Saving Physical Retailers from Digital Obsession
Even though 80% of global sales still take place in brick-and-mortar stores, a vast majority of business experts keep telling us the same story over and over: physical retail is doomed in the long run. It is a fact that, in the US and now in Europe, a growing number of retail chains or department stores, unable to compete with online giant retailers, are now in such a big trouble that they are forced to shut down hundreds of stores and lay off thousands of employees.
As is often the case, we are encouraged to spread a new truth, a new paradigm upon which modern retail has to be based: go digital or die. There is no other way.
This statement proves to be less convincing if you dig in a bit. For example, Irish clothing retailer Primark has been shaking up the European retail landscape for years even though the brand remains 100% physical. No online channels whatsoever.
Let’s be more practical. Physical retail suffers first and foremost from both a fierce competition between brands and ever higher operating costs which lead to major financial fragilities as soon as sales drop.
On top of that, consumers are turning away from shopping malls which have lost part of their attractiveness, especially toward the Millenial generation who rejects boring and unsurprising customer experiences. In this context, online shopping is reaping the benefits.
However, over the last few years, both retailers and property companies are telling us that they will fix the problem thanks to digital tools and innovations. Seriously ?
I’ve been working in the retail business in Europe for years and I am struck to see how fast and pervasive very fashionable ideas are spread in this industry. Retailers and property companies are unanimously making public statements full of magic words : “phygital”, “digital experience” “connected commerce”… to reassure their audience that they figure out how to deal with the economic situation.
However, there is a difference between the rhetoric and the reality. In the CRE business, most of the digital initiatives still don’t prove fully convincing. They appear to me more as PR tools to shed light on new developments rather than true game changing drivers. Meanwhile, footfall in shopping malls is still declining every year.
As far as social media marketing is concerned, shopping malls have not found the recipe for success as well. “Fans” are not responding massively to the daily contents provided by the malls. There is a main reason for that. Property companies are generally using social media to try to sell stuff, not to provide value. They have neither the right mindset nor the financial resources to create relevant brand contents on a regular basis.
The same goes for a majority of new digital tools and solutions designed to help physical retailers to take advantage of the technology. If CRM systems prove to be efficient and relevant before and after the store visit, there is still room for improvement for in-store solutions to drive the customer experience and improve sales.
When I was a marketing director for property companies, I often realised how non practical some of the in-store digital tools were in real life.
I am sure you remember the “beacon” hysteria that took place a few years ago. Retailers were (and still are) poised to install these sensors in their stores to capture their audience and drive sales through targeted push notifications on mobile phones. Those who were sceptical about beacons would be soon out of the game. That was the course of retail history. Period. We all know now that beacons did not change the game especially since they need the bluetooth to be switched on as well as an installed app. Major weaknesses when it comes to capture a broad audience.
Digital solutions have to be both simple and seamless to get a chance to succeed in-store. As soon as you need to figure out how it works, customers give up.
Of course, I am certainly not telling you that digital is a fad in the retail business. Technology provides massive opportunities to interact with clients and build up successful businesses. The very way of shopping has been drastically altered thanks to new technologies.
The best retailers in the world got it all and provide immersive and exciting customer experiences on a regular basis thanks to relevant digital tools in their physical stores. Nike, for exemple, makes it possible to get the most of a store visit enabling its customers to customize sneakers, join sport communities or improve skills. The kind of vibrant experiences that would have been neither possible nor scalable in the former retail world.
To wrap this up I think that we don’t appreciate a physical retail space just because it offers digital services or experiences. We fundamentally like a brick and mortar store for its concept, range of products and brand image. If technology enables you to dig in this environment and get the most out of it, it does make a difference. But not the other way round.
Digital or not, retail is always about execution and practicality.