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Retail

The Future of Ecommerce is In-store

By Karina Masolova, karina@plainlanguagemedia.com

With traditional retail business models crashing down, and ecommerce on the rise, retailers will need the power of brands to thrive. Two dominant trends emerge when looking at the future of retail: retail-tainment and omnichannel.

Despite the rise of ecommerce, shoppers still prefer to see, touch, and experience products. According to Retail Dive, 62% of shoppers frequent physical stores for exactly that reason—among 18–24-year-olds, that figure jumps to 65% of shoppers. A separate study from Market Track shows that shoppers prefer to buy big-ticket items like cars, appliances, and jewelry in-store. The most preferred categories for online purchases were books, toys/games, and entertainment—that is, the types of goods that are frequently licensed.

Yet, there is something slightly off-kilter to the American experience about virtual stores like Tesco Homeplus’ “fourth generation retail store,” now counting 22 locations in South Korea. Busy shoppers can scan codes on strategically placed posters in locations like subway stations and receive a delivery that same day. The stores mostly stock groceries and staples, with some electronics offerings.

Thanks to that, brick-and-mortar stores won’t disappear entirely—they will transform. By 2020, EKN research expects that the retail environment will be dominated by theme-based stores, fulfillment centers, and pop-up shops. But there is a clear risk to having all these moving parts—namely, ending up with a confused mess.

Both retail-tainment and omnichannel have been around for years, but retailers have always demarcated the line between marketing and merchandising. That view is slowly shifting.

Retail-tainment can take many forms; the most common installations in shops and malls are dedicated cafés, boutique shops, and demonstration areas. The idea is to encourage shoppers to treat the store as a destination in and of itself and to linger longer when they’re there. Disney’s Imagination Shops, the official stores of sports leagues like the NFL and MLB, and Bass Pro Shops’ Outdoor World locations (featuring bowling, archery ranges, miniature shooting, and ranges) are all examples of how much entertainment can fit into one themed shopping experience.

It should be noted that these are very controlled environments, with Disney (for example) controlling the products, marketing, employee training, and overall retail strategy through centralized leadership. When it comes to bringing the Disney experience to outside stores, the giant has struggled to recreate the magic. For brands that want to be part of the retail-tainment phenomenon, it is important to be as hands-on as possible with dedicated brand ambassadors supervising the experience.

In this way, physical stores become more like showrooms than warehouses. It makes fiscal sense; Walmart’s internal research showed that 94% of its shoppers say their decisions are more likely to be influenced by in-store demos than advertisements. When Tony Rogers joined Walmart as its new CMO last year, he pushed suppliers aggressively to participate in in-store programs (but not at the expense of Walmart actually paying more for products).

Retailers typically offload their marketing expenses on licensors, licensees, and others who front the costs of TV and print advertising with CMFs and other contributions. Now, stores like Walmart are eschewing traditional advertising and asking brands to contribute to retail-tainment and other experiential marketing programs. Because the cost of such activations is negligible, retailers are incentivized to cycle through partners frequently, before they get stale.

Target’s Wonderland, a 16,000 sq. ft. pop-up store that debuted in the holiday 2015 season, is one example of what can be done. At the New York-based installation, visitors visited 10 holiday-themed displays (think giant Etch-A-Sketch, Disney, and LEGO figures). Consumers added toys to their shopping list by scanning a code with their RFID-tagged card. After completing the tour, shoppers checked out, paid, and picked up their packages. CMO Jeff Jones admitted that the retailer wasn’t looking to actually set up these installations in every store, but rather to use the project as a launching point to develop “new shopping concepts.” In an interview with Fortune, he added that shoppers wouldn’t be interested in a “spectacle” when buying staples like diapers and underwear.

It’s not hard to imagine the possibilities—even for staple goods. Rather than stacking products on shelves, retailers can set up displays, demonstrations, and hands-on areas for consumers to test-drive products. Even shopping for diapers can be fun. Wouldn’t you want to try to recreate the “leak test” so often shown on TV ads? And the technology for implementing a pick-up system (or even better, free shipping) at the end of the shopping experience is already built into our mobile devices.

Omnichannel’s Shopping Loop

So, if the store becomes a theme park, how are products actually getting into the hands of consumers? There are different types of models that fall under the omnichannel banner, including O2O (online-to-offline) and “click and mortar” selling (apparently distinct). According to Google, 85% of online shoppers start a purchase on one device and finish on another. The goal for B&M retailers is to get them to finish it in-store.

China’s Bailian Group launched iBailian, an omnichannel e-commerce platform, in 2016 to help integrate its online and B&M businesses. I suspect that the final form of massive M&A deals like Amazon’s purchase of Whole Foods will resemble their model. Bailian customers can place their order online, and the goods will dispatch either from a central warehouse or from a physical store, if it’s closer. In this way, the fulfillment center does double-duty as a destination shopping experience as well as a warehouse. The converse is also possible, with customers purchasing goods after browsing them in-store, and having them delivered straight to their homes, with no fuss.

The “shopping loop” allows the conglomerate to coordinate publicity, promotion, and discount offers thanks to the detailed data collected from online shoppers (including preferences, purchasing power, and location). Targeted coupons sent directly to a consumer’s mobile device can be used in-store or online, and can be weighed differently to encourage certain shopping habits (if the B&M shops are empty, offer a deeper discount on in-store purchases).

The phyical and online marketplaces don’t complete, but rather work together. It would be possible to track whether a store, underperforming in terms of physical on-site sales, actually delivers on targets thanks to shoppers completing purchases on mobile devices.

The challenge for Bailian is in tweaking its online experience and marketing for shoppers based on their location (the buying habits of first-tier cities are different from third-tier cities). Retailers already understand regional differences, and the key might be to incorporate them into the online shopping experience as well. Offers, promotions, and coupons are not enough on their own—brands and retailers must also create a sense of urgency. Quickly found that amongst consumers the key drivers behind coupon use are:

  • Exclusivity—72% prefer exclusive offers that aren’t available to everyone, even if they’re lapsed buyers.
  • Timeliness—60% find time sensitive offers motivating, while 46% find the same of limited quantity offers.
  • Earnings—88% are more likely to redeem a reward or offer that they had to work for, with 73% stating that earned offers are more likely to be valuable than offers open to anyone.

Quikly’s findings also show that frequent (as opposed to seasonal, one-off) loyalty campaigns, staggered over time and encompassing multiple stages, work best. In the same way, retailers are incentivized to make sure that retail-tainment initiatives are updated as frequently as store windows are today.

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