Clicks to bricks and bricks to clicks: the future of the high street

It’s been a challenging year for brick-and-mortar merchants across the globe: giants such as Sears and Toys “R” Us have faced bankruptcy and closure, and while department store brands such as House of Fraser and Marks & Spencer have survived, they’ve also been forced to close several stores across the UK. Meanwhile, 2018 has also seen Amazon post record profits: becoming the best performing retail stock in the S&P 500 and the fifth largest retailer in the UK.

It’s easy to conclude that the high street has reached the next stage of a slow and terminal decline — with e-commerce its anointed successor. Nonetheless, reports of retail’s death have been greatly exaggerated. Certainly, online shopping will continue to grow and e-commerce will continue to innovate, but this doesn’t mean that the offline experience is obsolete. There’s a reason that Amazon purchased Whole Foods, the US grocery chain, in 2017.

Physical touchpoints continue to be important to consumers, and the tactile appeal of a product that can be tested in-person shouldn’t be underestimated. Because of this, -e-commerce retailers and merchants are embracing omnichannel strategies in greater numbers: leveraging digital tools to augment the in-store experience, and vice versa.

‘Bricks to clicks’ and ‘clicks to bricks’ both have a place in the current landscape. The question, then, is whether traditional ‘brick’ retailers can withstand e-commerce’s forays onto their territory.

 

How Amazon is saving retail

The first thing bricks-and-mortar retailers can do is stop treating Amazon as the enemy. Traditional merchants have a deep suspicion of e-commerce — and given the aforementioned examples, it’s not hard to see why. But the narrative of bullying digital monopolies forcing bricks-and-mortar stores out of the market doesn’t necessarily stand up to deeper scrutiny.

A closer look at the aforementioned Toys “R” Us reveals problems such as unsustainable debt, poor customer service, inventory overflow and poor merchandising. No doubt Amazon contributed to some lost sales, but so did bricks-and-mortar supermarkets such as Walmart and Target. In most meaningful respects, it’s a story of classic mismanagement.

It’s the same story with many other fallen retail giants, with Amazon playing the bogeyman for companies that declined or collapsed for a variety of reasons. In reality, the rise of e-commerce provides a lucrative opportunity for the high street: if stores can provide an exceptional in-store experience and invest in digital tools, they won’t just endure — they’ll lay the groundwork for an exciting and profitable future. Progress requires competition, and e-commerce has duly provided.

For example, Amazon has opened five physical locations since 2016, where customers can simply walk in, pick up their items, and leave: no fumbling over debit cards, no counting pennies, no queueing at the till — accounts are charged as customers leave the store. It’s been a successful initiative, and it’s proved that the future isn’t online or offline: it’s both.

 

The new digital high street

Naturally, not every retailer will have the resources of your average e-commerce giant. Amazon’s cashier-less experiment won’t necessarily be a good fit for businesses that built their reputations on a foundation of person-to-person customer experience. But technology companies are diverse enough to create solutions for merchants in all sectors, and the point of sale (POS) market alone has proven fertile ground for innovation.

Nike, for example, has sales assistants walk around with handheld POS systems — giving the user the choice to buy the item there and then, or have it posted to their home address. Starbucks’ app allows the consumer to order a coffee on the way to the store so they can pick it up the second they arrive. Marks & Spencers (along with a number of major supermarkets) is expected to trial the removal of in-store tills in 2019 — allowing users to pay through their smartphones instead.

These are distinct brands that operate in radically different industries, but they’re united by a need to provide a smooth, convenient payment experience — and an understanding that technology can help them do just that, merging online and offline in a way that enhances the in-store experience and incentivises customer experience.

Customers don’t want an impersonal digital experience for everything: in many cases, they’d prefer digital to supplement and augment traditional retail transactions. Consider Philip Morris, the international tobacco retailer: it recognised that its IQOS heated tobacco product would require a tactile component for consumers to understand its appeal. So, despite never having physical locations before, the company set up stores with interactive digital and feature displays — where the target audience could find out about IQOS, try it, and purchase it easily.

There is room for physical locations to flourish. Consumers can order Lego online — but once they’ve ordered it, an irrevocable choice has been made. The opportunity to go into the store, dither for half an hour, and fill a pint cup with an eclectic selection of hand-picked blocks is something they simply can’t get online.

But modern consumers exist in a digital world, and physical retailers must meet them in the middle — and make the most of the opportunities provided by technological innovation. That means overhauling antiquated POS systems, and it means providing an integrated, holistic customer experience wherever it is possible to do so.

These are scary times for merchants, but they have the potential to be transformative — for better or worse. The retailers that survive and prosper will treat e-commerce as an inspiration, not an adversary.

 

Written by Christian Deger, CEO and Founder at Payworks
First published on PaymentEye on 26-10-2018