Till a few years ago, a physical store was considered an absolute must in the retail industry. In fact, a retail company’s might and success was judged by its “footprint”, or the number of stores it operated. A new way of shopping emerged in recent years, where consumers could make a purchase through a digital channel (eCommerce, online shopping, mobile shopping). Any other form or channel of shopping is a mere extension or combination of these two channels. 

According to the U.S. Department of Commerce (Q-o-Q, Q4 2019 to 2020), USA saw a 6.9% increase in total retail sales, as well as a 32.1% growth of its eCommerce business. As a percentage of total retail sales, eCommerce rose from 11.3% to 14%. Not only did it grow in absolute terms, but also captured a bigger percentage of total retail sales.

Let’s now come to the key question: “Why do consumers choose one channel over the other?” The drivers usually include channel attributes, attitude towards a channel, a consumer’s shopping motives, and the product categories.

In order to understand the process that precedes transactions, let’s consider what consumers who preferred in-store purchases were looking for: 

• An ability to physically interact with an item before buying.
• Immediate ownership of goods rather than wait for shipping.
• Avoiding the hassle and complexity of returning unwanted or defective items.
• Avoiding shipping costs.
• A desire to speak directly to a representative and get detailed information about a product or service.
• The experience of shopping in retail stores and doing other fun activities.

When the pandemic swept across the world in 2020, it fundamentally changed the way people lived, spent their money, and made purchases. In fact, the changes in consumer behavior was so drastic that retail businesses had to rethink and redefine their models of supply chain and service delivery. 

Before digitized shopping became a norm, retailers only had to worry about getting products to their store’s aisles. With eCommerce and `Direct to Consumer’ models gaining traction, retailers have to plan to get their products to the consumers doorstep. Interestingly, eCommerce and online shopping existed long before the pandemic hit the world. However, the adoption of these channels accelerated during the global lockdowns. 

Does this trend imply that the digital channels will destroy the ‘brick and mortar’ stores in the coming future? That seems highly unlikely. Instead, retailers and consumer companies would now be focusing on:

• Optimizing their physical footprint.
• Creating an omni-channel customer experience strategy.
• Using physical footprints as a distribution center, for D2C platforms and curb side pick-ups.
• Creating a robust last mile delivery capability that ensures highly accurate delivery drop-offs, with short turnaround times. 
• Making the process of returning products simpler and hassle free.
• Knocking off delivery or shipping costs by including it into the product cost. 
• Making online shopping experiences more interactive and “real” by using technologies like Augmented and Virtual Reality.

It’s becoming apparent that social distancing is here to stay for a long time, as people will be careful about their movement even a post pandemic world. In order to maintain their share in the retail market, in-store shopping digital channels will have to include curb side pick-ups and queue management systems into their delivery. This will ensure crowd control in physical stores and make customers shop responsibly and plan their shopping trips wisely. This, in turn, will save investments worth billions of dollars in real estate and other overheads for retailers. 

Keeping the fast changing dynamics of the retail industry in mind, what does the future of the industry look like? Let’s summarize the key developments that are already on the roll, and fast gaining momentum: 

Fusion of in-store and digital models of operation:

The pandemic pushed retailers to adopt “phygital” store models – where they provide users with digitized, real time, one-on-one shopping experiences in their homes. Phygital stores blend online and offline shopping experiences. Using technology like conversational tools, customers can take virtual shop tours, get live product demonstrations on video calls, view interactive product stories, place orders, register complaints, and get their purchased items home-delivered or picked from the store.

Retail stores will recreate real-life shopping experiences and human interactions in a digitized environment – by forging a direct link between customers and the sales staff. Using text messages, chats, and live videos, customers can interact with stores, ask questions, view products, and get recommendations to seamlessly complete purchases.

Deliverance of next-gen technology

By deploying advanced technologies on the storefront, retailers will be able to better understand their consumers, enhance shopping experiences, and become relevant to their customers. Innovative retailers are taking advantage of an array of technologies, ranging from mobile devices and apps, interactive kiosks and digital signage, sophisticated beacons and wireless networks, to secure payment systems. Technology is playing a big role in helping retailers improve the way they do business and take their relationship with customers to the next level. 

However, deploying the latest technologies is not enough. Retailers will need to establish robust IT infrastructures to support and integrate these technologies, so they can work seamlessly. With modern storefronts and powerful back office support, retailers will not just survive, but thrive.

Optimization of physical presence

Till 2019, physical stores were still the venue for 90% of retail transactions – indicating that despite the speed and convenience of e-commerce, customers still looked for personalized interaction and in person locations are still relevant for retailers. Stores can optimize their physical presence by harnessing technologies like AI, augmented reality and virtual reality, and 5G communications to breathe new life into brick and mortar experiences. The store functions that can be digitally improved include:

• Product touch and feel: Stores that sell cosmetics, fashion labels, and automotives – goods with high emotional appeal – can use technology to enable consumers to have a direct sensory encounter with products before buying.
• Immersive exploration: Big brands that shape shopping experiences can build a brand ecosystem that nurtures a community of diehard enthusiasts.
• Personal and trusted advice: Sectors like banks and telcos can deploy technology to act as knowledgeable sources to provide guidance and validation to customers.

Creation of an omni-channel strategy 

Today, customers are looking for richly tailored shopping experiences. This has made it imperative for retailers to offer compelling omnichannel experience. For instance, since the pandemic, more than one-third American shoppers have made omnichannel features, such as buying online and picking up their products in store, a part of their regular shopping routine. 

Young buyers are the biggest takers for this new, omnichannel way of shopping, as they cross traditional channel boundaries with ease and evaluate brands and retailers on the seamlessness of their shopping experience. Omnichannel experiences add personalization to shopping journeys and create a more durable relationship between retailers and shoppers.

If the traction that physical stores have enjoyed so far has taught us anything, it is that customers seek human interaction when they shop. Therefore, in a post-pandemic world, digitizing in-person shopping experiences is the way to go for retailers. With the right tools, they can build personalized relationships with customers and offer virtual, yet real time, contact with physical stores. Therefore, while digital channels will become a powerful, go-to option for shoppers, it will ensure that in-store channels don’t become obsolete.

Anup Sukumar

Practice & GTM Lead -Retail and Consumer Goods, Digital Operations & Platforms, Wipro

Anup has 15 years of experience in Sales, Marketing, Business Development, Bid Management and Practice in the IT and ITeS space. He has developed successful GTM strategies and worked with organizations in Retail, Consumer Goods, Automotive, Consumer Electronics, Healthcare, and Hospitality.