From clicks to bricks

The internet is more of a preoccupation for bricks-and-mortar retailing than ever. But what does the triumphal success of the internet really mean for supermarkets, shopping centers and corner shops? An article by Dr Martina Kühne

In its study „The Story of Unstoring“, the Gottlieb Duttweiler Institute examines how online shopping is changing the retail environment, how „bricks” and “clicks“ complement each other in a way that leaves open a future for traditional retailing, and what exactly the shop of the future will look like.

„Kiss your Mall Goodbye,“ ran an influential story in „Time Magazine“ back in summer 1998: „online shopping is faster, cheaper and better.“ The headline created shockwaves throughout the world of retail. A good few years have passed since then, and most shopping centers are still there. Much has of course changed in that time, such as the way in which consumers obtain information, how they interact with one another and how they buy. And there is no sign of a change in this dynamism over the coming years. On the contrary, three relative newcomers – Apple, Google and Amazon – have already forced the 500-year-old book printing industry and its distribution channels to find new business models. And this development has the potential to shake up other sectors too.

„Unstoring“ means rethinking what a shop is

To understand the future of shops, you need to know something of history and how bricks-and-mortar shops took on the role of marketplaces of old as social meeting places fostering contact between people. You also need to understand what was happening immediately before: the first unstoring tendencies could be seen when global brands such as Nike, Prada and Apple began to position their own flagship stores as accessible advertising spaces, in which the brand experience became more important than actually selling products. The world of the shop has been constantly reimagined. This is borne out by a few recent developments: The online department store eBay is now establishing a physical presence – at least temporarily – close to Oxford Street. The online giant Amazon is also pursuing plans for its own shops. Music retailing, on the other hand, is almost completely disappearing from the high street and taking place predominantly in cyberspace, or more specifically the iTunes store. Tesco – the poster boy for UK retailing – has in the last few months been creating a stir in South Korea, where it has transferred supermarket shelves to billboards. Travellers on the underground can use their waiting time to scan product barcodes with their mobile phones and have the goods conveniently delivered to them at home.

So who can say what a shop means today? Or what it will mean tomorrow? One thing is clear: the online and offline worlds are increasingly converging. As mobile phone use spreads further, digital technologies are increasingly moving in on the physical world. Instead of two distinct spheres – the virtual and the tangible – mobiles are blurring the boundaries. Although it will always be human nature to want to use the senses of touch, smell and hearing and humans are herd animals, they also want to use the innovations offered by web-based technology. They want to compare prices from home. They want to see products and adapt them to their own personal preferences. And they want to access product information or read about the experiences and opinions of other consumers while on the move.

Conventional retailers that had previously concentrated on the provision of parking spaces, rent costs, opening hours and employees now need to learn to separate the hype from the evolutionary shift taking place. Although experience shows that the impact of technological innovations tends to be overestimated in the short term, we know that the medium to long-term impact is regularly underestimated. And if new giants such as Amazon, Google, Apple and Facebook are turning the retail industry on its head with their behind-the-scenes machinations, then bricks-and-mortar retailers need to remain very alert and anticipate changes in good time.

Bricks or clicks? Both!

Greater differentiation of formats and an unending variety of shop concepts can be expected in the future: from nostalgic book shops to personalised high-tech stores, and from local weekly markets to virtual shopping centers. The challenge shared by all retailers is to have an awareness of what the function of a shop really is. The days of simply holding stock in a prime location are definitely over. And the likelihood is that we will need less straightforward retail space. Instead, shops must increasingly play to their original strength as social meeting places, a local first port of call and a real showroom in a world that consumers increasingly perceive as a virtual one. That will of course always be a balancing act, as even the “third place” offering a high quality of experience must ultimately pay the rent. Will people in 10 or 20 years’ time really be content to only interact online when they shop? Despite the growth in online shopping, that appears unrealistic from today’s vantage point. Nevertheless, we cannot deny the reality of the online evolution. Rather, retailers need to find intelligent strategies for supplementing “clicks” with “bricks”. If in future consumers can photograph any item (such as the shoes or handbags of passers by) they see on the street using their mobile phone, then for traditional retailers the route to the store could become their greatest enemy. There is only one solution: to seize the new technologies, but intelligently so. There is a great deal that is already technically feasible today. But the more important question is what really makes sense from a customer perspective. And if 21st century consumers find it too isolating to shop with a pixellated basket, if time is too short to compare prices online, if social media recommendations become too confusing, then they will learn to value the local corner shop again – retailers that do not waste customers’ time but instead add value by enriching or simplifying their lives. However, shop owners should not hope for too much in the way of nostalgia. Although a handful of small, high-end record shops are popping up on the streets again, farmers’ markets are proving popular and weekly markets are delivering an inspiring shopping experience, these are profitable niches, but remain marginal. Retailers that are able to meld the real and the virtual at least as well as their customers are already doing have the greatest potential.

GDI Gottlieb Duttweiler Institute

The GDI is a leading Swiss economic and social thinktank. It regularly conducts research into and publishes papers on consumer and retail issues. The GDI hosts international conferences and also acts as an event venue. You can find more information and photographs at www.gdi.ch

Tip

Further reading Martina Kühne, “The Story of Unstoring – Weshalb der Laden kein Laden mehr ist” (The Story of Unstoring – Why a Shop Is No Longer a Shop),
GDI study no. 33, 2010 www.gdi.ch

5 propositions on the future of the shop

  1. He who hesitates is lost
    For too long, shop owners have sat back and waited for their customers to walk through the doors. Now they are increasingly adopting mobile technology and shoehorning their way into their customers’ schedules and day-to-day lives. Some are using fast growing online discount services such as Groupon and Germany’s DeinDeal to get onto price-sensitive customers’ mobile phones and lure them back into the shop with attractive bargains. Particularly smart mobile services time these alluring offers to coincide precisely with very quiet periods. Companies that offer tailored mobile services have the edge over their conventional rivals on the high street.

  2. Shops are becoming clickable
    In future, there will be a digital layer, supplementing products and ranges with additional information (product origin, descriptions, price comparisons, etc.) from the digital world. Apps such as GoodGuide and Barcoo that can be downloaded onto any mobile phone enable products to be located and extra information to be obtained. In this way, the tactile and theatrical side of shopping is blended with the convenience factor that today’s mobile applications offer. This ties in with the new augmented reality applications promoted by brands such as Lego, Adidas and Shiseido, which link the real shopping experience to virtual elements. Any business that fails to recognise the potential of the mobile phone as a personal shopping assistant or to optimise its customers‘ service experience has a problem on its hands.

  3. The world is turning into a giant shopping center
    However, it is not just in-store shopping that is changing. The world itself is increasingly becoming a gigantic shopping center, in which products can be bought anywhere, at any time and right away, where consumers can click on any item – be it on a shelf, in a window or being carried by a passerby – scan the bar code and purchase it. Applications such as ScanLife already incorporate a bar code scanner into mobile phones, used to identify coveted items in shop windows. This makes it possible to buy the item online right away, regardless of opening hours. However, round-the-clock availability of goods will quickly usher in a counter-trend of certain products being made available in limited runs, with an exclusive cachet. That will certainly arouse keen interest among cyber nomads – a group with many resemblances to shopping Neanderthals.

  4. Anything that can be digitised will be digitised away
    Digitisation is an unstoppable process. Now that it has music and media in its grasp, the sights are trained on bookselling. But other physical retailers will be fearing for their business models in future as well, as ground-breaking 3D technology is on the advance. If “The Economist” magazine is to be believed, it will turn every sector with which it comes into contact on its head. So-called 3D printers will enable new products to be designed and then printed out relatively quickly as tangible objects. The technology is still expensive and not really for end-users, but that could change soon. The MakerBot, a 3D printer costing around USD 1,000, already allows keen hobbyists to print out simple objects such as plates, cups and toys at home. Sceptics should check out the “Thingiverse.com” platform, where DIYers are busy exchanging digital designs. That sounds like a gloomy outlook for shop owners, unless shops can set up their own 3D workshops in which customers can “print out” their own individual designs with professional support

  5. All traders are only temporary
    When retail businesses disappeared off the radar in the past, it was usually because they went bust, were bought out or ceased trading without any succession arrangements in place. In future, shops will disappear simply because their function as a store room or location for selling alone is just no longer needed. Some shops will cease to be required by a generation that has grown up with the mobile internet in its pocket. The message for retailers that are in business today, and that want to remain so in future, is that no shop – online or offline – is built for perpetuity any longer. More than ever, retail never stands still. That is highlighted, for example, by the growing number of pop-up shops that are opened at the right place and the right time and then disappear a while later.

Continue reading: Aktivities in the centers

Back to: An overview