Stores set for bright future with Bricks and Clicks Retailing
We read a lot about the Retail Apocalypse but it is clear to Openbravo that physical stores are never going to disappear. Indeed, they will play an essential role in enabling the offline and online worlds fuse together around the concept of “bricks and clicks” retailing.
It is obvious to any retailer that traditional brick-and-mortar retailing is undergoing a structural transformation driven by the relentless shift of more and more consumer spending to digital channels.
It’s not just specialty retailers that are affected by this dramatic shift. Banks, travel agents, insurance companies, realtors and many other service businesses traditionally required a dense network of branches in prime shopping locations to serve their customers. But they now have to dramatically rationalize their branch portfolio as more and more of their business is done online.
The challenge for all physical retailers is essentially the same: consumers visit stores less often so the revenue per store drops. If the fixed costs associated with physical store cannot be reduced, then the stores lose money and ultimately they have to be close – something that has been happening in increasing numbers.
It’s important to note that not all sectors have been hit equally hard by e-commerce. In the US, consumer electronics, books and apparel retailers have suffered the greatest number of store closures in the last 10, according to this chart from Statista. Meanwhile, DIY and sporting goods retailers have experienced a net increase in stores over that period, increasing by 1,041 and 593 respectively.
Shift to Online Continues
Could the wave of store closures be slowing? Ecommerce still represents a small percentage of the retail cake – in the US, online accounts for little more than 10 percent of total retail sales. So the shift of sales from physical stores to online seems set to continue.
But we are also seeing a very interesting development in which the leaders of online commerce are now investing in physical stores – the so-called “bricks and clicks” strategy. Amazon is going to open six more Amazon Go convenience stores, which do not require checkout staff, after opening its first in Seattle in January.
In China, the trend for online giants to embrace brick-and-mortar commerce is much more advanced. According to US investment firm Sanford Bernstein, 30 physical retailers have been acquired by Chinese internet companies in the past six months.
Why are they doing this? As in other big economies, e-commerce takes a relatively small share of the Chinese retail market – just 16% according to Wells Fargo.
So the online giants like Alibaba and Tencent realize that if they want to grow quickly, the easiest way is to buy up existing brick-and-mortar retailers and then try to blend the offline and online worlds together to offer a seamless shopping experience to their customers.
So the future of retail is not going to be purely online shopping, but a fusion of e-commerce and physical stores. Omnichannel technologies are key to making that happen of course which is why Openbravo is particularly excited about the opportunities that “clicks and bricks” retailing presents.
Read more in this interesting article by Steve LeVine.
Want to know about how omnichannel can transform your physical stores? Download the Openbravo ebook “Omnichanel Retailing: A Practical Guide”