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As e-commerce dies, click and mortar takes its place: Future of retail P3

David Tal, Publisher, Futurist
@DavidTalWrites
LinkedIn

Mon, 09/14/2020 - 10:04

Throughout the early 2010s, thousands of tech journalists forecasted the impending doom of brick-and-mortar retailers at the hands the burgeoning e-commerce upstarts that rose out of Silicon Valley, New York, and China. And for much of the 2010s, the numbers bore this out with e-commerce sites exploding in revenue, while brick-and-mortar chains shuttered location after location.

But as the 2010s draw to a close, these trend lines are beginning to collapse under the weight of their own hype.

What happened? Well, for one, the bleeding brick and mortar companies wised up about digital and began investing heavily in their e-commerce offerings, increasing competition in the digital marketplace. Meanwhile, e-commerce giants like Amazon cornered ever larger chunks of digital consumer verticals, in addition to popularizing free shipping, thereby making it more expensive for e-commerce upstarts to enter the market. And online customers, in general, began losing interest in e-commerce shopping fads like flash sale websites (Groupon) and to a lesser extent, subscription sites.

Given these emerging trends, what will the new model for retail look like in the 2020s?

Brick and Mortar transitions into Click and Mortar

Between 2020 and 2030, retailers will succeed in conditioning the bulk of its shoppers to make the majority of their everyday purchases online. This means that most people in the developed world will stop shopping for basics in person and will instead only physically buy “wants.”

You see this now with in-store cashiers occasionally giving you online coupons stapled to the front of your receipt or giving you a 10% discount if you sign up for their e-newsletter. Soon, retailers’ previous headache of showrooming will be inverted when they mature their e-commerce platforms and actively encourage shoppers to buy their products online while in the store (explained in chapter two of this series). In fact, studies found that there’s a greater likelihood of shoppers making physical purchases the more often they interact with and research the store’s online content.

By the mid-2020s, high profile retailers will begin promoting the first online-only Black Friday and post-Christmas sales events. While the initial sales results will be mixed, the massive influx of new customer account information and buying data will prove to be a gold mine for long-term targeted marketing and sales. When this tipping point occurs, brick and mortar stores will make their final transformation from being the retailer’s financial backbone to its main branding tool.

Essentially, all of the biggest retailers will become full e-commerce businesses first (revenue-wise) but will keep a portion of their storefronts open primarily for marketing and customer engagement purposes. But the question remains, why not get rid of stores altogether?

Being an online-only retailer means:

*A reduction in fixed costs—less brick and mortar locations means paying less rent, payroll, insurance, seasonal store redesigns, etc.;

*An increase in the number of products it can sell online, opposed to the limits of in-store inventory square footage;

*An unlimited customer pool;

*A massive collection of customer data that can be used to more effectively market and sell customers more products;

*And use of the future’s fully automated warehouse and parcel delivery infrastructure may even become cheaper logistically.

Now, while these points are all well and good, at the end of the day, we're not robots. Shopping is still a legitimate pastime. It's a social activity. More important, depending on the size, intimacy (think fashion items), and cost of the product, people generally prefer to see and interact with what they're going to buy before they buy it. Consumers have more trust in brands that have a physical store they can visit and interact with.

For these reasons and more, previously online-only businesses, like Warby Parker and Amazon, have opened their own brick and mortar stores, and are finding success with them. Brick and mortar stores give brands a human element, a way to touch and feel a brand in a way that no website can offer. Also, depending on where you live and how unpredictable your work hours are, these physical locations act as convenient centers to pick up the products you bought online.

Because of this trend, your experience in a late 2020s retail store will be far different than it is today. Instead of focusing on just selling you a product, retailers will focus on selling you a brand and on the social experience you have in their stores.

Store decors will be better designed and more expensive. Products will be more elaborately showcased. Samples and other free swag will be more generously handed out. In-store activities and group lessons indirectly promoting the store brand, its culture, and the nature of its products will be commonplace. And as for the customer experience representatives (store reps), they will be judged equally on the sales they generate, as well as the number of positive in-store social media and messaging app mentions they generate.

Overall, the trend over the next decade will see the bankruptcy of pure e-commerce and pure brick and mortar brands. In their place, we will see the rise of ‘click and mortar' brands, these are hybrid companies that will successfully bridge the gap between e-commerce and traditional in-person retail shopping

Fitting rooms and the click and mortar future

Oddly enough, by the mid-2020s, fitting rooms will become a symbol of the click and mortar retail revolution.

For fashion brands, in particular, fitting rooms will increasingly become a focal point of store design and resources. They will grow larger, more luxurious and have far more technology packed into them. This reflects the growing appreciation that a great deal of the shopper buying decision happens in the fitting room. It's where the soft sell happens, so why not rethink it the retailer's favor?

First, select retail stores will optimize their fitting rooms with the goal of getting every shopper who walks into their store to enter a fitting room. This may involve adding browseable shopping screens where customers can select the clothes and sizes they want to try on. A staffer will then pick out the selected clothes and then text the shopper when their fitting room is ready with their clothes neatly laid out for them to try on.

Other retailers will focus on the social aspect of shopping. Women especially tend to shop in groups, select multiple clothing pieces to try on, and (depending on the value of the clothing) can spend up to two hours in the fitting room. That is a lot of time spent in a store, so brands are going to make damn sure it’s spent promoting the brand in a positive light—think plush couches, luxury wallpaper backgrounds for instagraming outfits, and possibly refreshments.

Other fitting rooms might also feature wall mounted tablets displaying store inventory, allowing shoppers to browse more clothing, and with a tap on the screen, notify store reps to bring them more clothes to try on without leaving the fitting room. And of course, these tablets will also enable the instant purchase of clothing, instead of the shopper having to make a trip and wait in line at the cashier after trying on the clothing.

The shopping mall isn’t going away anytime soon

As mentioned earlier, pundits throughout the early 2010s predicted the fall of shopping malls, alongside the fall of brick and mortar chains. And while it’s true that many shopping malls have closed throughout much of North America, the reality is that the shopping mall is here to stay, no matter how large e-commerce becomes. And that shouldn’t come as a surprise. In many towns and neighborhoods, the mall is the central community hub, and in many ways, they are privatized community centers.

And as retailers begin to focusing their storefronts on selling brand experiences, the most forward-thinking malls will support that shift by offering macro-experiences that support the brand experiences being created inside the individual stores and restaurants that occupy it. These macro-experiences include examples such as malls amping up the decorations during the holidays, secretly allowing or paying for “spontaneous” social media-shareable group happenings, and setting aside public space for community events on its premises—think farmers markets, art exhibitions, doggy yoga, etc.

Malls will also use the retail app mentioned in chapter one of this series that would let individual stores recognize your buying history and habits. However, malls will use these apps to track how frequently you visit and which stores or restaurants you visit the most. The second you walk into a future “smart mall,” you’ll be notified on your phone or augmented reality glasses about the newest store openings, mall events, and specific sales that might interest you.

On a superficial level, by the 2030s, select malls will have their walls and floors laced with digital displays that will run interactive advertisements (or store directions) and will follow (or guide) you wherever you walk through the mall. So starts the age of trackable, online ad remarketing entering the offline world.

Luxury brands stick to brick and mortar

As much as the trends noted above may spell a greater integration between the in-store and e-commerce shopping experience, some retailers will opt to go against the grain. Specifically, for high-end stores—those places where the price tag of an average shopping session is at least $10,000—the shopping experience they promote won't change much at all.

Luxury brands and storefronts aren't making their billions on quantity like the H&M's or Zara's of the world. They make their money based on the quality of the emotions and lifestyles they impart upon the high-net-worth clientele who buy their luxury products.

Sure, they’ll use high-end tech to track the buying habits of their customers and greet shoppers with personalized service (as outlined in chapter one of this series), but dropping $50,000 on a handbag isn’t a decision you make online, it’s a decision luxury stores best enable in person. In fact, a study by Euromonitor notes that 94 percent of all global luxury sales still take place in-store.

For this reason, e-commerce will never be a priority for the top, most exclusive brands. High-end luxury is largely marketed by carefully selected sponsorships and word of mouth between the upper classes. And remember, the super-rich rarely buy online, they have designers and retailers come to them.

The fourth and final part of this future of retail series will focus on consumer culture between the years 2030 and 2060. We take a long view of the societal, economic, and technological trends that will shape our future shopping experience.