Next step for digital retailers is to open physical stores
- I am sure that Amazon will open physical stores in the near future. This prediction comes from Robin Lewis who is the CEO of the retail strategy newsletter “The Robin Report”. - The omni-channel strategy - selling both online and in stores - will win, he says in this interview with MARKET Magazine.
- By: Karsten Bengtsson interviews
- Published: 11-04-2014
MarketMagazine caught up with CEO Robin Lewis on a Skype-connection from his US east coast office - to get his view on the future of retail - among other things.
What is the future of retail?
- That it a very big question. And not a happy one. But lets begin with that all research shows that consumers who have the opportunity to shop both online and in the store, like the department store Macy’s, spend 3-4 times as much as consumers that only have one channel to shop at. So if your are a pure e-commerce player like Amazon the consumer who shops there will spend less than the consumer who has both channels. That is why the omni-channel is the best marketing strategy going forward.
That is also why we at “The Robin Rapport” predict that Amazon eventually will open physical stores in the near future. Amazon’s Jeff Bezos is not a stupid man. He understands that the consumers will always want a gathering place - we are social animals after all. And physical stores will always be the place where we can go and look at each other and have a shopping experience. But the brick and mortar stores will have to shrink in size and grow in terms of the shopping experience that they provide to the consumer. The consumer will need a reason to take the time and effort to go to a physical store.
So you think Amazon will open physical stores. Why will they do that?
- Amazon has this gigantic database - it is bigger than the one at the Pentagon - with a lot of information on all their consumers. They know what the working mom with two kids who lives in the northeast corner of the United States eat for breakfast and what brand in boots she is wearing and which movies she is watching in the evenings with her kids. So I predict that Amazon will open small stores that will look a lot like showrooms. They will have a lot of items and products that are popular in specific geographic areas - in the countryside or in the city. There will, of course, also be an Internet screen where you can buy or download all the products that Amazon has. And they will also serve coffee and have music - and this will create a really nice experience for the consumer.
And in the future you will see all the pure e-commerce players, including e-Bay, open up brick and mortar stores just as most brick and mortar stores have opened online stores. The omni-channel strategy - selling both online and in stores - will win.
The “show rooming” problem
So all stores will have these two channels - selling both online and in stores?
- Yes, if you don’t operate in both channels - omni channels - in the future, you won’t be around for long. But one important thing: the two channels have to be integrated with one another. The consumer needs to be able to order, pay for, pick-up, and return the products they bought in both channels as a part of the whole shopping experience. And that can be difficult - to order online and to pick the product up in the store. It takes a lot of logistics work to be able to do that.
Will the omni channel strategy also eliminate the so-called show rooming problem, where the consumer go in to the store to get information and then buy online?
- Well, show rooming is and will always be a problem. You have a consumer that go into BestBuy (an electronic store in the US) to get educated by BestBuy’s so called Geeksquad and after he or she has gotten all the information, they want - they will simply scan the barcode of the product into their smart phone and find six other places where they can buy the product, maybe even cheaper. And they will end up buying from Amazon. So “showrooming” is not going to go away. But a lot of stores are now saying: Go ahead - scan the bar code - and if you can find the product cheaper anywhere else, we will match that price. And I believe that is the best way to combat the problem with showrooming. Simply match the price anytime.
Do you see the Apple Store as the model for the future of retail?
- Very much so. The real shopping experience at Apple Retail is that you get this wonderful rich education and that the Apple Store is just a fun place to go to. You learn things and you can chat with the sales person in the store for hours if you want to. It is like going to a sexy nightclub for these young people.
Do you predict any privacy issues with the ability to track consumers around the store using their cell phones?
- Yeah, the older generation - the baby boomers that are slowly dying now- they don’t like it. They feel it is an invasion of their privacy. But the younger generation… they couldn’t care less. They share naked pictures of themselves online! They don’t care.
But really, it is a win-win situation both for the retail business and for the consumer. If the retail store can watch you and get to know you right at the point of sale, then it can learn what you like and what you don’t like, which price range works, which doesn’t and so on.
Therefore the store can tailor its offers to you much better. So in the long run the consumer gets great benefits from all this data-collection.
The “high tech - high touch” experience
Do mono branded stores like Levi’s have an advantage over multi branded department stores like Macy’s?
- Mono branded stores has some advantage. It is easier to build an audience around just one brand. It is easier to brand them as cool and sexy. And these mono brands can control the whole image and design in the store much easier so the store becomes more of a lifestyle experience than a traditional shopping mall. Store like H&M - they have a doorman, music and even their own perfume that is being released into the store. Again - it is like going into a nightclub.
But of course the mono branded stores are also more vulnerable, because if their brand is doing poorly then they are doomed. If Bloomingdale or Nordstrom or Macy’s have a brand that is selling poorly, then they can just sell more of another brand. The multi brand department store can also keep the consumer longer in the store simply because there are more things to do. And now you see department stores like Macy’s trying to morph into a small shopping mall with a lot of mono branded shops in there - so they can get the benefits from both worlds.
You talk a lot about a “high tech -high touch” experience in the physical store, what do you mean by that?
- If you look at Burberry’s flagship store in London it has taken in-store technology to a whole new level. You walk into that store and you see a giant LED screen with streaming videos of live fashion shows and music blasting out in the store. And there are food courts and so on. And if you walk by a designer scarf in the store and you like it, you can take your smart phone and scan the bar code and right there on your phone comes a YouTube video with the designer who is talking to you and telling you all about that scarf; the fabric it is made of, how it was made, where is was made, what inspired him as a designer and so fort.
There is also a new technology called “Virtual Fashion Mirror” where the consumer can use hand movements to download images of clothes in the store and the clothes will appear on the consumer’s body in the mirror. And you can order it right there, from the mirror.
This makes the physical in-store experience much richer and therefore creates a more compelling reason for the consumer to leave their living rooms and their Internet and come to the physical store.
But with the rise of Internet and smart phone shopping, the brick and mortar stores will probably shrink in physical size and their product range will be more limited - simply because they will sell more online. But I don’t think that online sales will dominate the whole retail industry in the future. Internet shopping will probably reach - and stay - around 30 to 40 pct. of the market in the future, says Robin Lewis from the “Robin Rapport”.