is there a future for brick-and-mortar retail? › hubfs › escalent 2 ›...
TRANSCRIPT
Is There a Future for Brick-and-Mortar Retail?Reports of brick-and-mortar retail’s death may be exaggerated
WHITE PAPER | DECEMBER 2018
Introduction
There is debate about the future relevance of brick-and-mortar retailers.
Some argue that e-commerce and the Amazon effect have doomed the in-store retail industry to a slow death. Others argue there is still a lot of retailing to be done in storefront shops, malls, as well as grocery and big-box stores. The question is, who is right?
Escalent funded a study to better understand how consumers want to shop. Our research sheds new light on both sides of the argument and confirms that the reports of in-store retail’s death are greatly exaggerated. The current narrative is that online sales are growing at far higher rates than brick-and-mortar sales and causing a steep drop in business at physical stores. But, as we discovered in our research, the truth is much less absolute.
Amazon has changed shoppers’ expectations and interactions with brick-and-mortar businesses. However, consumers continue to have a stronger desire and need to browse and shop in stores rather than online. When analyzing the impact of e-commerce sales, it is important to note that while the percentage of online retail sales growth is impressive at 16% and dwarfs total in-store retail sales growth at 3.4%, the total revenue of e-commerce activity is $62.5 billion compared to $152.7 billion for in-store retail. Additionally, our research has found that some sectors are immune to e-commerce inroads, ensuring both in-store shopping vitality as well as the need to support and maintain the physical presence of the business.
To avoid becoming victims of the Amazon effect, these findings point to the need for brick-and-mortar stores and the brands that sell within them to better understand their customers’ needs and desires as well as how their customers want to interact with retail products. This paper will review how people shop, where we expect growth in online shopping, proven strengths of brick-and-mortar stores, and how brick-and-mortar stores can use this information to better prepare for future and potentially unexpected changes in retail.
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
Grocery, household, and health and beauty products appear to be least susceptible to e-commerce sales erosion.
How People Shop Depends on the Category
This makes sense, as these products have changed from tangible to intangible digital items. The digital format as well as tools such as tablets, laptops and smartphones have enabled consumers to bring an immersive purchasing experience into their own home, office, car, subway or train.
Groceries
Household Products
Health and Beauty Products
Pet Food and Supplies
Home Improvement or Repair Products
Clothing or Footwear
Music, Movies or Books
Electronics and Computers
We deduce that the tactile in-store shopping experience for these categories exceeds shoppers’ need for the efficiency and convenience online shopping offers.
IN-STORE SHOPPING BEHAVIOR IS STRONGEST IN THESE CATEGORIES:
ONLINE-ONLY SHOPPING IS SLIGHTLY HIGHER THAN IN-STORE FOR:
We studied various consumer groups to uncover their shopping tendencies and preferences in several retail product categories. The products include those sold in stand-alone retail stores, in big-box retailers and online.
In-store purchases outstrip online purchases in all but two product categories.
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
CATEGORIES SHOPPED IN THE PAST THREE MONTHS
of consumers purchase some or all of their groceries in physical stores.
96%
57% 24% 8% 11%
44% 15% 7% 33%
44% 15% 5% 36%
40% 32% 13% 15%
32% 13% 7% 48%
23% 14% 9% 55%
21% 14% 6% 60%
19% 22% 20% 39%
18% 22% 27% 33%
18% 18% 9% 56%
13% 9% 3% 75%
In store Both in store and online Online Do not shop category
76% 16% 4% 4%
81% 15% 4% 1%Groceries
Household products
Health and beauty products
Pet food or supplies
Home improvement or repair products
Clothing or footwear
Household appliances
Jewelry or accessories
Sporting goods
Electronics and computers
Music, movies or books
Toys
Baby products or supplies
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
Overall, shoppers in each category appear to have established behavior and don’t expect to change how they shop in-store or online. As it stands, 58%–82% of shoppers across all categories report no change in their shopping behaviors since last year. While this is great news for brick-and-mortar retailers, it is not an invitation to sit back and relax.
Only a handful of categories are expected to see a higher increase for online purchases than for in-store purchases.
This continues a trend from last year and is evidence of online shopping’s inroads in those categories. For brick-and-mortar businesses to stay competitive, in-store sales volumes in these categories should be closely monitored and their customer experience evaluated to better understand the shifting behaviors. Store owners should consider enlisting help to innovate the in-store shopping experience.
For most categories, barring usability, convenience benefits or any unforeseen new advantages, we expect the e-commerce growth percentage trend lines to continue apace or begin to flatten.
Where We Expect Online Shopping to Grow
of shoppers across all categories report no change in their shopping behaviors since last year.
58%–82%
ONLINE SHOPPING IS EXPECTED TO GROW IN THESE F IVE CATEGORIES:
Music, Movies or Books13%Electronics and Computers7%
Toys7%Clothing or Footwear4%Jewelry or Accessories 3%
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
Only five categories are expected to see a higher increase for online purchases than for in-store purchases.
EXPECTED CHANGE IN SHOPPING BEHAVIOR FOR 2018
Groceries
Household products
Health and beauty products
Pet food or supplies
Home improvement orrepair products
Clothing or footwear
Household appliances
Jewelry or accessories
Sporting goods
Electronics and computers
Music, movies or books
Toys
Baby products or supplies
11%
14%
10%
18%
11%
9%
12%
20%
16%
17%
17%
22%
28%
24%
21%
17%
22%
15%
9%
13%
19%
15%
13%
12%
14%
12%
13%
7%
7%
4%
3%
0%
0%
1%
1%
4%
5%
8%
16%
In store more Online more
NetTotal
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
REASONS FOR SHOPPING IN STORE BY CATEGORY
One interesting finding is that a few categories seem relatively immune to online shopping competition. Grocery and home improvement merchants appear the least susceptible to e-commerce sales erosion, which may be due to the hands-on aspect of these categories—consumers like to assess the quality of their food when buying groceries and may need in-person advice with home improvement.
Where Brick-and-Mortar Shines
Groceries Household products
Health and beauty
products
Baby products or
supplies
Pet food or supplies
Home improvement
or repair products
It’s convenient 48% 54% 44% 35% 53% 43%
I want to see or touch the item first 55% 34% 39% 29% 21% 47%
I don’t want to pay shipping costs 42% 44% 33% 23% 39% 32%
I don’t want to wait for shipping 41% 43% 35% 21% 38% 34%
I can more easily find what I am looking for 37% 34% 33% 28% 25% 28%
I can easily compare products 34% 32% 28% 28% 22% 31%I enjoy browsing the aisles in-store to find what I need 40% 33% 30% 24% 21% 27%
I can easily compare prices 32% 32% 30% 20% 24% 26%
I can easily browse for new products 26% 22% 29% 22% 20% 20%I can speak face-to-face with a sales or customer service representative 18% 11% 18% 15% 10% 41%It offers a greater variety or selection to choose from 25% 16% 16% 11% 12% 16%I don’t have to worry about where to ship the products 20% 19% 14% 12% 11% 14%
Products are better quality 22% 7% 8% 14% 7% 8%
Coupons 1% 1% 1% 0% 1% 0%
It offers better prices or discounts 1% 1% 0% 0% 0% 0%
None of the above 2% 2% 3% 10% 1% 2%
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
For the other categories, it is important to understand what drives your customers in order to improve the customer experience. Find out where customers come from, what brought them to your store and why they go to your store rather than shop online. Overall, our research shows commonalities among in-store shoppers that brick-and-mortar stores should consider to improve the in-store shopping experience.
Older shoppers: Consumers age 55+ tend to be “traditional” and stick with shopping behaviors and products with which they are comfortable. These consumers’ weekly purchase behaviors trend toward in-store. They are the least likely to shop for products both “online and in-store” and appear less likely to purchase products online at all.
Shoppers with lower household income: Consumers with an annual household income under $80,000, particularly females 45 years and older, shop more in stores.
Tactile shoppers: These shoppers want to engage their senses—smell, sight, taste and touch—as they shop the aisle. Retailers can protect themselves from e-commerce inroads by heightening the tactile and experiential nature of the in-store experience for these consumers. Use technology to enhance the experience. Depending on what you are selling, virtual reality is showing up as a tool to help store owners provide a highly engaging and helpful experience when shopping.
Browsers: Primarily comprising women and older consumers who like to browse aisles, comparison shop, and touch and feel an item before buying it, these shoppers often want to consult with in-store customer service representatives. Making it easy to comparison shop, matching online prices, and servicing customers in the aisle and after the sale are attractive attributes for these shoppers.
Price shoppers: No shipping costs, the ability to compare prices across physical products and the instant gratification of leaving the store with the item in hand are factors that increase the desire to make a trip to a store rather than surfing the net.
of consumers prefer to buy perishable items in-store where they can determine freshness—a key reason why in-store shopping dominates the grocery category.
BARRIERS TO SHOPPING ONLINE
87%
87% I prefer to buy perishable items in-store where I can determine the freshness or quality myself
74% When I make big-ticket purchases, I tend to stick with brands I know and trust
70% When I buy items where look and color are important such as fashion or decor, I tend to want to see them in person before I buy
65% When purchasing expensive or large items, I would rather purchase in a store than online
61% I enjoy walking through the store, browsing the aisles for new products
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
In-store shopping is not dying but there is significant pressure to adapt to consumers’ changing needs and expectations.
There is an emotional strength and draw to the in-store shopping experience. However, e-commerce is affecting how consumers interact with brick-and-mortar stores and will continue to evolve the way consumers shop. There is a reason formerly established companies such as Toys “R” Us, Sears and many music and electronics stores had to close. It’s unlikely what forced these stores to close was 100% about price and convenience, but that they failed to keep up with what consumers wanted from their in-store experience.
While we can confidently say in-store shopping is not dying, there is significant pressure to adapt to consumers’ changing needs and expectations. Here are four ways to engage consumers as their shopping habits evolve:
1 . KNOW YOU R CUSTOMERKnowing who your customers are and how they want to shop is the foundation of success. Conducting customer experience and path-to-purchase research will help you understand your customers’ shopping attitudes and behaviors so you can always deliver the best product mix and add value to the shopping experience.
2. USE A LL O F YOUR RESOURCES AND GET CREATIVESet up pop-up stores to pull in specific consumer segments, use technology to implement real-time promotions or enhance the shopping experience, and provide discounts for loyalty and unique or personalized deals that online retailers cannot match.
3. PUT CUSTOMERS F IRSTUse research to help your sales team provide a positive experience centered on customers’ needs. Train your sales team to engage consumers, arming it with the knowledge it needs to add value to the purchase decision. Then, ensure consumers have a smooth, seamless experience across all the ways they interact with you online and in-store.
4. MA KE SHOPPING AN EXPERIENCEProvide interactions with your products and services to allow consumers to engage all their senses as they shop. Many consumers miss the tactile nature of shopping in their online interactions. For many consumers, shopping is a pleasurable and tangible change of pace from their screens, their connected lifestyle and the general demands of life.
Don’t Panic, Adapt
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
Technology is changing the number of ways to shop and creating a need for all retailers to work harder to understand their customers.
As you can see, brick-and-mortar stores are not doomed. However, brick-and-mortar retailers need to be ready to adapt as online disruptors change the underlying fabric of how people shop and access products. Only part of Amazon’s power is its ability to quickly deliver what consumers want directly to their doorstep. Amazon’s willingness to meet and anticipate its consumers’ needs is setting the convenience and efficiency bar at new levels. While local merchants may currently have the same abilities as Amazon, they must reframe their thinking to fit shoppers’ shifting desires and expectations.
Brick-and-mortar stores offer many benefits—even Amazon knows the power of brick-and-mortar retailing. Just last year, Amazon moved into the in-store grocery experience by acquiring Whole Foods. It also opened its own in-store bookstore, Amazon Books, in 2015. Amazon uses its knowledge of consumer desires and technology to enhance the in-store shopping experience. Brick-and-mortar stores need to pay attention as Amazon is already changing the in-store shopping experience with ideas like no checkout required. Amazon will change the technology that brick-and-mortar stores may be able to use to improve the experience for shoppers. Keep your eyes open for new technologies and work to implement the ideas that make sense for your shoppers.
The Amazons of the world are applying innovation and unlocking doors that shoppers are reacting to and in many cases welcoming into their lives and homes. Technology is changing the number of ways to shop and creating a need for all retailers to work harder to understand their customers. Those that want a more in-depth look at their customer base should look at how their customers buy and what keeps them coming back. Consider conducting path-to-purchase research to better understand where your customers are coming from, where you might be losing them and potentially where you can get in front of them before they even need your services or products.
With the right information, brick-and-mortar stores can innovate, delight and create stronger ties with their customers.
Strategic Insights
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
IS THERE A FUTURE FOR BRICK-AND-MORTAR RETAIL?
© 2019 Escalent. All rights reserved.
P 1 .734.542.7600E [email protected]
ESCALENT.CO
ABOUT THE RESEARCH Escalent interviewed a national sample of 1,003 consumers aged 18 and older from April 4 to April 6, 2018. Respondents were recruited from the Full Circle opt-in online panel of US adults and were interviewed online. The data were weighted by age and gender to match the demographics of the US population. Due to its opt-in nature, this online panel (like most others) does not yield a random probability sample of the target population. As such, it is not possible to compute a margin of error or to statistically quantify the accuracy of projections. Escalent will supply the exact wording of any survey question upon request.
About EscalentEscalent is a top human behavior and analytics firm specializing in industries facing disruption and business transformation. As catalysts of progress for more than 40 years, we tell stories that transform data and insight into a profound understanding of what drives human beings. And we help businesses turn those drivers into actions that build brands, enhance customer experiences and inspire product innovation.
Visit escalent.co to see how we are helping shape the brands that are reshaping the world.
TA LK TO THE EXPERT
Jill MillerSenior Director, Research & [email protected]