“Successful retail in the digital age isn’t just about ‘how to respond to Amazon’ but about how to stay on top and ahead of the wave of innovations hitting retailers,” say Brian Gregg, Kelsey Robinson, Jess Huang and Sajal Kohli.
That means investing in technological capabilities and developing a strategy that makes the best use of the value proposition of the store itself.
There are seven reasons why consumers visit stores, the authors write, including: value and price, convenience and ease, breadth and depth of assortment, omnichannel at scale, product vetting/touch and feel, consultation and styling/authority, and experiences and community.
Amazon long ago conquered the first three of those and with the acquisition of Whole Foods and the opening of its own Amazon Books stores has made serious inroads into the omnichannel area that had previously been a strategic advantage for brick-and-mortar retailers.
Similarly, the Prime Wardrobe offer and a no-questions return policy are lessening the importance of going to a store to touch and feel a product. But the authors argue that “this space is still unclaimed”.
They point to the success of pop-up stores in malls that can offer distinctive products for a short period and in-store events where consumers can try out products and learn more about them.
Online retailers typically offer review and ratings and chatbots are being developed to guide shoppers, but, the authors say, these “still fall far short of speaking in person with an expert” – whether that’s a stylist or a knowledgeable handyman.
And Amazon has yet to replicate the notion of “retail as theater”, a concept that embraces everything from the airy modernism of Apple stores to the yoga classes offered by Lululemon.
Retailers also need to consider how they can differentiate their offering, by stocking unique brands or products, for example, or focusing on specific customer segments.
In addition, store efficiency should be constantly monitored. “[Using] analytics to optimize trade and promotions (T&P) is a particularly valuable area to focus on”, the authors advise, “since only one third of T&P spend generates a positive ROI.”
Sourced from McKinsey & Company; additional content by WARC staff