-digital customers” or “doing branding — not the modern kind of brand-as-experience, but old school logos and taglines validated by focus groups” or “handling ‘PR’ — not the modern kind of everything-social-is-PR (and pretty much everything is social), but old school news releases and press conferences?” He continues:
“I’m exaggerating to make a point, but in a C-suite that has a strong CDO and a digitally inexperienced CMO, that may not be too far off the mark. The CMO might start to feel like that poor wretch in Office Space who keeps having his desk moved to smaller cubicles in darker corners of the building. Next to go is his stapler. What is marketing’s purpose if not to understand and connect with the customer? I fully appreciate that understanding and connecting with modern customers is more complex than ever and requires enormous changes to what we’ve called ‘marketing’ in the past. I sympathize with more traditional marketing leaders who have had a veritable tidal wave of changes crash upon them with a velocity that is nothing short of dizzying. This is an epic challenge. But that doesn’t change marketing’s responsibility. If you carve out all things digital from marketing — in a world that is asymptotically approaching all things being digital — and give it to a CDO who’s independent of the CMO, then the CMO has lost that responsibility. And with great responsibility goes great power.”
Brinker’s comments have larger implications. It’s not just the CMO who is going to have to change if he/she is going to survive the entire retail sector is going to have to change. In his interview with Stephens, Joel described how new shopping centers are being built more like circular town centers that encourage people to linger and mingle. Designers of such complexes recognize that humans are fundamentally social creatures and will seek social experiences that fulfill an innate desire to be with others. At the same time, the new complexes are incorporating the latest digital technologies to serve up information along with experiences that will make them more competitive with online retailers.