Brands Must Embrace the Store's Future — Since It's Already Here
It's 2017. Remember when e-commerce was "disrupting" the retail industry?
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Overall retail sales increased 4.0% to $658.3 billion during the 2016 holiday shopping season.1 Online sales rose almost 13% to $122.9 billion, accounting for 19% of the total.2
During the critical Thanksgiving weekend, the number of online shoppers increased 5.3% to 108.5 million compared with 2015, while the ranks of brick-and-mortar shoppers slipped 1.9% to 99.1 million.3 In the most troubling retail segment, sales in malls across the full holiday season dropped 9.9% as traffic fell 12.3%.4
These kinds of statistics are no longer shocking. They simply reflect what The Washington Post called "a long-term shift in which shoppers are choosing the convenience of swiping, tapping and clicking over a trip to the mall." So while the continued trend toward online shopping didn't quite have traditional brick-and-mortar retailers dancing in their empty aisles, neither did it produce the same level of alarm, fear and gnashing of teeth that it has in years past.
“There has been a lot of talk about online versus in-store retail in the past few months, but that comes from people who don’t realize that online and retail today are the same thing. Today’s retailers sell to shoppers any way they want to buy," said Matthew Shay, the National Retail Federation's chief executive officer. That's not spin doctoring, folks, that's embracing reality.
This doesn't mean that the disruptive portion of the "digital disruption" era is over at retail — not by a long shot. It's just that disruption has become the normal course of doing business these days.
The first quarter of the year was again a chaotic time for the industry, with many struggling retailers forced to take an honest, post-holiday assessment of their business. Abercrombie & Fitch announced plans to close 60 stores, Office Depot 75, hhgregg 88, Macy's 100, JCPenney 140, Sears Holdings 150 and Payless one thousand.5 (Like we noted earlier, the holidays were not very kind to the mall.)
At the same time, Nordstrom announced plans to roll out 15 stores in its new Nordstrom Rack concept, TJX Companies to add 200 locations across its three value banners, Dollar General to open one thousand stores.6 Meanwhile, the entire CPG world is anxiously awaiting the arrival of European "disruptor" Lidl this summer. (Apparently, 2017 will be very kind to discount retailers.)
Embracing New Retail Strategies
OK, so we've embraced omnichannel as the future of retail. And we know that the physical store won't be going away — but it does need to change, quickly and dramatically, to meet the demands of omnichannel shoppers. Success will be driven largely by the retailer's ability to make the online and in-store experiences collectively seamless but separately necessary.
It's pretty clear that we'll continue to see fewer brick-and-mortar shoppers. The ones who do make the trip will have far different expectations about the experience, and will only come back if retailers — and their manufacturer partners — not only meet these expectations, but also find ways to go beyond them.
Millennials shopping during the holidays used their mobile devices to compare prices, read product reviews and find deals while they walked through physical stores, and 96% of them ultimately made a purchase right there.7 What's more, 64% of Millennials say they buy online from retailers with a physical presence so they can pick up and return orders at a local store.
Retailers met these changing expectations in various ways during the holidays, by improving either the omnichannel or the store experience:
- Both Macy's and Nordstrom introduced services that let shoppers buy gifts online, then have the recipients notified about the purchase via email. Recipients were allowed to accept the item and approve delivery, choose a different item or opt for a store gift card.
- Sam’s Club hosted the "Gift Genie," a chatbot offering on Facebook Messenger that generated product ideas by "talking" with shoppers about categories or intended recipients.
- Walmart stationed "Holiday Helpers" dressed in Santa-style outfits at the front of stores to speed up the checkout process by directing shoppers and opening new lanes when necessary.
- Toys "R" Us opened four experiential stores that feature a "Play Lab" letting kids "test drive" out-of-the-box toys.8
Embracing New Merchandising Strategies
Toys "R" Us probably offers the best example of how the traditional store is changing. Online shopping is altering traditional category management and merchandising strategies; some categories will very likely be "lost" entirely to e-commerce. (Think high-frequency and bulk-purchase products.) That literally will leave more room inside the store to offer services and deliver better, interactive experiences.
Product displays have to play a greater role than they ever did before. In the future, actually carrying product might be the least important job — in some cases, it might not be necessary at all. Displays now also have to effectively deliver an experience, with product, packaging and display working in tandem to deliver the brand proposition and not just enable the sale, but to close it. That's going to require more augmented reality tools than it will B-flute corrugate materials.
With an eye toward e-commerce, displays need to play a greater role in winning over category shoppers. Getting entrenched consumers to switch brands is becoming harder as online shoppers increasingly buy off pre-made lists and even through pre-ordered subscriptions. The store could end up being the best place to break such digitally driven shopping habits.
If that's not already enough responsibility, product displays also need to go beyond brand building to enhance the overall store experience, making that trip to the physical store worthwhile — and worth repeating.
In this new, rapidly evolving world, in-store merchandising and packaging are growing more critical to success. WestRock is committed to providing innovative new packaging and display solutions to our clients. Whether it be our new connected packaging product or differentiating Shopper Solutions merchandising. Through our retail knowledge end insights, we bring a strong point-of-view and consultative customized solutions to all our programming.
Obviously, there's no one solution for meeting these new demands on merchandising and packaging no single path to success. The need for ongoing innovation is the only certainty, along with a readiness to test and learn and a willingness to fail — fast and often — as you follow shoppers into the future of retail.
Whatever you do, just don't call that disruption anymore. It's just the new normal.
For more information on how we can help you win the war in the store contact your WestRock representative or check us out at www.westrock.com.
2. National Retail Federation
3. National Retail Federation
4. Retail Next
5. Minneapolis Star Tribune, USA Today, Fortune, Cosmopolitan, Biz Journals
6. National Real Estate Investor, RIS News, Motley Fool
7. RetailNext Group
8. RetailNext Group
To find out how we are developing solutions to meet a rapidly evolving retail, consumer and shopper environment please call your WestRock representative.