SOS: Why Brick and Mortar Retail is Worth Saving

With every narrative that speaks about the rise of online retail, it hails its rise to prominence as the force of good that benefits customers immensely. For the most part this is obviously true; online shopping provides lower prices, a more convenient way to shop, and a wealth of product choices. In the midst of all this, plenty of customers do not spare a second thought to struggling brick and mortar retailers. Many feel that after years of charging consumers with expensive products, and taking a big profit margin, they deserve to be in the position where they are in at the moment. 

 
as much as this guy deserved it

Despite that, there are several facts that indicate how brick and mortar stores are not only worth saving, but they need to be saved. First, is the fact that retail is one of Australia’sthree biggest employers, the other two being the banking and the manufacturing industry. With so many people working in retail, if retail continues its decline, how will the job market absorb these people?

It would most likely mean that unemployment would rise, starting an unwanted chain of events that shackles Australia’s growth. Furthermore, it is not only the number of jobs that would be lost through the demise of retail, but also the type of people that retail can employ. Its flexible time nature means that it suits part time workers such as mothers or students, workers who would find it very hard to find other jobs that offer the same kind of flexibility. 

 students: providers of the best kind of service

This situation is not going to happen in the future, it has started happening now. Just late last year, Myer group, Australia’s leading retailer, announces that they will close several of their stores due to increased pressure from stagnant growth and low consumer interest. Smaller retailer WOW Sight and Sound, with 15 stores in 4 states are closing all of its stores, and noted that they will letting go 580 people as a result. Another retail group, Premier Retail, which owns Just Jeans, Portmans, and Dotti, has also announced that they will be closing around 50 stores around the country.

With so many stores closing, many popular shopping streets in Australia’s largest cities can look very sparse. Which brings us to the next fact: a faltering retail sector will lead to a decrease in commercial property development, which will weaken a sector that is considered as key in any economy that is trying to grow, the real estate sector.

Most retailers are already going for smaller store spaces, and going away from the big box store concepts. Lowering prices means that retailers have to sell a lot more of the same item to make the same kind of money. For example, due to the drop of price in most television sets, a retailer such as Harvey Norman needs to sell a lot more units just to survive. This situation has also led some retailers to opt for shorter leases rather than longer ones, to ensure that they have the flexibility to either close or reduce the space that they are renting.

 too much space can be pretty weird looking

As it is with every bad news, the silver lining is not far behind. Despite the doom and gloom, there are retail stars out there such as Zara, Topshop, and the always busy Apple store. These retailers have been able to generate turnover that is similar to large department stores while operating from a much smaller space, therefore paying a lot lower rent. This might be the future of successful brick and mortar stores, with more specialized products and services, in better defined spaces. 

Read More

Retail Innovation: Tesco's Augmented Reality

Bringing together the virtual and the real seems to be stuff of science fiction just a few years ago, but innovation in various fields have shown us that the future is indeed here, that we do have the capability to create and utilize technology in a way that was not possible just ten years ago. At the moment, nobody needs innovation more than traditional brick and mortar stores. Pressed from many sides, whether that be increasing consumer demands, decreasing profits, and the threat of online commerce, these traditional retailers need to find new ways to connect with their consumers.

 disappointingly enough, not one of these ships has been invented

One retailer who seems to be in the right track in terms of innovation is Tesco. Acknowledged as the third largest retailer in the world, Tesco does most of its business in the UK, but has a presence in fourteen different countries. As large as they are, Tesco are not immune to the flagging fortune of the traditional brick and mortar store, if anything, their immense size makes them even more vulnerable to the effects brought by online shopping. Tesco found its rise to success by correctly managing margins, and always obsessing about being efficient.

Their first innovation is their effort in augmented reality, where consumers can actually create a three-dimensional model of the product they want to purchase and see how it mesh to the home. It is specifically used for Tesco’s online wing, and it becomes a point of differentiation for their website. The presence of something new becomes very intriguing for consumers, and it successfully translates Tesco’s strength as a brick and mortar store into an online setting. 

this video feels both retro and futuristic at the same time

Another interesting concept is Tesco’s breakthrough in South Korea. In their effort to get a larger market share, Tesco started displaying ads of their shelves in South Korean train stations. Consumers can actually scan their desired item, purchase it right there, and get the products delivered to their homes. Since this type of innovation is unparalleled in the retail, Tesco enjoys a significant media attention, which it can utilize to further push its products. 

waiting here makes me want to buy steak

Finding the meeting place of the virtual and the physical is a key development that is needed to grow retail into a new business model that consumers will be attracted to. 3D models are applied in various online shopping retailers, but not in the way that Tesco has envision it. Research has shown that this lowers the consumers perceived risk (Shim and Lee 2011), and lessens the barrier for the consumer to make the purchase. It has also been suggested that technologies such as 3D representation creates similar experiences that consumers might have in a traditional store, therefore blurring the boundaries of online and traditional setting (Dahan and Srinivasan 2000).

While Tesco is not out of the woods just yet, and it remains to be seen whether these innovations will be popular among consumers or not, signs are looking promising. Moves that might be audacious and impossible are needed to generate interest and still be relevant to the consumer.

References:

Dahan, E. and Srinivasan, V. 2000. The predictive power of internet-based product concept testing using visual depiction and animation. Journal of Retailing 17(2):99-109. Emerald. http://emerald.com (accessed March 29, 2012).

Shim, S.I. and Y. Lee. 2011. Consumers’ perceived risk reduction by 3D virtual model. International Journal of Retail and Distribution Management 39(12): 945-959. Emerald. http://emerald.com (accessed March 29, 2012).

Read More