Howard Shultz, CEO of Starbuck’s recently stated that e-commerce opportunities such as computer-based and smartphone shopping is causing “seismic change” in the retail industry. Recent statistics support that theory. Foot traffic in retail stores dropped between 7 and 10 percent last year and is predicted to keep falling. Store growth of major retailers has slowed to 3 percent, down from 12 percent in 2011. Many retailers are consolidating the number of stores in their portfolio. As an example, Staples, with half of their sales now coming from e-commerce channels, is looking to close hundreds of stores in the next two years. And they are far from alone.
SPS Commerce, a leader in retail cloud services, recently issued a study showing that e-commerce has replaced brick-and-mortar as the top retail industry growth driver. In addition, it found that suppliers are not keeping up with omni-channel demands. Suppliers, in order to be attractive, must master rapid fulfillment, have detailed and comprehensive inventory information and provide drop-ship capabilities. The survey also found the following:
- Retailers ranked growing e-commerce as the top priority. Improving the in-store experience was also deemed extremely important but trailed the e-commerce focus.
- Distributers and logistics providers are focused on rapid fulfillment above all else. Suppliers ranked streamlined fulfillment as their top priority but strategy and execution is not where it needs to be.
- Retailers want more or improved item attributes from their vendors
- Distributors are demanding that vendors provide better visibility to available inventory
- Legacy systems and adversity to change are key inhibitors to omni-channel progress
Obviously, traditional brick-and-mortar retailers are keenly aware of the changing retail industry landscape. As evidenced by the SPS Commerce study, they have identified the issues needed to stay relevant and are 100 percent focused on that evolution. A priority is to maximize omni-channel capabilities such as pinpoint inventory accuracy, real time inventory data, maximum distribution and delivery capability and exciting and user friendly websites.
In addition, some retailers have identified the in-store “experience” as a strategic advantage and a top priority. Terry Lundgren, CEO of Macy’s and truly one of the architects of the modern department store retail space, envisions the need to create more memorable experiences for the in-store customer. Exciting restaurants, personal experiences unique to a given customer, cooking demonstrations and other offerings where the customer can get personally involved are all things virtually impossible to duplicate on line. Meanwhile, Luxotica is focusing on a key strategy including “story telling” windows to engage the customer.
It’s reasonable to believe traditional brick-and-mortar stores will always have a solid base in the future of the retail industry. People will never stop wanting to shop at a store in person, at least some of the time. The in-store experience allows them to touch, feel and try on the merchandise and to make comparisons. It also serves as a social experience, satisfying the need to interact with other people. And the in store customer can take advantage of those “special experiences” that are, again, not even possible online.