The birth of e-commerce with the launch of Amazon in 1994 began the democratisation of retail and the proliferation of choice that consumers now enjoy, driving a shift in the balance of power from the retailer to the customer. And retail has been evolving significantly ever since.
To this end, there has been much debate about the impact online is having upon physical retail, and there has been speculation that the government is considering implementing an online sales tax to create a fairer system for all retailers. The premise of an online tax fundamentally misses the point, however – both in relation to the cost structure of running on and offline channels, as well as how consumers shop.
We live in a multichannel world. Consumers don’t see channels, they only see experiences. For example, approximately 65 per cent start their journey online but complete their purchase offline. Depending upon the category, a significant percentage of online sales start offline, particularly in furniture, electricals, homeware and DIY.
The reality is that even after Covid, online only represents 26 per cent of total retail, according to the Office of National Statistics. Physical retail still dominates, although in grocery, the percentage of online sales has doubled from around 8 to 16 per cent. Despite the negative hype, the high street is not dead. But it does need to evolve. Government initiatives such as the High Street Task Force will help.
If you were starting a retail business today, what would it look like? If you had plans for national coverage, you probably wouldn’t follow the traditional path of opeing a store or two in every town and conurbation throughout the UK. You’d be more likely to adopt the Selfridges model, and have a few flagship stores in four or five major cities, together with a significant online proposition.
That said, as many people adapt to a new, most likely permanent, way of living and working – perhaps spending a day or two in the office and the rest of the week working from home – there may be an opportunity for retailers to have more of a local presence. But this can also be achieved by opening up smaller pop-up stores without the need for long, expensive leases.
Offline retail has the advantage of human interaction – and when this is effective, it is a competitive advantage when it comes to customer experience. Add to this the fact that the pandemic has led to more people working from home and shopping locally, as well as an uptick in staycations. Physical retail is not going away and the change in consumer behaviour will be a boost for many local independent retailers.
Consumer behaviour is also changing in relation to what we buy. As we all become increasingly aware of our own carbon footprint and its impact upon the environment, we move towards more conscious consumption. This will see us buy less and want to experience more. Which is why experiential retail and delivering a great customer experience will be so important. But it will also lead to retailers having a wider range of product options for consumers – from buying new, to buying pre-loved, from products that have been upcycled to products you can rent.
To be successful in the future, retailers need to provide customers with a seamless experience across all of their channels and touchpoints. Most retailers still operate in silos, which does not promote the joined-up and collaborative approach required to ensure customers have a seamless experience. So, I see more integrated organisational structures and processes that can deliver this.
For national chains to be successful, they really need to behave more like an independent retailer. That means delivering more localised and personalised experiences for customers as opposed to the current bland, disengaging, homogenous experience customers are exposed to. In order to achieve this, retailers need to trust and empower their staff to make decisions at a local level that can have a positive impact upon the customer and upon the performance of their store.
Customer service must improve – at present, it is a disjointed and broken experience, partly because it is treated as a cost centre as opposed to a profit centre. This drives all the wrong decisions that ultimately lead to customer frustration, dissatisfaction and churn.
Retail will have a bright future but only for brands who recognise that they need to be where their customers are, have a clear purpose, be socially responsible, put their people first, and are truly customer-centric in all that they do.
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By Martin Newman, The Consumer Champion