Is Physical Retail in Vogue Again?

“The more things change, the more they stay the same.” That was said by French critic, journalist and novelist Jean-Baptiste Alphonse Karr in 1849.

And 169 years later, it’s still as true today. Especially in retail. Twenty-four years after the founding of Amazon.com, and the beginning of the ecommerce revolution, the physical store is back in vogue.

The biggest sign of this trend was Amazon’s purchase of supermarket chain Whole Foods last year. The fact that the 800 pound gorilla in ecommerce would acquire a supermarket chain with nearly 500 stores and more than 90,000 employees accentuates the importance of physical stores in modern retailing.

Customer Experience and Distribution

Two main things that Amazon gains from Whole Foods are the ability to offer a better customer experience and more distribution locations closer to where people spend time. Despite the amazing growth of ecommerce, digital sales only amount to 9% of US retail sales. This means that the overwhelming majority of products are still purchased in physical stores.

Now Amazon has nearly 500 opportunities to craft a personalized in-store customer experience, which can help selling products which require more hand holding, like the line of Amazon Echo smart speakers, as well as to up sell customers. With delivery times increasingly important in retail, the ability to have a distribution center so close to customers, whether they come in to pick up ordered products OR have them sent via delivery person or drone, will help Amazon compete with physical retailers.

Amazon isn’t the first ecommerce retailer to seek out a physical presence. Eyewear e-tailer Warby Parker opened their first physical store five years ago, three years after the company was founded, and other digital retailers opening physical stores include Zappos, Bonobos, Boll & Branch, Allbirds, Away, ModCloth, Glossier and Madison Reed. Despite the convenience of ecommerce, shoppers like to touch, feel and try on the products they want to buy before purchasing them. Smart online retailers like ModCloth use their physical interaction with customers to obtain correct measurements in order to make future purchases more successful. According to the National Retail Federation, one more advantage of physical stores beyond the customer experience is the fact that stores have higher conversion rates than digital retailers. And with all of the available retail space in the US, it’s easier and less expensive for e-tailers to open physical stores today.

But can older physical retailers adapt to today’s customers and succeed? One company worth studying is US consumer electronics retailer Best Buy. In 2012, Best Buy CEO Hubert Joly rolled out an aggressive plan which included hiring relying on better, more professional and knowledgeable service staff and opening store-within-a-store shops for leading vendors including Samsung and Sony.

“We’ve invested significantly in the physical experience in the stores, and candidly, it is so helpful,” said Best Buy CEO Hubert Joly. “You cannot use your senses online to see the difference in picture quality of the TV or the sound quality of a headphone. You really have to go to the store.” And the better in-store experience and customer service, including Best Buy’s Geek Squad, who provide service online, on the phone, in your home, and at more than 1,100 Best Buy stores, also gives online buyers confidence that they’ll receive effective support and service, contributing to a stronger multi-channel presence.

Best Buy is also focusing on the smart home market by showcasing emerging products in this category and staffed by employees who can educate even the most low tech consumer on product usage, benefits and installation.

The significance of ‘seeing the difference’ was also important to OEM manufacturing vendors like Samsung, who are better able to market their products through trained staff in their stores-within-a-store at Best Buy, who had more store space after getting rid of CDs and DVDs. And these vendor-partners are making significant investments to enhance the shopping experience at Best Buy stores.

The strategy of better service, store-within-a-store shops for key vendors and price matching resulted in improved growth and profitability, with the 2017 holiday season the chain’s best in 14 years.

Here’s one data point which explains Amazon’s acquisition for Wholefoods: 40% of Best Buy’s online orders are either picked up in OR shipped from a Best Buy store.

The focus on customer experience and better service have enabled Best Buy to turn around their business. Even Amazon founder and CEO Jeff Bezos had kind words for Best Buy, saying “The turnaround that got done there, from just a business case study point of view, is going to be written about and talked about for a long time.”

Beyond understanding Best Buy’s success, offline retailers need to understand the value of ecommerce (and mcommerce) as part of their online / offline channel strategy. And they need to also tap e-commerce-first marketing automation technologies, like personalization and other machine learning technologies, in order to profit from a better understanding of their customers.

I doubt that the horse and buggy will make a comeback against the car, but maybe soon, we won’t talk about e-commerce and m-commerce and brick and mortar. Maybe it will all just be commerce.

Roei Livneh is the CEO and founder of Curve.tech

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