The retail future is bricks + clicks
By Anand J. Mehta June 26, 2013
- The reality is that online and in store strategies are no longer mutually exclusive, but if structured right, completely complementary
- In the connected world, it is about understanding the impact of mobile, online and social media – or ‘omnichannel’ retailing
THIS is not an article about traditional retailers and the challenge presented to them by online retailers.
We are all aware of the statistics that identify the exponential growth of online sales, but the fact remains that even in the most mature markets they account for below 10% of aggregate sales.
The profitability and scalability of this business model is another separate discussion in itself – it is clearly evident in our discussions with leading retailers that most companies are pausing to evaluate the difference between fashionable concepts and functional business models.
The financial results of online retailing aside; an equal force in driving this pause has been the impact of smartphone penetration in all countries globally. E-commerce is clearly being replaced by mobile commerce largely due to the fact that m-commerce is complementary to harnessing the power of “clicks” or the web-based platform, to create resulting transactions within the “bricks” or physical stores.
Malaysia, like many countries with high smartphone penetration, has seen very strong results within the mobile commerce market in recent years, as reported in the PayPal Online and Mobile Shopping Insights 2011. The data showed that:
- The m-commerce market in Malaysia saw phenomenal growth from RM101 million in 2010 to RM467 million in 2011, representing a more than 370% jump in just one year.
- The m-commerce market is also forecasted to grow more than seven times to reach RM3.43 billion in 2015, which translates to 60% of the online shopping market.
The reality of m-commerce is that online and in store strategies are no longer mutually exclusive, but if structured right, completely complementary.
The shopping journey can be divided into three parts – discovery, selection and transaction. Savvy retailers are aware of the discovery and selection components being increasingly initiated online or on mobile, and are using this ‘omnichannel’ engagement hook to ensure that the final and most critical component – transaction – is executed in-store, where they invest their rental, salary and advertising dollars day in, day out.
In the past, technology enabled and streamlined the back-end infrastructure of a retailer, but today, it has emerged as the key front-end enabler of connectivity with customers. The scale is transformative and is compelling retailers to either evolve or perish.
The relationship that a retailer had with the customer has come full circle. What started as a personal relationship between a local merchant and customers, founded on trust and the expectation that the merchant would over a period of time know their likes and dislikes and help them with what they needed and alert and inform them about new items on the shelf, underwent depersonalisation and grew into organised retailing.
Organised retailing is all about scale of operation and the use of technology extensively to make shopping a lot more ‘self-service.’
While retailing was getting organised, a whole new revolution of wireless connectivity through mobile phones was underway and transforming the way customers connect and make informed choices.
Today, smartphones have enabled a whole generation of consumers to be ‘always on’. They have fused the virtual with the physical world, delivering ubiquitous connectivity with the Internet and permanently changed consumers’ purchasing behaviour.
Consumers have come to rely more on their mobile devices than their desktops or laptops for their shopping needs.
In fact, social media and mobile devices have shifted power in the retail industry from suppliers and retailers to well-connected shoppers. These new consumers are equipped with a strong sense of entitlement and the expectation of consistent, high-quality service across multiple retail channels.
The depth of product features, prices and alternatives discovery that drove online visits is now expected on the go with a consistency between ‘clicks’ and ‘bricks.’
The single most critical consistency in being able to deliver is that a smartphone with an individually branded retailer application can deliver this dual functionality.
Omnichannel, the new retail paradigm
The proliferation of smartphones and tablets, coupled with the ubiquity of WiFi networks, is urgently demanding a change in retailers’ traditional go-to-market model. The traditional attributes of retail being location, product, price, quality and service are simply a prerequisite now, rather than a differentiator.
Retailing in the connected world is about understanding the impact of mobile, online and social media.
This irreversible trend is ‘omnichannel’ retailing. It is no longer just a concept, and is best defined as multiple and individually relevant touch points, equipped with unfailing memory and the intuition about consumer preference, available digitally and physically.
This is helped by the game-changing ways in which wireless technology and applications are coming together to form solutions that are empowering sales associates, and connecting with the already connected customer with their personal tastes, at their preferred locations, through their preferred media.
A traditional retailer’s move towards omnichannel is an organic shift and a ‘must’, but what is striking is that some of the pure-play Internet vendors are shedding their online purity and moving into setting up of a physical outlet.
Even Amazon has installed lockers in shopping malls from where customers can pick up deliveries. Could this be its baby step towards brick and mortar?
In Malaysia, an example of a physical retail giant embracing omnichannel retailing is Tesco, which recently launched it e-Store and delivery service – marking its move into a retail format already in use in selected markets, such as the United Kingdom.
Its management has declared the move an important milestone in the company as it emerges into the era of multichannel retailing, which required it to put in significant time and effort into optimising the Internet to fit the shopping behaviour of its customers.
Embrace the converse
Last June in New York, we called out to retailers to embrace omnichannel retailing to sustain and grow their business. The future is not about the number of stores added but about connecting with the customer, understanding what they want, when they want and where they want.
Today’s global retail leaders are embracing technology to do away with these perceived occupational hazards, thereby garnering massive competitive advantage.
With digital space and smartphones, no longer does one size fit all. There is a compelling need for mass personalisation. Failure to change and to deliver an integrated shopping experience across all channels puts a retailer at risk of becoming irrelevant.
Customer experience revolution
There is a radical shift in the consumers’ purchasing behaviour due to the fusion of virtual and physical worlds. This was a sentiment clearly echoed by the retail community at the World Retail Congress in Singapore.
The collective voice at this key global industry event (constituting approximately 20% of the GDP of the top 52 countries) agreed that digitisation, personalisation and localisation are mandatory for success in retailing globally – more so in the Asia Pacific region due to the diversity of cultures:
This is further validated by a Consumer Study concluded by Motorola Solutions in Singapore around the end of 2012. The study revealed that:
- 61% of the respondents said out of stock items or the inability to spot promotions added to their discontent.
- Sales staff interaction and product knowledge emerged as deal breakers, with 51% of customers identifying them as key pain points in their shopping experience.
- 31% of consumers encountered unhelpful staff in at least five out of 10 shopping occasions.
- The survey also revealed that the top pain points for retailers are out of stock items – this constituted 40% impact, while long checkout lines constituted 29% impact.
Meanwhile, even as e-commerce and m-commerce open up a world of borderless shopping, domestic e-commerce continues to lead in Malaysia, indicating a pressing need for local retailers to step up their efforts to capture a slice of the e-commerce and m-commerce pie, as evidenced by the following numbers:
- Over 4.4 million smartphones were sold in Malaysia in 2011 and nearly half (40%) of all online shoppers made a purchase on their mobile devices last year.
- In 2011, 70% of all online spending was on domestic Malaysian websites.
- The total spend on local websites in 2011 was RM1.36 billion, compared to RM608 million on overseas websites.
The way forward
Never in the history of retailing has the customer been so central to future success. It is imperative for retailers to deliver a seamless customer experience across all channels and provide the right services and products at the right time to the customer.
The good news is that future facing mobility solutions are available today. It is up to the retailers to embrace such technologies and align their business around the theme of evolving customers. Constantly analysing customer behaviour is the way to get ahead of the customer and lead the experience game with the connected shopper.
Anand J. Mehta is the director for Retail Industry at Motorola Solutions for SEA, India, Japan and Korea, and has 15 years of firsthand experience in key roles with the region’s top retailers.
Foreign e-commerce threat for retailers in Malaysia?
Motorola Solutions expands retail portfolio
Pikom comes out with its own ‘MSC’
For more technology news and the latest updates, follow @dnewsasia on Twitter or Like us on Facebook.