A nation of shopkeepers. That’s how Adam Smith referred to Britain in The Wealth of Nations, arguing that a society influenced by merchants had a strong foundation to become an empire. However, the past decade has seen the emergence of e-commerce throw traditional retailers into a state of crisis. Customers have in a short time become accustomed to a hassle-free and frictionless service that’s on demand, online and on time. As a consequence, bastions of the high street such as Jaeger and Austin Reed have all gone bust. Similar trends can be spotted across the pond where 2017 saw more stores close than during the financial crisis, sparking talk about a retail apocalypse.
And it’s relatively easy to see why, according to a study from Ipsos Retail, the footfall in bricks and mortar stores has dropped by 22% since 2007. “The truth is that modern offline retailers are extremely ineffective,” says Olga Kotsur, CEO and founder at Mercaux, the mobile-retail platform. Just consider how much time you’ve wasted in fitting rooms for sales people to fetch you the right size shirt only to discover that your size is unfortunately out of stock. In comparison, any online shop will not only inform you if they’ve got the right garment but also provide several similar alternatives within seconds. “The convenience of online is hard to replicate in the offline world right now,” says Kotsur.
But difficult as it might be, it’s not impossible as long as retailers are willing to innovate. In fact, their very future depends on it. “It’s going to be really hard for retailers who don’t change to survive,” says Kotsur. Maybe that’s the reason why many major brands are actively looking for ways to adopt new technologies. For instance, Walmart has opened a tech incubator in Silicon Valley and, closer to home, John Lewis is supporting startups through its JLAB accelerator. Moreover, established players aren’t the only ones supporting a new generation of entrepreneurs. In 2016, VCs dashed out over $384m to new enterprises in this space, according to Crunchbase, the startup database. Clearly, both big brands and budding businesses are recognising the demand for innovation. “It’s no longer a choice; it’s a must-have,” says Kotsur. “If your competitors can bring both the convenience of online and the experience of physical stores and you can’t, then your customers will become frustrated.” In other words, while technology is at the centre of these companies’ woes, being able to evolve with the times can prove to be their salvation.
Given that traditional retailers’ problems began with online shopping, it’s only logical that many companies’ first step is to offer their products on the web. “The contrast in performance between businesses who use e-commerce and those that don’t is significant,” says Douglas Gurr, UK country manager at Amazon. And it seems as if this point has hit home as the number of UK SMEs planning to sell products online is set to rise from 64% in 2017 to 88% by the end of 2018, according to research commissioned by Amazon UK and Enterprise Nation, the small-business community. The report also found that SMEs that use e-commerce expect three times faster revenue growth and two times faster jobs growth compared to those that don’t. And if you ask Gurr, this faith in the power of online is well founded. “The impact digital tools and services have on a small business cannot be underestimated,” he says. “They can improve productivity, boost revenue growth and provide real export power.”
However, rather than being satisfied with simply opening e-commerce sites, retailers are actively looking for ways to blend the offline and online experiences offered to customers. “The two can’t be siloed anymore,” says Eric Jones, vice-president of global brand and communications at WP Engine, the WordPress-hosting platform. Instead of having the digital and physical sides of your business compete with each other, they should instead offer different sides of the same coin. “The battle starts online,” says Jones. “It’s very unlikely that you’d walk past a store and just pop inside unless you’d heard about the store online first.”
Another reason to mix the digital and the physical realms is because customers are increasingly expecting to receive a holistic experience from brands. “Their general attitude towards technology is changing,” says Jones. For instance, while 37% of baby boomers say that the internet will determine what they do each day, that number rose to 51% for Gen Z, according to a report from WP Engine. “For Gen Z, it’s very much at the core of who they are,” says Jones. “They don’t differentiate between online and offline, technology and non-technology. To them it’s all just a part of the human experience.”
Nowhere is this blend more prevalent than in the way retailers are starting to use augmented reality (AR). “Done right, AR creates enjoyable and memorable experiences for shoppers – both in-store and at home: almost like pieces of theatre that can bring campaigns to life,” says Malcolm Fogarty, chief digital director at tcc global, the retail-marketing firm. Companies like IKEA and Amazon have already developed tools to see how new furniture would look in your home before making the purchase. Similar innovations can be seen in bricks and mortar stores. For instance, fashion brands like Uniqlo and Burberry have used AR mirrors in their stores to boost their customers’ experience. “Ultimately, for those businesses that are brave enough to see the vast opportunity of AR and dive in, AR can change customer experience and shopper journeys for the better,” Fogarty says.
Another way technology can change the tide for retailers is by empowering their salespeople. “There is a huge and urgent need for this and it’s definitely something retailers are looking at,” says Kotsur. “And it’s obvious why when you think about it.” Indeed, store personnel can struggle to keep keep track of an ever-changing range of products, know where everything is located in their store and what’s in stock. Fortunately, simple things like providing staff members with tablets can enable them to provide a better service. “It can make them more effective and help them sell more,” says Kotsur. And if customers buy more, it can only be stellar news for retailers’ bottom lines.
But adopting innovations can also provide retailers with a better understanding through big data and AI. That’s true whether they are using AR or tablets to boost customers’ experiences in their stores or offering their services through voice-activated smart devices like the Amazon Echo or the Apple HomePod. “From a retailer’s perspective all these things are generating massive amounts of data around the consumer, what they are searching for and how they’re using products,” says Steve King, CEO and co-founder of Black Swan, the data-mining startup. By analysing this data, retailers can cut wastage, improve their supply chain and acquire a better understanding of what customers want. “On airlines alone, we’ve seen how AI can cut wastage by 20%, eliminating £1bn worth of waste and delivering improved margins,” says King. In a business with such low margins as retail, using AI and big data is a god-send.
Clearly, retailers have the world to win by adopting new technology. But even if it’s easy to be overwhelmed and even wooed by new technological innovations, they must remember their prime directive hasn’t changed. “Customer experience [comes first], technology second,” says Fogarty. With everything from AR to big data changing the face of retail, Fogarty warns against using new technology just for the sake of using it unless it can improve customer experiences. If it doesn’t then adopting it becomes an exercise in futility. “What is clear is that despite the increasingly digital world, customers still yearn for the human touch,” he concludes. “Regardless of predictions of their downfall, bricks and mortar has a key role to play.”