Retail is undergoing an unprecedented period of change, brought on by the shift to online—as well as social, technological, and economic factors. The role of big-box stores is being challenged. As growth slows, retailers are responding by scaling back new store expansions, investing in smaller retail formats, and reshaping their existing physical assets by reimagining the Store of the Future.
The store is not dead, but it does need to be reinvented to remain relevant for the future. E‑commerce is forecast to account for 27 percent of global chain retail sales by 2023 (up from 19 percent in 2018), which means that physical stores will still account for the majority of sales and remain an essential route to consumers.
To differentiate and remain relevant, physical stores will need to become a physical portal for brand encounters and product experiences—places where consumers can learn, co work, socialize, be inspired, and experiment with new products.
Edge by Ascential has identified four key characteristics of the Store of the Future: it creates a memorable experience that can’t be replicated online; it is positioned as a social hub; it builds frictionless online-to-offline (O2O) interaction; and it offers curated products that differentiate it from the competition.
Retailers such as Walmart and Carrefour lead the way globally, investing in the in-store experience and customer offering, while ensuring the store is central to a future O2O proposition. In terms of digital-first stores, Alibaba’s Hema format sets the standard that retailers are racing to catch up with.
The reinvention of the store brings a number of opportunities for retailers and their suppliers, although these can only be fully realized if both parties can achieve a greater understanding of customers and their needs, demands, and behaviors.
As such, retailers will need to view their stores in new ways and judge them by a new set of measures, encompassing organizational structure, brand offer, retailer economics, and supply chain. In particular, traditional brick-and-mortar (B&M) retailers must invest in data and solutions to understand:
As Patrick McDermott, CRM Manager, Toys R Us Japan, says, “The way we stay relevant and the way we can compete with these big digital giants is … to understand the customer as much as they do.”
The ability to monitor, measure, and assess store-based traffic and performance—and to align key performance indicators around these—will be an important differentiator for future retail winners.