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Are We Experiencing a Brick-and-Mortar Apocalypse?

Are We Experiencing a Brick-and-Mortar Apocalypse?

For the past year, news outlets have extensively reported hundreds of retail locations closing down.  Some of the largest US department stores, like Macy's and Sears, have closed down hundreds of stores each, and traditional retailers like Payless Shoes have recently filed for bankruptcy.  Reporters are saying this is the end of traditional brick-and-mortar retail, but while stores are closing, the amount of total consumer spend is rising - it's just attributed to online revenue. Are we experiencing a brick-and-mortar apocalypse?

The short answer is no.  There will always be a need for physical retail; however, the future of what physical retail actually looks like is very much in the air.  Below are some thoughts on the shift away from brick-and-mortar as we know it, and what we could reasonably expect from physical retail in the future.

Change is natural and necessary

Traditional retail had a very long run without any kind of disruption or innovation.  One of the reasons for the rise of e-commerce popularity is that brick-and-mortar has not seen a significant change in decades. Customers enter a store, search for an item, pay, and leave.  There have been slight augmentations of that system, like free samples, in-store product demonstrations, etc, but the evolution of retail has been relatively flat. When e-commerce introduced a way for shoppers to perform those exact same functions from the comfort of their own home, there was no incentive or differentiator that enticed customers to come back to shopping in-store.  

There are several aspects of physical retail that e-commerce can't replace:

  • Immediacy of goods - no shipping, no waiting, no delays.

  • Ability to touch/test/try out goods before purchase.

  • Easier returns/in person customer service.

While these aspects of retail are important, we'll soon see a variety of services specific to physical retail that will update and enhance the shopping experience.  For example, hardware and home-goods stores are beginning to incorporate Augmented Reality within their in-store experience. This enables customers to see how specific pieces of furniture or furniture sets will fit in a specific space.  This is an experience that entices customers to shop in store rather than online because it's A) a solution for a real customer challenge, and B) only feasible in-store.

The scope of brick-and-mortar must become much smaller and more specialized to remain enticing to customers.  A great comparison is in transportation; humans used to travel on horseback before cars were introduced. Horses still exist, and people still travel on horseback sometimes - it's just no longer the most effective means of transportation for the morning commute.

Brick-and-mortar is still the biggest player in retail 

According to a survey by Adobe, the 2016 holiday season saw over $1 trillion in total retail sales, of which only $91.7 Billion was spent through e-commerce.  Total e-commerce revenue made up less than 10% of total retail, and 70% of brick and mortar sales went to retailers that also have a strong online presence.  Essentially, this shows that e-commerce vs. brick-and-mortar shouldn't be viewed as an "either/or," but instead viewed as two complimentary aspects of the shopper's journey.   

According to Jetlore's consumer survey report from early February 2017 (download here), 64.5% of consumers prefer online shopping because they have immediate access to their preferred stores anytime and anywhere. This same idea applies to the research phase of the customer journey; customers now have the option to research and browse in-store products while they're sitting on their couch. When brick and mortar retailers also employ a successful online platform, their consumers are no longer limited by store hours or limited inventory, but can still benefit from the immediacy and customer service of an in-store experience. In fact, online research often determines where people shop in physical stores, as consumers are now able to verify inventory and availability before entering a physical location. Online retail is simply another avenue for customers to extend and amplify the usefulness of brick and mortar, not something that will completely destroy it.

Companies need to invest in a system that bridges the gap between online and in-store in a meaningful and relevant way; and the way to do that is to enhance the visibility of each individual customer's preferred content in the channels that make the most sense. 

Some of the companies with massive closures provide the worst online experience

As stated above, there needs to be a cohesive element between physical stores and online to run a successful brick-and-mortar retail business.  Jetlore's consumer survey report found that the two of the most frustrating aspects of online shopping involve retailers that don't remember customer information, and retailers that offer irrelevant product recommendations.  

Several retailers that are currently closing stores craft their online channels in the same way they would mail a catalog (which are all but irrelevant).  These retailers send catalogs that feature static content with discounted items and huge promotions/sales. Their emails promote the exact same collections of goods and discounts, and their homepage looks exactly the same as the email.  These channels don't coalesce or work together to create any kind of unique experience for the customer; the customer just sort of knows they're there when a product need arises. Without a way to understand how online and physical retail behavior interact, there's no way of creating an experience in either channel that entices customers.

The real opportunity for retailers lies in the ability to understand and predict each customer's preferences, in both content and preferred shopping method.  By predicting what individual customers want to buy and where/when they want to buy it, retailers can adapt content to user preference in the correct channel.  For example, a customer browsing with the intent to buy in-store shouldn't receive a "Free Shipping" promotion, and a customer with the intent to buy online shouldn't receive an in-store discount.  

Jetlore's Prediction Platform™ provides retailers with a compelling way to enhance the visibility of their goods, both online and in-store.  In 2016, Jetlore ran a local ad campaign with a large home-goods/home repair client, predicting and featuring the best collection of goods for each customer specific to their closest physical location.  This led to an uplift of $19M in brick-and-mortar revenue.

To learn more about Jetlore's Prediction Platform™,  click here.