Before the COVID-19 pandemic, brick-and-mortar retailers were already dealing with dramatic changes in consumer behaviors and expectations. The spread of the coronavirus may have exacerbated those issues, but forward-looking retailers recognized the need for change long before mandatory quarantines entered the picture.
Since day one, we’ve said that retail is not dead, it’s evolving and we believe that is more true today than ever before. The future of retail looks different than its past, but that future is far from a bleak one.
In our Q1 report, The State of Consumer Behavior 2020, we discovered that shoppers still prefer to shop in person for all sorts of reasons — and those preferences will not diminish in the face of ecommerce competition. People continue to recognize the value of in-person shopping because they crave unique experiences. While the short term impact on retail sales is inevitable, we believe, If anything, in the long term the situation with COVID-19 has only strengthened brick-and-mortar retailers’ status as a valuable segment of the consumer world.
We wanted to take our research one step further, so we consulted with more than 50 of the top experts in retail to gauge their perspective on some of the industry’s most pressing questions. Our interviews covered recent changes, top trends, most impactful technologies, and projections for the future of brick-and-mortar business. Below, you will find a summary of the insights based on what we learned.
Part 1: How Has Brick-and-Mortar Retail Changed?
Brick-and-mortar retail used to be the only kind of retail. Today, ecommerce has created a new ecosystem in which brick-and-mortar stores find themselves on the defensive. How do today’s markets compare to those of the past?
The Experience Economy Rises
Prices matter, but today’s consumers prioritize experience when they visit physical locations.
The most dramatic change that I’ve seen is the shift in how consumers spend their money and time in the experience economy. It is much more difficult to establish long-term meaningful connections through ads or traditional campaigns because of the saturation of ‘traditional’ marketing and in-store experiences, and the variety of options that consumers can access through technology. – Lauren Snyder, AnyRoad Head of Partner Experience.
Supply and Demand Flip-Flop
“The retail model for the entire second half of the 20th Century was all about pushing as much of a product through a channel as possible. A big assumption of that model was that demand was almost always triggered within the four walls of the store, and fulfillment happened in the store as well. What that meant is that demand (consumers) had to come to where supply was (the store). In the 21st Century, demand can be triggered anywhere, and fulfillment of that demand can happen in a number of ways. That means that supply has to go to demand – that could be the store, the home, or some other place.” – Brian Kilcourse, RSR Research LLC Managing Partner
Back in the day, stores could almost generate their own demand based on their marketing strategies and product lines. Now, informed customers make the rules.
“This reversal in what was the structural status quo and its implications is the key determinant of fortunes. There is no longer anywhere to hide. After decades of chasing growth at almost any price, many retailers are now struggling with consequences – too many stores, too much footage, too many SKUs and a customer base too focused on peripheral customers and not enough on core customers. Now that supply exceeds demand, these weaknesses are increasingly strangling many players.” – Richard Hyman, Board Advisor
Ecommerce Changes the Rules
No business has escaped the changes brought by ecommerce. For retailers, the digital and the physical now exist in the same ecosystem.
“Digital is now the front door to our store (and digital now influences over 50% of all purchase decisions). Brick and mortar is still important, but walking into a store is now rarely the first interaction we have with a customer, and the digitally disrupted consumer has very different expectations from our store.” – Jason Goldberg, Chief Commerce Strategy Officer at Publicis Groupe
Our research backs up the impressions of the experts. More than 68% of consumers in our survey claimed they had searched for a better price online after finding a product in a physical store.
“Digitally native and ecommerce savvy DTC brands are ushering in a new era of retail where the barriers to entry into new markets are removed, making it easy to reach their ideal consumer anywhere. Brands are being forced to think and act global because their consumers are borderless.” – Rathna Sharad, FlavorCloud CEO
Customer-Centric Brands Prevail
Companies used to create products, promote them with ads, and leave it at that. Today, businesses build communities first and sell products second.
The best way to explain it is to use Glossier as an example. It started as a blog, and after an audience was created that identified with the particular point of view and kept returning over and over, it introduced products. The advantage of that strategy is that it is real and authentic, something so important to consumers, and if it’s done well it makes customer acquisition, one of the most challenging things in the direct-to-consumer business, much more doable. – Richard Kestenbaum, Triangle Capital LLC Co-Founder and Partner
Third-Party Data Falls Away
Just when retailers thought they had figured out the online game, a crusade against third-party data changed the rules. That said, they’re still in a better position than most.
“The shift away from third-party cookies has been tough for most online stores. Retailers worked hard to master the technology involved in online advertising. But then the browser companies began to shun third-party cookies. Apple’s Safari deleted them in 2017. Mozilla’s Firefox made the same move in 2019. Now Google has pledged an end to third-party cookies by 2022. Interestingly, retailers, which already own enormous amounts of first-party data, are well-positioned for the future. But there’s still tremendous fear among retailers about how to advertise online after 2022.” – Laurie Weisberg, Intent Chief Sales Officer
Conscious Consumers Demand Better
Surprising no one in 2020, conscious consumers today dictate how brands manage and communicate about issues like sustainability.
“People are becoming more thoughtful about everything! We see smaller brands continually taking share from big brands in every personal care category as people shift to being ever more thoughtful about all their ‘stuff.’ It is not just millennials and millennial families — it is a psychographic switch among shoppers of all ages.” – Lauri Kien Kotcher, CEO of Hello Products
Informed Customers Have Higher Expectations
Good brands never tried to deceive their customers, but today, no one can hide from the light of the internet. Businesses can either adapt to tougher standards or watch the competition leave them behind.
“Elevated consumer expectations across the board regarding quality, convenience and price. Of these, the expectation around immediacy is the most dramatic. Consumers expect to have anything they desire delivered to their door within a day or else be available in a store or for pick up within the hour.” – Mara Devitt, Senior Partner at McMillanDoolittle
Consumers are more informed than ever before. In some cases, they are more well-versed than in-store associates. They can research products and compare brands all from the comfort of their home using a mobile device. Consumers are all about convenience and want retailers who can provide products and services quickly. Amazon’s growth is a testament to this impact. Joanne Heyob, SVP, Operations Strategy & Design, WD Partners
“Customer expectations have never been higher, but at the same time, positive affectivity has never had more power in the brand/customer relationship … But because consumers place so much emphasis on connection and value-alignment, when they harbor positive feelings toward a retailer, they are willing to work through some bumps in the experience in order to help that retailer grow and strengthen that relationship.” – Megan McNames, Senior Product Designer at Malomo
Buyers Browse First and Buy Second
More options combined with access to overwhelming amounts of information give shoppers all the time they need to make informed choices.
“The most dramatic change in retail over the past three to five years has been the shift not only to online shopping but also to online browsing. That shift is often eliminating the need to browse in a mall or street-front stores. Instead shoppers can purchase online or just head to one store where they can buy what they want. Or they might try one or two other competitors, but not spend much time in a mall or looking at other stores. As a result, store traffic will increasingly decline and, along with that, sales.” – Marina Strauss, The Globe and Mail Former Retailing Reporter.
Part 2: The Most Important Trends in Brick-and-Mortar Retail Today
Sure, retail has changed, but the big stuff has already happened, right? Maybe not. Current trends in technology and consumer expectations call into question just how far the evolution of retail will go.
“A trend that I am starting to see is for retail technology companies — both the large tech giants through to start-ups — directing their attention to retailers’ brick-and-mortar stores to help harness the power of technology to digitize the store in a way that creates an efficient operation for the retailer, but more importantly can deliver a seamless, intuitive, and exciting experience for the consumer.” – Ian McGarrigle, World Retail Congress Chairman
Shopping Has Become Entertainment
Consumers who venture out to physical locations want more than access to products. They also want a good time.
“Shopping is entertainment. People enjoy being entertained — but what has changed is how people entertain themselves. Nowadays it is with digital content, available to them via technology they carry in their purses and pockets. If retailers want their stores to be a better experience for consumers, they have to embrace the ‘entertainment’ aspect of shopping. And that means to have the ability to interact with consumers in highly relevant ways while they are in the store.” – Brian Kilcourse, RSR Research LLC Managing Partner
Sales Associates Matter More Than Ever
Our research proved that people need sales associates more than detractors of physical retail would admit. We found that staff helpfulness came in third as the biggest influence of in-store experiences, behind only cleanliness/organization and product variety.
The sales associate’s role is more critical than ever. This human being, typically called an associate, should be educated to earn a master’s degree in customer engagement, brand ambassadorship or in empathy. The associate is the final, most important link in the value chain — the link that touches the consumer at point of sale where the purchase begins or ends. Nordstrom hires associates primarily on the basis of the person’s interpersonal skills, empathy, engaging, and just a nice person, over any past retail credentials. – Robin Lewis, The Robin Report Founder and CEO.
Supply Chains Go Global
Retailers can’t leave all the technology on the front end. Supply chain advancements have transformed once-local arrangements into complex global networks.
“There’s also new opportunities available for brands to optimize their supply chains to sell globally from anywhere — whether it is from a country where their products are being manufactured or regional warehouses for expedited deliveries or handling returns. This enables brands to optimize their unit economics depending on how trade and tariff regulations shift, and manufacturing needs change, while also accounting for reducing carbon footprint with efficient networks.” – Rathna Sharad, FlavorCloud CEO.
Communities Are Now Critical
Brands have always enabled people to feel like part of something larger. Thanks to communications technology, those communities have massively extended their reach.
“When you look at highly successful brands today, there is a greater meaning to the retail store — events, workshops, yoga classes, running groups, master classes, panel discussions — that bring customers into their brand experience in a bigger way. In many of these concepts — there is a belief that we have a responsibility to do better — from sustainability, to customer health, to giving back. Patagonia, of course, is our gold standard. Customers want to know that their dollars are supporting what they believe in.” – Dawn Dobras, Credo Beauty CEO.
In-Store Experiences Determine Loyalty
Our research, unsurprisingly, found that nearly 70% of shoppers say in-store experiences are important or very important.
The in-store experience will continue to be deeply engaging, making that transition from a transactional environment to an experiential and entertaining experience. Naturally, this will involve the use of engaging technology and a predictable shape shift of the store size and layout. Convergence will continue to dominate, and the intersection of physical and digital for the customer will be increasingly frictionless. – Paul Greenberg, NORA Network Founder.
Last-Mile Delivery Relies on Retail
Last-mile delivery causes headaches throughout the supply chain industry. Retail can fix that.
“Leveraging stores will be critical to win the battle for the last mile. Stores will play an ever more important role to reduce the high costs and inefficiencies of our current consumer direct delivery/returns models.” – Mara Devitt, Senior Partner, McMillanDoolittle
“Pop ups, small formats, and showrooms are what retailers are exploring right now to test new concepts, reach new consumers in urban markets, and optimize inventory. Food offerings that are a unique extension of a brand are another way to create memorable experiences. Pop ups are low risk and can help retailers maximize peak times of the year without the long-term lease commitment. Adding food offerings can create a social aspect to retail that has been missing.” – Joanne Heyob, SVP, Operations Strategy & Design, WD Partners.
Consumers Demand Price Transparency
Transparency doesn’t stop with sustainability. Consumers want to know they’re getting the best deals, and even when they’re not, they’re OK with paying a premium for better experiences as long as retailers are honest.
“Online has created a huge transparency around price, and the convenience of online means that those who shop in store demand an enhanced experience. Price retailers need to be able to evolve to ensure their bricks and mortar networks offer the experience that customers now demand, whilst maintaining the requisite margin to ensure their longevity. Inevitably this will demand even greater cost control, alongside the development of a true multi-channel retail operation which maximizes the value of their bricks and mortar network.” – Diane Wehrle, Marketing and Insights Director for Springboard.
Data Alone Is Not Enough
As much as experts stress the value of data, information alone does not a sustainable strategy make.
“It’s become clear that adopting even the best analytics and automation solutions serves nothing unless there is a team able to make the right decisions based on the use of these solutions. So, in the next three to five years, we are going to see the rise of retail teams with a completely new set of skills and mindset. – Anna Belous, Chief Marketing Officer at Competera.
Automation Paves the Way for Growth
Machine learning and AI empower retailers to do more with their limited opportunities to impress.
“The rise of automation will only serve to change retail jobs, especially with retailers looking to reduce costs. Ironically, online groceries are still unclear in terms of the economics, so the growth there needs to be paid for, too. In addition, consumers are becoming more aware of how much they eat and what they eat, so there are definite trends in play around areas like vegan / meat alternatives, organic foods, and how sustainable the food and fashion is, which will all play a part for consumers.” Steve Dresser, Director at Grocery Insight.
Digital Brands Explore Physical Spaces
Brands that started as digital-only offerings see immense value in adding physical locations.
“We’ve seen a shift to digital retail and the emergence of digital native brands. Now, digital brands are pushing to have more physical presence because the cost of customer acquisition online is much higher. I am very excited to see how a new equilibrium will emerge in the next few years.” – Vicki Guan, Evri, Inc. Co-Founder and CTO.
Part 3: Technologies Shaping the Future of Retail
Technology lies at the heart of these changes. The tools that companies use today will shape their futures, and tools yet to be developed will change the fates of companies that have not yet opened. Retailers must stay informed and stay proactive to survive.
Inventories Will Manage Themselves
Inventory management may require human input for the indefinite future, but new tools may make that task much easier.
“I’m intrigued by computer vision solutions to monitor inventory on shelves. It’s still early days, but the lack of precision in inventory in stores is the key reason in my opinion stores have lost share to the web.” – Sucharita Kodali, Forrester VP Principal Analyst.
Predictive Intelligence Will Foresee the Future
This isn’t Minority Report. With predictive intelligence, retailers can make educated guesses about consumer needs and prepare to meet those needs before consumers even experience them.
Machine learning lets retailers predict how a user will behave online in real time. Think about that! When you visit a retailer’s site that uses predictive intelligence, the site knows what you’re likely to do and behaves accordingly. That’s happening now … The models boost revenue and reduce inefficient ad spending. And they run on first-party data. Soon every online retail site will have some version of this. – Laurie Weisberg, Intent Chief Sales Officer.
Artificial Intelligence Will Strengthen Engagement
Speaking of sci-fi technology, artificial intelligence already does some impressive things. In the future of retail, AI could free associates to handle the more human tasks of customer relations and engagement.
“As consumer experience becomes increasingly important, the responsibility of a store associate will ultimately shift towards customer engagement. I believe in order to transition to a customer-centric model, robotics and artificial intelligence will need to support associates with tasks such as restocking, cleaning, and personalized recommendations.” – Vicki Guan, Evri, Inc. Co-Founder and CTO.
Automation Will Accelerate Both Capability and Competition
Stores without automation will soon find themselves unable to compete with operations that implement smarter tools. Automation will speed up the entire industry, empowering small retailers to compete on a more even playing field with bigger ecommerce companies.
“Automation will have the biggest impact on retail. One of the biggest challenges businesses are facing now is finding skilled, reliable labor. This is especially true in retail fulfillment logistics. The increasing demands of consumers to have a broader selection of products and to receive them faster will create a breaking point within the given tight labor market. Additional labor resources will have to be added, and robots are a no-brainer. They are reliable, precise, and in endless supply.” – Kristen Moore, Chief Marketing Officer of inVia Robotics.
Electric Vehicles Will Cut Costs
Imagine an entire delivery system that needs no gas, less maintenance, and limited human input to complete routes.
“Electric delivery vehicles. The trend lines all point in the same direction: not enough last-mile capacity, improving performance, lower costs, and a desperate need to address climate change as aggressively as possible. The age of the diesel-belching truck will reach an end sooner than people realize.” – Mike Newman, CEO of Returnity Innovations.
Augmented and Virtual Reality Will Change Experience Expectations
From video games to medical treatment, reality-altering technologies have already begun to change the world. In retail, consumers may soon come to expect different realities in every store they visit.
“Augmented and virtual reality will have a big impact in the next 3-5 years providing consumers the ability to experience products and services in a more interactive way — essentially a ‘try before you buy’ service. This could be a huge advantage to retailers who currently struggle with the influx of online returns to stores.” – Joanne Heyob, SVP, Operations Strategy & Design, WD Partners
Blockchain Tech Will Revolutionize Supply Chain and Communications
As the technology behind cryptocurrency, blockchain already enjoys the spotlight in tech circles. Soon, that same tech could help retailers of all sizes communicate and collaborate with partners and customers.
“Connectivity and digitization across the entire supply chain all the way through the customer experience. All systems have really been siloed, so I think we’re going to see more systems that connect entities and participants all the way from sourcing and design to production down through to the end-consumer and merchandisers in the retail stores.” – Suuchi Ramesh, CEO and Founder of Suuchi.
Part 4: Predictions on the Future of Brick-and-Mortar Retail
What comes next? No one can say for sure, but the experts believe the future of brick-and-mortar retail looks bright, if a bit unfamiliar to the markets of old.
Imagine a world where the fluidity between online and offline is so seamless we no longer think about them as separate channels.
Store associates will be as informed as Google search. They will understand customers as if they were on a first-name basis, access to inventory will be seamless regardless of where its located, same-day delivery will be a standard. – The Lion’esque Group CEO Melissa Gonzalez.
Physical Spaces Will Shrink
People want to visit stores, but they may not spend as much time there or visit as often. Thanks to the presence of online shops, physical stores may soon take up less space.
“People will always want to visit and purchase in physical shops. However, the massive growth of online has cannibalized physical floorspace. There needs to be a massive reduction of physical space, and this has barely begun. The weaker players will gradually be taken off life support and make room for the strong to elevate the overall customer experience across the industry.” – Board Advisor Richard Hyman.
Larger Entities Will Absorb Newly Available Real Estate
As some retailers downsize, others will seize the opportunity to make a bigger impression in the real world. Most of the companies that do this will be ones with capital to spend on the risk.
“No one knows the answer to this question, but we are starting to see some hints of it. The biggest clue so far is the new mall that is about to fully open in Northern New Jersey called American Dream. It has allocated its space 55% to food and entertainment and 45% to retail. It is taking guidance from the model of Disney World and Las Vegas, where you go for entertainment and do discretionary shopping along the way.” – Richard Kestenbaum, Triangle Capital LLC Co-Founder and Partner.
Stores Will Personalize Experiences Down to the Footstep
Some stores already push location-specific discounts for customers who use their apps. What else will personalization bring?
“It may be another decade or so away, but just as predictive intelligence builds an online retail experience on the fly — creating the page that is most likely to monetize any single individual — that level of prediction will come to brick and mortar too. Soon, you’ll enter a merchandise-free store and the items on display (or the screens that show them) will change based on what you are likely to buy.” – Intent Chief Sales Officer Laurie Weisberg
“It always starts and ends with the customer. Where does she live, shop, eat and play? How does she like to spend her time? How can you make her happy? How can you surprise and delight her? What makes her stop and think? Retailers that stay connected to their customers will always be around.” – Dawn Dobras, Credo Beauty CEO
Omnichannel Experiences Will Become the Norm
Smartphones, home PCs, in-person shopping trips — soon, all will become one indistinguishable experience.
“There is always room for new and exciting retail formats — especially ones that are both brick and mortar and online. The best retailers/brands, even those that began as DTC only, are realizing that brick and mortar is still critical so that people can experience the brand IRL, even if they come back and purchase online. A seamless omnichannel experience with a clear strategic role for each channel will be the winning formula in the near future. Many younger brands that began online only have created compelling experiential and bespoke shopping opportunities IRL that help shoppers identify with their brands as a lifestyle choice.” – Lauri Kien Kotcher, CEO of Hello Products
Quality Will Win Over Quantity
Not all retailers will survive to see the next wave. The ones that do, however, will design shops that look remarkably different from those of the last century, or even the last decade.
Fewer shops but better shops. This doesn’t just mean putting blow-dry and nail bars in department stores, but making shops an inviting, entertaining, welcoming space to go … The problem is that’s easy for a boutique to do, but it’s really difficult to replicate that standard across 500 shops. I think that the larger chains have more to do in terms of serving their local communities — giving over space to social needs. There’s plenty of upsell potential still if people are crossing the threshold. Ashley Armstrong, The Times Retail Editor.
The Winners Will Play to the Extremes
No more jacks of all trades. In the future, stores that specialize will succeed.
“Retailers will win in physical channels in the future by excelling on the extremes: extreme convenience — providing a frictionless experience in store like Amazon Go — vs. extreme engagement — providing a unique, highly personal experience based on deep knowledge of the individual consumer. The best example of this today can be seen in the Nike House of Innovation in New York City, where they support both convenient precision shopping experiences as well as immersive brand experiences under the same roof.” – Mara Devitt, Senior Partner, McMillanDoolittle.
Physical Stores Will Remain King
Online can grow all it wants. Physical stores will still do more business for at least the next decade.
“Stores are not going away. By 2023, 78% of global retail commerce will still be in physical stores. As Walmart and Target have demonstrated, new digital services linked to a physical store can drive aggressive differentiated growth. Physical stores will only thrive if they have a clear branding or consumer recognized pricing leadership position. Think luxury brands on one end of the spectrum with clear brand positioning and low pricing leaders on the other, such as Walmart, TJ Maxx, Aldi, and Lidl. The retailers that will continue struggle are those in the middle that lack a clear brand identity, and/or aggregators of lots of brands, such as department stores.” – Tony D’Onofrio, CEO of TD Insights.
Personalization and Responsiveness Will Define Physical Retail
Consumer expectations will continue to evolve regarding how stores treat them as individuals. Brick-and-mortar businesses must be ready to meet tomorrow’s consumers on that ground.
“The future of brick-and-mortar retail lies in a transformation that will see stores become the new face and personality of brands, and back-of-house technology like data powered recommendation engines boosting retail stores with better intelligence to engage customers. Stores will become more responsive (such as smart internet-connected devices and interactive displays), with new retail interaction points and even physical stores (like pop-up stores and temporary market places) brought to consumers instead of the other way round. It definitely won’t be “brick-and-mortar” the way that we know it, but “clicks-and-mortar” in the new retail! – Cheryl Guzman Ng, Global Head of Marketing at ViSenze.
The Human Need for Social Interaction Will Remain
If the pandemic has revealed anything, it’s revealed that humans remain social creatures.
Before the Coronavirus outbreak, I was convinced that bricks and mortar stores will always have a future in retailing, and I remain so … As humans we crave social interaction, and one very likely outcome of the enforced restriction could be a bounce back in demand for brick-and-mortar stores.
However, given the rising demands of consumers in terms of price and convenience, the long-term future for brick-and-mortar retail may still lie in stores broadening their role to function as more than simply transactional locations and instead as community hubs. – Diane Wehrle, Marketing and Insights Director for Springboard.
Ready for the future of retail? Listen to experts like these, and you’ll never be caught off guard by developments in this rapidly evolving industry.