A Direction for the Future of Retail Stores

The Internet has introduced a range of new avenues and tools for people to obtain products they need or want, changing their behaviour as consumers. The online impact can be expressed in different ways; for example, consumers may effortlessly and often more quickly obtain requested products that are unavailable at stores in their vicinity; more conveniently gather information on several suppliers and compare their offers; and consequently often may order online at lower costs than buying in brick-and-mortar shops (after accounting of course for delivery costs). Not less importantly, however, consumers apply the Web as a rich resource of information for conducting “market research” on a product category before going to buy at a store or order online. It is no wonder that many traditional retailers, small and large, regard electronic retailing (e-tailing) as a threat to their businesses. Furthermore, if one considers also the spreading use of mobile hand-held devices and apps designed to provide consumers with updated information and tools to help them with their purchase decisions as-they-go, the pressure on retail stores could only be growing.

While e-commerce is encroaching on the sales at traditional stores on the streets and in shopping centres, traditional retailing is, as yet, not at an existential risk, and stores are not near disappearing from our street scenery. The overall share of online sales out of total retail sales in the US stood at 5% in 2008 and is expected to rise to 8% by next year  (2013); Forrester expect the share to  plateau at 10% (1). In Europe, during 2011 Britain was leading (even over the US!) with an online share of 12%, followed by Germany (9%), Switzerland (8.7%), Denmark and Norway (~8%), and France (7.3%). Britain, Germany, and France account for 71% of the European online retail sales (2). Nonetheless, retail stores of certain categories (e.g., computers, electronics, entertainment media) are already under stronger pressure and are at greater risk, and can expect to face more structural and operational changes in coming years. Retailers in other fields also cannot remain complacent as shares of online sales are growing over time (e.g.. share in Britain grew from 8.6% in 2008 to 12% in 2011). Even more crucial for traditional retailers to take to their attention, Forrester point to the significant impact the Internet has as an information resource on offline sales: If we take explicit online sales + online-influenced sales in the US, they were estimated to account for 40% of total retail sales in 2009, and may reach 54% by 2013 (3).

Moreover, many consumers no longer check the relevant information they seek on the Internet at home and then come to a brick-and-mortar shop — they bring the Internet with them to the shop on mobile devices like smartphones and tablets. According to a recent survey commissioned by Google, 31% of consumers in the UK report checking product information on their smartphones as they stand in front of the shelf display at a store (US: 35%, Israel: 39%)(4). In addition, shoppers may use apps that provide them more efficient access to market information and tools they can utilize during decision-making in-store. They may also share information and consult with friends in social media networks while at the store. Store owners and managers need to acknowledge the additional information shoppers may access in-store as well as how using digital technologies and interactive tools influences the course of their shopping visits.

One way to face the digital and interactive technologies is by trying to fight them off, insisting that the traditional stores, with their facilities and staff, offer better solutions to consumers’ needs and expectations. This fight, unfortunately, is likely to be futile because those technologies are already widely available, well-rooted in the way of life of many consumers, and especially the younger generation (born after 1990) is not about to give them up. A better way would be to bring the advanced technologies into the store, integrating them cleverly with the overall design of the store scene. They may be assimilated with facilities and fixtures of the store and as part of the services the store offers its patrons.

Suppose you enter a DIY (Do-It-Yourself) store, and as you step into the entry hall, to your right there are three stands with flat screens on top of poles at 45° angle. Each information post lets you look at an interactive floor plan and possibly search for the location of products you seek that will be flagged on the store diagram. You move on to the department of working tools like electric drillers. On a screen attached at eye-level you may choose to watch a short video of the machine in operation, rotate the product to be shown from different angles with annotation for its different parts, and possibly read additional technical information on the side bar. Only some of the products can be displayed in-store, but for some other products you find a QR (square) code that directs you to an online information page for the product on your smartphone.  You no longer have to run after information — it follows in your footsteps wherever you go.

This scenario is not truly fictional — these technological features are already applied to some extent by retailers worldwide. Watch for example for the new FuelStation store by Nike in London (14 March 2012): The sports company seems to have taken the new interactive digital approach to the full. First, the store has a dynamic fixture display whose appearance changes with the movements of shoppers passing by. Second, the store features advanced displays such as augmented reality tools that display interactive animated product information and iPads embedded in walls that show product and event information. Furthermore, shoppers can access Nike Web-based store on the iPads and order products.

In a post last year on the crisis of retail chains for music/entertainment media (7 April 2011) I attempted at sketching some outlines for the design and organization of future stores in this field. Two themes in particular, I suggested, could make stores better adapted to new patterns of behaviour among consumers — personal customization and social interaction. Customers should be given good reasons to come to a store instead of compiling their songs or other media collections online at home, whether acting alone as individual buyers or acting in groups of friends.

During a visit to a brick-and-mortar store, customers may end-up making their purchase of a product in an online store, whether the retailer’s own Web-based store or a competing e-store. Writing in the blog “The Scholarly Kitchen” (12 Jan. 2012), Kent Anderson describes how he switched from buying books he found at the Waterstones store in London to ordering online using the Amazon app on his iPhone, either their print or Kindle editions. His motive: not carrying as many as a dozen books with him and not paying the British prices in pounds.  Anderson, an executive in academic publishing, sees an important shift in the future functioning of retail stores with promising opportunities for serving customers in new ways: ” Imagine the opportunity presented for redesigning retail spaces to support these behaviors — QR codes to online review centers, instant price-matching opportunities (even to the company’s own Web site), and so forth.”  It is in the retailers’ interest to offer their own references to recommended information sources of their choice, particularly linking with their own online store. Bookstores, specifically, should accommodate customers who prefer e-books and provide them “reading terminals” to browse digital editions at the store with options to make the purchase at the retailer’s online store or at the cashier desk.

An application of these concepts for a primarily service provider is nicely demonstrated by the Royal Bank of Canada (RBC). Last year RBC launched a new style of banking Retail Store (1 February 2011) that combines interactive digital devices for self-service with more traditional advisory by human professional staff. In the branch-store clients may watch video guides on financial plans and services, receive customized investment recommendations with interactive and visual illustrations, view profiles of the branch experts, and more. The Retail Store applies Microsoft Surface technology and exhibits comfortable and spacious sitting and working areas for clients to create a blend of “shopping” and “banking” retail experience.

This is the place to emphasise that it is not at all intended to suggest that the retail store scene should be surrendered to digital and interactive technologies (e.g., Nike may have stepped too far). Fashion stores, for instance, have properties of space, design, and merchandise display that attract shoppers to walk around, touch and pick clothing items, and try them on, having an experience that an online store website cannot really create for them. Designing a store loaded with digital features will only make it too similar to online alternatives for shopping, diluting most of its physical and experiential advantages. But some interactive facilities can be embedded in the store so that shoppers are allowed to see more information on the fashion items, how it may look on models out-of-store, or even simulate how it would look on themselves. The technological features should be applied to let customers look at the merchandise in more ways, enriching their shopping experience, and possibly establishing links with their online experiences on the store’s website. Technology should not replace human staff — they can complement each other for different customers and in different situations.

Retailers can no longer afford to ignore the various ways and practices of consumers in using digital and interactive technologies, especially retail chains and large/department stores. Adopting and embedding these technologies in physical stores is about creating continuity and integration: letting customers extend their digital activities into the store, making their shopper experiences online and offline connected and less divergent, linking and coordinating the channels operated by a retailer for interacting with the customers (e.g., physical store, online, mobile apps), and using common visual, audio and other symbols that help to enhance the retailer’s brand as a whole.

Retail brick-and-mortar stores are most likely to be here-to-stay. They offer qualities of shopping experience that cannot be fulfilled online. But combining features of the physical and virtual environments in-store can complement each other and create even more effective and enjoyable shopper experiences. Online and interactive technologies should not be viewed as mere threats to traditional retailing. They should better be approached as challenges that need to be answered cleverly and creatively.

Ron Ventura, Ph.D. (Marketing)


(1)  US Online Retail Sales Forecast 2008 to 2013, Forrester, Feb. 2009

(2) Online Retailing: Britain and Europe 2012, Centre for Retail Research, UK


(3) Ibid. 1

 (4) “Israelies Are Looking at the Smartphone Istead of the Shelf in the Store”, TheMarker (Hebrew), 25 July 2012 (a report of findings from the Consumer Commerce Barometer research project commissioned by Google. Hebrew readers can find this article at  http://technation.themarker.com/digital/1.1785242)

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