What Amazon and Museums Can Teach Us About the Future of Retail

If you wanted, you could view entire collections of the world’s great museums from the comfort of your home. And yet no one would say museums are dying. That’s a fact that says much about the future of brick-and-mortar stores in an era when online shopping dominates.

Museums are quiet, they show work in their full, original sizes, and allow the patron to see the individual brush strokes on the paintings and a vividness of color that can’t be replicated on an electronic screen.

In other words, it’s about experience. The same is true of brick-and-mortar retail stores.

Retailers are issuing their 2016 post-mortems, and in addition to news that the online channel beat in-store on Black Friday, we’re seeing that online shopping this holiday season was up 11 percent over last year’s haul, compared to a 4 percent growth rate for all retail.

But contrary to popular opinion, brick-and-mortar stores aren’t dying. Their value is simply changing, and many brands will have to adapt to the idea that online shopping complements – not replaces – the in-store experience. Brands may have to learn that interacting with the customer isn’t always about the sale.

With that in mind, I’ve compiled some thoughts on how brands should evolve and adapt to a world in which the physical store is as much as an advertisement and a

showroom as it is a marketplace.

Emphasize experience and differentiate the brand: If Gap were to launch a retail brand today, it would be just another company selling khakis and navy blue sweaters. The question is, how would it stand out? Online, that’s tough. There are more than 800,000 online stores, many of them using the same e-commerce providers, layouts and retail skins. It can, frankly, get tiring to browse a site’s offerings when the only differentiator is the URL at the top. In a store, shoppers can feel the weight and quality of the fabrics, and they take in a number of other clues about a brand’s values. Physical stores curate the experience of shopping by allowing customers to try on clothes, to see how pieces mix and match to create outfits, and by providing stimulating sounds, scents, and visual aesthetics. In the online world, it’s much harder to stand out, especially when most retailers’ websites rely on the same layout.

Integrate data: If an online shopper buys something, it’s pretty easy to capture her email address and to track it when used for future purchases. But if she shops in a physical store as well, the brand might be missing out on vital data. We did an analysis for a client that showed the real value of the omnichannel shopper. Customers who bought in-store and online spent far more in total than those who only shopped in one or the other. Yet tracking them can be incredibly hard. This can devalue, wrongly, the brick-and-mortar channel. Some customers, for example, might try on a pair of pants, and then go home and order them online to avoid having to carry bags. Use loyalty programs to build a database of customers and track them online and in store. Another strategy is to offer a free shipping coupon to customers who tried on clothes yet didn’t make a purchase as a means of tracking that behavior. Beacon technology as well is likely to enhance this capability.

Change your perspective: Brick-and-mortar retailers need to de-emphasize sales. This one is tough, I know. But think of all those high-end stores on Fifth Avenue in New York. Many of them are empty of customers, even in the run up to the holidays. No matter what their markups are, the rents alone probably make negative ROI a foregone conclusion. But the location alone is a form of advertising that likely supports sales in other markets. Retailers are going to have to look at their brick-and-mortar operations as places where consumers are educated about the brand and its story, so that when consumers do decide to make a purchase, even online, the brand is at the forefront of their mind.  There’s also an operational aspect. Retailers can reduce shipping costs by using physical locations to accept online returns, and maybe steer consumers to a new purchase.

Love thy neighbor: Talk to any mall executive, and they’ll acknowledge that some properties are struggling. They’ll also tell you that some properties are going gangbusters, with great foot traffic, no vacancies, and years-long waiting lists for new tenants. High-end malls are a great example of the benefits of having good neighbors, and mall operators work hard to curate the right mix of tenants. Retailers with less-than-optimal surroundings should work hard to create the kind of cross promotion and energy that builds foot traffic. But to do that, retailers will have to change their mindset. Instead of looking at the boutique across the street as a competitor, see it as a potential ally with a lot of shared customers.

In December, Amazon, the quintessential e-commerce killer of brick-and-mortar stores began initial tests of its drone delivery plans. It also won a patent for floating warehouses that might house the drones, providing even faster delivery. But Amazon also announced plans for a retail grocery and convenience store – albeit a high-tech one that requires no checkouts. In 2015, it opened a retail bookstore – one in which the stock was informed by the popularity of titles in its online store. And just this year, it announced plans to open a retail operation in Manhattan.

What do we make of these mixed messages? One of the smartest, most data-driven retail companies in the world is experimenting with physical stores at the same time it is doubling down on the convenience of online shopping. Amazon knows that online isn’t the only way to reach the customer. If those developments don’t reinforce the value of omnichannel strategies, it’s hard to say anything will.

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