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The silent revolution of the retail chain

Redazione di NewsFromThePlatform | May 25th, 2017

The value of e-commerce in the retail market was, in 2016, close to $2 billion, that is, 8.7% of the entire industry. And if the overall growth of retail sales is slowing down, digital retail continues to increase very rapidly, with a growth rate of 23.7%. By 2020, e-commerce sales are estimated to generate more than $4 trillion, reaching 14.6% of the total annual retail spending.

The ever-increasing trend in online retailing brings with it an intensification of the competition between big e-commerce players and more traditional retailers. In the United States, nearly 3,000 brick-and-mortar stores have closed since the beginning of 2017 – unexpectedly, big retail chains are the ones locking the shutters, about a third of which is likely to cease business soon. Macy’s, the luxury chain, closed down 68 major department stores in the first quarter of the year, as did other American brands including Payless (1000 stores in 2017), Crocs (160), American Apparel (110), Abercrombie & Fitch (60) and Guess (60). In Italy, on the contrary, small retail shops are closing, at a rate of one in ten, for a total of more than 90,000 just in the last year. The most affected industry is that of fashion (-20%) followed by hardware and construction (-19.9%), jewellery, perfumery (-17.5%) and bookshops (-17%). By contrast, online sales have grown by 75%.

The question that comes to mind is how can brick-and-mortar stores outlive the supremacy of e-commerce? The key, as we have already pointed out here, is the convergence between offline and online worlds towards a new equilibrium that marks the future evolution of sales support strategies – and retailers are well aware of it. In fact, according to a questionnaire by Fujitsu, 40% of European retailers and 73% of Italian retailers believe that by 2021 their business will no longer have their current structure, and 80% of them (82% in Italy) is in favour of digitalization. In Europe, 56% of traders (almost all of them in Italy) agree that the digital revolution is the most important challenge that their company is facing. 82% of the interviewed Italian retailers said that they have already changed their business strategy through important investment in technology (73%), new strategic partnerships (46%) and the development of new services and products (46%).

Among the players that are helping retailers to bridge the digital gap are, especially, start-ups. They are developing services that allow retailers to keep up with e-commerce competitors, such as in-store technologies that range from robots for the storing process to enhanced reality showcases, to Wi-Fi devices that collect data on shoppers behaviour. Many start-ups are focussing on optimizing existing operations through the use of cloud-based software and mobile applications. Others have created innovative tools to collect data and improve customer engagement through location analytics and proximity marketing strategies.

The brick-and-mortar store is not going to disappear: it has some essential features that e-commerce cannot replicate, including the support of shop assistants, the possibility to touch the products – and in some cases even smell them, i.e. grocery or perfumes or toiletries – and the satisfaction of taking the item for which you have paid immediately with you. It is no coincidence that one of the latest trends in the retail industry is the launch of brick-and-mortar stores by native digital companies, including Amazon, Bonobos and Warby Parker.

As Andrea Di Camillo, Managing Partner of P101, points out, digital and traditional retail can and should be two sides of the same coin, since “a key aspect of retail today is the integration between traditional and digital retail in the name of experience: people do not walk into a store just to buy an item, rather, they want to have a fulfilling shopping experience. In order to offer this kind of service, however, the store needs digital support, and vice-versa: for example, digital tools are essential to collect data about customers and profile them more precisely, to the end of offering them, in the brick-and-mortar store, the experience they desire. Without digital information it would not be possible to turn the store into a place of experience.”