How Brick-and-Mortar Stores Can Win

While online purchasing appeals to customers, nothing replaces the experience of brick-and-mortar stores.

With the rapid rise of online commerce, retailers have asked themselves how brick-and-mortar stores can win. To be clear, brick-and-mortar stores aren’t going anywhere. Smart marketers know that in this case “how” isn’t a question; it’s an opportunity to establish a competitive advantage.

Brick-And-Mortar: A Solid Foundation

There’s no proof that brick-and-mortar has a firm place in modern society quite like Amazon – the supposed killer – opening a physical location of its own. What’s more, Amazon is not alone. Rent-the-Runway, Birchbox, and Bonobos, businesses founded on the idea that retail should be in the cloud, have all cut the tape on physical addresses. 

Online commerce still represents a relatively small percentage of total sales. AT Kearney reported that brands with a brick-and-mortar presence captured 95% of all retail revenue. 67% of online customers visit a physical store before or after purchase. According to eMarketer, by 2017 in-store retail will account for $5 trillion in sales, more than 11X the amount generated online. By 2025, McKinsey forecasts that online commerce will represent less than 15% of total retail sales

The reason brick-and-mortar holds such prominence in the retail world is customer experience. There are numerous advantages a physical store provides that online can’t:

  1. In-person help – a recent TimeTrade survey discovered that senior retail executives considered personalized assistance their #1 priority and competitive focus. The executives also commented that providing this service gave them a true advantage when it came time for customers to decide where they would spend their money.
  2. Customers prefer the in-store experience – among digital shoppers worldwide, eMarketer found that 72% feel the traditional store experience was most important when making a purchase – by far the highest percentage out of locations and channels studied. 
  3. Tangible products drive purchasing behavior – while shoppers can look at a wide selection of products online, it’s actually seeing and touching (what retail experts call “trial and testing”) that drives the decision to purchase. According to the Houston Chronicle, consumers pay much more for products they can see in person, especially high-value items such as designer clothing, antiques, and jewelry. The study went on to say that a retail storefront appeals more to customers and generates a higher profit margin on individual items. 
  4. Immediate possession has value over delivery – online commerce introduces processing, shipping, and delivery. Even if a customer has to pick up the product at a later date, an AT Kearney study discovered that “in-person, in-store pickups exclusively offer a sense of reliability and trust that consumers don’t find online and through home delivery.” Moreover, customers can return products easily to a store nearby instead of having to deal with the headache of shipping a product back to its online source.

How Brick-and-Mortar Stores Can Win

What brick-and-mortar retailers need to understand to achieve long-term success is that new business models are not the enemy. Stagnation is the enemy (we all know what happens when brick-and-mortar businesses fail to evolve). 

Fortunately, there are a few actionable next steps that retailers can take in order to remain effective at driving purchases from modern consumers. In no particular order:

Use technology to make the retail in-store experience more effortless

According to eMarketer, 36% of consumers considered electronic receipts sent via email or text the most appealing technology available in retail stores. In-store kiosks allowing customers to order items that were out of stock or not sold in the store ranked second. Shelf labels that customers could scan to purchase or search for info came in third.

NB: all of these benefits have nothing to do with the technology itself. They are implementations of technology that make customers’ in-store experiences easier. Oftentimes, retailers incorrectly view technology as an end in and of itself. To attract the more lucrative pragmatic majority (beyond early adopters), envision in-store technology like an awesome sports ref – i.e. keeps games under control and organized without being an attention hog.  

Engage customers with relevant content reported on an online survey of over 1,000 shoppers in the U.S. and Canada that said the strongest driver of brand loyalty was customer engagement. The majority of survey respondents said that polite, courteous, and knowledgeable in-store employees made for the best shopping experience. 

To quote marketing expert Arnold Schwarzenegger, “Well duh.” Of course those characteristics matter. What’s between the lines is that customers value engagement that provides value to them. Three examples:

  1. Rather than blasting opt-in email lists crossing fingers for a better than benchmark open rate, A/B test to discover content that converts.
  2. Launch a loyalty program that provides customers with transparency in their reward progress earned.
  3. Reach out to customers when they are shopping, as opposed to when they are busy doing something else.

When in doubt, remember that “engagement” needs to be “engaging.” 

Implement a data strategy

According to McKinsey, 35% of what consumers purchase on Amazon and 75% of what they watch on Netflix come from product recommendations based on personalization algorithms. Physical retailers can follow suit. Loyalty program data, for one, is ideal for discovering customer preferences and profiles. Location data much talked about, will only become more usable in the future (beacons, in particular, have a ton of potential). Eventually, retailers should strive to replicate the online experience, where customers in-store can easily access relevant information that helps them make a decision. 

Remember, there’s one too often overlooked maxim to remember when it comes to data: experience dictates success. Those brands that wait for the perfect time or solution before launching an analytics solution will fall behind. Implement a data program now to develop the experience needed to manage outreach in the future (just don’t forget that all important effortless customer experience). 

Embrace and understand customer lifetime value

Harris Interactive found customer retention to be 6-8 times more cost-effective than customer acquisition. Physical retailers have to move away from treating each customer the sameOf course, you need a baseline for all, but – without exceptions – some customers have more value for a business than others*. Combine the tactics mentioned above – technology, engagement, personalization, and data – to develop an understanding of how to ensure that those who visit come back and those who drive the majority of your revenue never switch allegiances.