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Brick & Mortar: Demise or Reinvention
By Sreekanth Chetlur, Head of E-Commerce & Omni Channel, Pt Matahari Department Store TBK
Retail is changing and it doesn’t matter if you are a small scale retailer or a multi-billion dollar retailer, it is affecting everyone. Traditional retailers who are not embracing the change are either shutting down their stores or filing for bankruptcy. In the last few years, this change has become even more evident in some of the developed economies but the impact is seen in the emerging markets as well.
Competition is being felt not only from the other retailers but more importantly from digital, mobile, e-commerce, marketplace, sellers on social media, mom & pop store, etc. Customers are present across all the possible channels one can think of and they are just weighing in the right place & the right time to make that purchase.
Let’s talk about Indonesia for that matter, it is the 4th most populated country in the world and also one of the youngest populations, facing some radical changes, GDP is growing at an impressive rate, international players are entering the market and expanding their footprint, rise in e-commerce and heavy influence of Chinese players, only growing, native start-ups arising and a heavy influx of foreign investment, all of this has really given today’s customers a whole new opportunity to explore, discover and possess the commodities which they wished for and this is quite similar to some of the other emerging Asian economies.
All of the above is great for customers and also for the overall ecosystem, to learn, adapt and change. But more importantly, it's a wakeup call for the traditional B&M players who have in the past seen double-digit same-store sales growth (SSSG) and struggling today due to the radically changing retail landscape.
So how traditional B&M retailer should embrace the change?
In my experience working across different markets, Omni-Channel retailing is the only way for a traditional retail house to re-invent itself and drive positive and sustainable growth in years to come.
What is Omni-Channel?
Simply put, it is a form of retail which puts customers in front and provides a seamless and consistent experience across in-store and the online channel.
But just having a transactional/e-commerce website will not make B&M store Omni-Channel, at the most it will make it Multi-Channel and may not help in achieving the desired goals.
Think of it this way, to grow, in the past retailers were supposed to be present in all major areas where there is a population density to capture the market and serve customers, but the advances on the internet and more importantly with the adoption of mobile (increase in smartphone penetration), customers want to discover, explore, shop on their smartphone with the comfort of staying in their bedroom or office or anywhere.
B&M retailers can offer something which is beyond what pure-plays can offer and that’s their in-store experience
But B&M retailers can offer something which is beyond what pure-plays can offer and that's their in-store experience. It is a proven fact that customers will convert 2.5X more with a brand which has both online and offline presence as compared to only one. Having a physical store gives customers more confidence in the brand.
As per Gartner, customer experience will be the biggest differentiator for retailers going forward and will be the only ground to succeed in.
INTEGRATING ONLINE AND OFFLINE is the key to any B&M to succeed and stay relevant. Leveraging stores as possible collection points for customer orders, allowing online returns in stores or treating stores as fulfilment centres will become a necessity for retailers to provide an omnipresence to customers. Human emotions cannot be replaced, no matter how much Artificial Intelligence or Robotics advances in their respective fields and that's exactly how retailers need to survive, differentiate and succeed in this ever-changing landscape.
Stores need to act as EXPERIENTIAL ZONES for customers to resume the discovery session which they would have started online. Research Online Purchase Offline (ROPO) is an extremely important metric to measure, Omni-Channel retailing is not just about converting your customers on a pre-determined channel but rather giving customers greater experiences across all channels and letting the customers choose how they wish to interact.
Omni-Channel also allows you to focus on your LOYAL CUSTOMERS as they are the reason why the retailer has seen consistent growths in the past, leveraging on the loyalty customer case and reaching out to them to convey how much the brand cares via targeting or re-targeting are very important tools to use, acquiring new customer is also an important priority but this is where the marketer needs to strike the right balance and ensure the campaigns are targeted smartly, leading to higher conversions.
With an integrated Omni-Channel approach, you end up collecting this vast data and it allows you to do customer segmentation for both online and offline customers and allows you to PERSONALISE the user experience on all the possible customer touchpoints.
Speaking of PROFITABILITY, it is of no surprise that it takes few (or several) years for pure-play e-commerce platforms to achieve break even or earn profits as it is a long term vision wherein the first and the biggest cost is attributed to the customer acquisition, be it the marketing spends on brand awareness or giving hard discounts as it's one of the strongest ways to incentivise the customers to make that first buy, this is where Omni-Channel retailer:
• Can leverage on the existing brand value and in a cost-effective way onboard the loyal customers and keep the cost of acquisition lower.
• Can allow to limit the incremental cost and drive incremental value as one can leverage stores to act as collection or drop-off points for customer orders (limiting the use of carriers).
• Increase in footfall of online customers further helps in getting some windfall sales in-store and impulse buys pops up.
• Store-personnel also carries out online orders and if done smartly the work/cost can be distributed and this avoids the mounting fulfilment centre costs.
In a nut-shell, Omni-Channel retailing allows greater CX, increase in top line & the overall growth without affecting bottom-line much.
If the retailer can keep the above fundamentals in check, continues to innovate, doesn’t hesitate in taking few risks, it won’t just be about surviving but growing successfully and will end up being more RELEVANT.