Online and traditional retail have been locked in a battle to the death since Amazon began stealing market share from Borders and Barnes and Nobles in the late ‘90s. In that war it appears traditional retail is losing. Online has so much to offer. It is easy and convenient. Web stores can carry more variety because they don’t have to worry about shelf space. Online often has less overhead, so prices are frequently lower than traditional retail. What can traditional retail offer that will get people off their browsers and into a brick and mortar store?
The old method for competition in retail was price. Big-box stores of all types, from Walmart to Best Buy, grew by using superior logistics and economies of scale to price small and mid-sized merchants out of the regional markets they entered. However, large online sellers have proven they can be price competitive with their brick and mortar counterparts, so that is no longer an option. Amazon sells office supplies just as cheaply as Office Depot.
Online is able to beat traditional retail by matching them on price while beating them in variety, availability, and convenience. This lopsided competition is corroborated by sales data from the last decade. For example, a report from Adobe Digital Insights on the 2015 holiday shopping season showed that e-commerce grew by 11% while brick and mortar only grew 1.6%, accompanied by a 4.8% decline in department store sales. Online has been improving and traditional retail has either stayed the same or declined, each year since then.
Things are looking pretty dire for traditional retail. Traditional retail has had its fair share of struggles lately, as any industry does when it faces disruptive change. Many companies that relied on brick and mortar sales have gone bankrupt, like Toys R Us, Kmart, and Mervyn’s. However, I think most takes on this phenomenon are overly pessimistic. When you begin looking into the details of these retailers, their problems often have less to do with pressure from online and more to do with their own shortcomings. Toys R Us didn’t just fail because of declining sales, but because it never evolved its store experience to the expectations of modern consumers. Large stores with unfocused layouts and poor customer service made for an undesirable shopping experience. Mervyn’s failure stemmed from new owners who were clandestinely breaking it apart in order to sell its valuable real estate holdings. Kmart’s closures were caused by dirty stores, underwhelming offerings, and rude staff. These examples are counterbalanced by other, thriving stores in the same markets. Specialty stores like the LEGO Store and Build-A-Bear continue the tradition of the toy-only traditional retail experience. Kohl’s has picked up Mervyn’s affordable clothing position. Target happily took all the customers dissatisfied with Kmart. When done right, brick and mortar retail can still put up a fight against online.
The three main draws for retail shopping are immediacy, safety, and experience. For a long time, the greatest arrow in brick and mortar’s quiver was that you could walk into a store with an idea of what you wanted and walk out of the store with the goods in hand. If the price is roughly comparable to that of an online seller, buying something in person lets you have it now. Everyone likes the idea of stopping at a Best Buy on the way home, picking up a new TV, and watching a game/show/movie on it that night. Of course, there are emergency purchases as well. While immediacy is desirable for almost all shoppers, it is a Godsend in certain categories. Someone looking to pick up tools, materials, or even whole new appliances to do a home repair may not be in a position to wait two to five days for everything to arrive via Fedex. For a parent who has run out of diapers, even next day delivery is too slow.
Another motivation to purchase in stores is safety. Not safety for the shopper, but safety for the goods purchased. This consideration comes from multiple places. For starters, if someone buys something in a store they have it safely with them from point of sale to arrival. On the other hand, especially in certain neighborhoods, porch theft can be an issue. Amazon boxes, especially large ones that appear to contain valuable goods like TVs or computers, are often left on porches by the delivery drivers only to disappear before the recipient comes home from work. At one building where I worked, packages left outside by lazy delivery people would be pinched immediately, regardless of the likely quality of the contents. Even if you live in a neighborhood where porch theft is not an issue, there are also concerns about the safety of fragile objects during the shipping process. For many consumers, if the price is similar, they would rather pack a high price object in the back of their car than risk it being damaged on its way from the fulfillment center.
These two ideas, immediacy and safety, often work together. When I was building a gaming computer, both immediacy and safety impacted my decision to buy certain parts from my local Frys, rather than from Amazon or NewEgg. Expensive items I could find at a substantial discount online were bought there, like the CPU and graphics card, but other fragile items, like the motherboard, were purchased locally. Similarly, once I had most of the components I needed, I realized I didn’t have an adequate case. Since I wanted to play my Steam library as soon as possible, buying the last thing I needed to get the rig up and running from a local retailer made the most sense.
The last value traditional retail offers over online is the in-store experience. “Try before you buy” is a powerful paradigm. The most obvious place this is effective is in clothing. Most people want to try something on before purchasing it. They want to make sure the fit is right. They want to make sure it looks nice on them. They want to make sure they like the color. Online can show you a picture, but you won’t know what you are really getting until it arrives. Shoes, too, are something most people want to try out before buying. Beyond the fashion aspects, there are also practical issues, like whether they are comfortable to wear or provide good arch support. Nurses want to be sure their daily wear shoes won’t hurt if they are on their feet all day. Basketball shoes need to be able to take hard cuts without fear of a rolled ankle. Hiking boots need to be able to take on all kinds of uneven terrain without causing blisters. These are things best tested in a showroom. Sure, services like Zappos exist, but the process of mailing returns is something people are much less comfortable with than simply handing the unwanted shoes back to a salesperson.
If traditional retail can find a way to bolster these three strengths of immediacy, security, and experience, I believe a healthy niche can be carved for brick and mortar. They will never return to their market dominance pre-Internet. However, a hybrid model that mixes store fronts and online sales can compete with an online-only retailer.
Immediacy is a valued aspect of retail, but not as unique as it once was. Two day shipping is standard with Amazon Prime, with some packages coming even sooner, which is fast enough for most people to trade the small wait for not having to drive to the store, shop around for what they want (if it is even in stock), and drive home. There are still businesses whose immediacy puts them even, or sometimes ahead, of online offerings, such as grocery stores, but these are only a small part of the traditional retail space.
Security is another strength of retail. Perhaps the clearest example of how important security can be is the lengths to which Amazon has gone to try to eliminate that weakness in their model. From pick up locations to time sensitive lock boxes to even a special security system that lets delivery people put packages just inside a locked door, a whole plethora of ideas have been trotted out in an attempt to assuage fears of porch theft. However, they all must sacrifice either convenience or aspects of home security, which has made consumers skittish and the efforts largely unsuccessful.
This leaves the in-store experience. As arguably the greatest source of value for traditional retail, it is a natural place to stake a claim. Online cannot replicate the in-store experience because they have no store. While the instinct is to focus on how a store can bring in paying customers, research suggests that incidental purchasing is a powerful source of revenue. It is often enough just to get people into the store even if they have no specific shopping plans when they arrive. It is also an area where online has historically been weak. Discovery purchases remain easier to come across in brick and mortar stores than online, despite online’s best efforts to algorithmically generate suggestions. Traditional retail’s physical location can make it a nexus for connected activities that will, in turn, drive sales.
Take Barnes and Nobles, for example. They are the last of the major box stores for books. Their strategy for surviving the arrival of Amazon had almost nothing to do with competing on the quality, price, or availability of books. Instead, they focused on reworking their stores to resemble a sort of coffee shop, reading room, and bookstore hybrid. This focus brought people into their retail locations to enjoy the experience of just being there and eventually converted them into paying customers. First maybe they bought coffee and a pastry. The next thing you know they are buying books. This redesign helped Barnes and Nobles survive where Borders failed.
This kind of strategy can be modified to fit all different kinds of businesses. Sports Basement and REI both host classes and act as a departure point for expeditions. This gets people to the store and creates opportunities for them to make impulse purchases while there. Maybe someone in a skiing expedition realizes that they didn’t pack a warm enough set of gloves. If the Sports Basement is open, they can just pop in and grab what they need. Maybe someone in a wilderness first aid class realizes, from the material in the class, that the little ouch kit they carry with them isn’t enough. REI has many different off-the-shelf solutions they can buy to raise the level of their equipment to meet their new level of training. Similarly, Michaels hosts DIY craft project classes basically every weekend, for both kids and adults, which directly translates into sales of materials for the classes and, for each attendee who gets hooked, on-going sales to support that newly found hobby.
This can work in stores other than big box stores, as well. Music stores that offer practice rooms for music teachers to rent, or just use, bring customers into their stores. Frequently their students will make small purchases before or after a lesson. Slightly less frequently, a teacher will recommend buying a book of practice songs in the store. Sometimes, though much rarer, a teacher might even suggest that a student upgrade their instrument from a starter model to an intermediate or from an intermediate to an expert one. While a new music book might be a purchase of $10 or $20 dollars, a new instrument might cost several hundred, or even several thousand, dollars.
Similarly, small tabletop game stores have, for years, hosted tournaments and other events for various popular board games and card games. Friday Night Magic, an event that requires each participant to purchase three Magic: The Gathering booster packs, has been a safe and consistent revenue source for the “local game store” which helps them compete with the bigger online retailers. Even if the event doesn’t require a purchase, or entry fee, just hosting events can get people in the door. For example, I have been in game stores at the same time as casual, prize-free Warhammer 40K events. Those players often buy snack food and drinks from the vending machines, buy accessories like dice boxes, and window shop both new Warhammer kits and the rest of the store’s game offerings. Even having a free play area, or better yet an area to borrow used copies of games to try before buying them, can drive traffic into the store and drive sales.
More traditional retail businesses should seriously consider the ways they can use compelling experiential offerings to get more people in the door. Perhaps Toys R Us would have had more consistent revenue if they had set aside part of their stores to host daycare services. Kids fall in love with a toy during the day and then ask Mommy or Daddy to buy it for them when they get picked up.
Another clever way to get people into stores, to facilitate impulse buying, is by offering a convenience rather than an event. Kohl’s, for example, has an arrangement with Amazon to handle returns. While this may sound like a deal with the devil, it hinges on two pretty clever insights that make it not as self-defeating as it may initially appear. In fact, it might even be quite genius. The first key to Kohl’s strategy is the observation that people don’t want to have to handle their own returns. It isn’t hard, but it can be a hassle. Instead, you could bring it to a Kohl’s and they do everything for you. The second key to Kohl’s strategy is the insight that most people still prefer clothes shopping at a retail outlet where they can try things on. This means any deal they make with Amazon is unlikely to undercut their business. Even though Amazon offers clothes, in a sense, Kohl’s and Amazon aren’t really in competition.
There are other conveniences that stores could provide, too. A big problem with style boxes like Stitch Fix, Frank and Oak, or Trunk Club is that after picking which items you want to keep, like with Amazon returns from the Kohl’s example, mailing the unwanted items back can be an inconvenience. A higher end traditional retailer could set up their own style box equivalent that utilizes a local store location. The selections will all still be made by a remote stylist, using the same tricks online style boxes use to keep their styling fees low, but all the selections are made from offerings found in the retailer’s collection. Consumers get a notification that their box has arrived and, at their leisure, they can come in and try things on. If they don’t like anything they can return it immediately. Not only does this drive sales, because people are coming to essentially accept or reject preorders, but it also gets them into the store which increases the possibility of discovery purchases.
Traditional retailers should also consider how the quality of their staff effects the in-store experience. While people may enjoy the convenience of online shopping, there is still a demand for knowledgeable sales associates who can answer questions or provide recommendations about purchasing decisions. Mid-range and budget stores need to figure out how to replace a disinterested workforce with one that cares and high end stores need to figure out how to replace the increasingly unpopular up-selling style of salesperson with someone who can create a genuine social connection with a shopper and help them find what best matches their desires.
Starbucks, In-N-Out, and Trader Joes are all examples of how businesses in hyper-saturated markets can grow to be market leaders, with limited advertising, by focusing on quality staff as part of an exemplary store experience. This strategy can be applied powerfully to the traditional retail space as well. Retail employees who are exposed to even a small number of online training modules can increase their hourly sales by nearly 50%, according to work published in the Harvard Business Review. It is worth it for retailers, who often look at employees as interchangeable minimum wage grunts, to instead see their floor staff as part of a total experience that will either bring people to, or drive people away from, their brick and mortar locations. From pure luxury goods at Tiffany & Co, to hunting and fishing supplies at Cabelas, to industrial farming goods at Tractor Supply Company, retailers who include well trained and highly capable staff as a component in their customers’ store experience are doing very well.
Traditional retailers could also aim to shore up some of their typical weaknesses, such as low availability of goods. Both my friends and I find it quite annoying when we take the time to drive to a brick and mortar store only to discover what they have in stock doesn’t match our needs. To use another clothing example, it is not a good customer experience to go to a store hoping to find a specific size of pants, relaxed fit, in light grey, tan, and black only to discover that all of the right sized pants are in skinny fit and none of them are in your desired colors.
A radical solution would be to move purchasing away from the traditional mode of walking into a store, finding an item, and bringing it to the cashier to take home. Instead, the showroom part of the store could be made smaller and have only a representation of the store’s offerings. Continuing with the pants example, the store might carry one of every size of pants in every type of cut in every color. These would allow customers to try things on, possibly in different combinations, to decide what they liked. Once the shoppers had determined the combination of brand, cut, and color, rather than picking up that exact item they would note down what they like in a ledger. Repeat that simple process multiple times until the customer is done finding what they want, then the completed ledger is given to a sales rep. The asked for items might be fetched from an adjacent warehouse or, more likely, ordered from a remote warehouse and sent to the buyer’s given address. This takes some of the best parts of both the online and traditional retail experience and meshes them with the traditional retail model. The stock in the showroom never depletes, since nothing is bought off the rack, so anyone who comes to the store knows they can try on a bunch of stuff without fear that what they really want won’t be available. Since the warehousing is decoupled from the showroom, the store can (functionally) carry a much wider variety of options, like online. And, unlike online, customers can try items for fit, hold items in their hands to feel the quality of the fabric and construction, and see the colors in person rather than trying to infer them from a JPEG.
One more area stores can target to improve their market position, related to the above idea, is taking the “try before you buy” paradigm and finding ways to strengthen and enhance it. A chain that does this very well at the moment is REI. Most mid to large sized REI locations have areas in the store designated for taking gear on a test drive. The area for sandals, shoes, and hiking boots has some artificial rocks you can walk over to feel how your footwear would perform in the wilderness. Tents are set up for you to look in and get a sense of the interior size. For a taller person like me, it is a big plus to be able to climb inside and check that I can sit comfortably without bumping my head. The bigger stores even have bouldering or climbing walls to let shoppers try their climbing shoes, chalk bags, and other accessories in close-to-real circumstances inside the store. These kinds of ideas can be extended into lots of other areas. Sporting goods stores could set up mini-courts or sections of artificial turf to try shoes, balls, and other equipment before making the final purchase decision. Electronics stores could have more than just a wall of TVs for comparison, but a room dedicated to replicating the living room experience where combinations of audio and video gear could be tried together to encourage sales. It could even motivate bundled purchases and a certain degree of up-selling as buyers fall in love with more expensive packages. Best Buy has tried this, to an extent, with their Magnolia home theater showrooms, but they focus exclusively on high end, aspirational gear and so miss the mark, in my opinion.
There is plenty traditional retail still has to offer that can help it survive, and even compete, in a world where e-commerce is dominant. There are some areas it has an advantage over its competition: in immediacy, in safety and security for purchased goods, and especially in the in-store experience. If traditional retail outlets fear the theoretically worsening retailpocalypse, the answer is to lean into their strengths. Make the most of what the brick and mortar space can offer a customer. Make more reasons for people to come to the store, beyond just the shopping itself, driving discovery purchases. Create compelling “try before you buy” experiences that give people a reason to not just one-click purchase online. Look for innovative ways to refresh the shopping journey by shoring up the weaknesses typical to the traditional retail model. All is not lost. While ATMs made everyday banking more convenient, they did not end the need for tellers. Instead tellers’ role in banking shifted from process agent to customer service. Similarly, the retail model is changing. The future is likely a mixture of online-only and hybrid businesses. On the one hand, almost every successful traditional retailer I’ve mentioned in this piece has an online presence. On the other hand, some online-only shops have seen the value of brick and mortar, such as Warby Parker, Casper, and Allbirds. There are clearly advantages to having a physical location even in the digital age. It is all just a matter of having the right strategy, design, and execution to make that storefront something worth visiting.