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The end of retail as we know it! — And L'Elisir d'Amore by Gaetano Donizetti

Categories: On my radar this week

Posted on 11-27-19 at 4:16 p.m.

More and more consumers prefer to shop online

Back in April 2018, I wrote a post about how the majority of consumers were still more attracted to in-store than online shopping. This was based on data from 2017. At that time, despite the growing appeal of e-commerce, two in three Canadians (68%) said they preferred to shop in stores (with no significant regional variances across the country).

However, our 2019 data reveals that interest in online shopping has grown considerably. In fact, while 19% of Canadian consumers preferred to shop online in 2017, that number has risen to 25%, while preference for in-store shopping has dropped to 60% (still with no significant regional variances).

When offered the option of visiting a store to familiarize themselves with products and then to order online to get the exact desired product delivered to their home, 14% said they preferred this option (virtually unchanged from 13% in 2017).

The future is online!

Unquestionably. While a six-point rise from 2017 to 2019 may seem modest, there was an 8-point rise among people under 55 and those with above-average incomes. Note, too, that among professionals and administrators, preference for online shopping has risen from 23% in 2017 to 36% in 2019 (a 13-point bump in two years!).

Based on this data, if the trend continues, within five years more than half of consumers under the age of 55 will prefer to shop online, a market share that "brick-and-mortar" merchants cannot afford to lose (and this does not account for the new younger generations of consumers who will enter the market by then). What's more, the younger the consumer, the more they prefer to shop online-yet another harbinger of what's to come.

At the supply level, too, the current trend will not hold. The pace of change will speed up exponentially! We live in an era of technological innovation that will see increasingly sophisticated, effective and targeted consumer marketing further accelerate the penetration of e-commerce (personalized offers using data science, geolocation, etc.).

There are too many stores!

In response to the momentum of online shopping, we will see a pushback by brick-and-mortar stores. This has already begun in some places. The in-store experience will certainly have to change to counter the trend. It will have to become part of an ecosystem of experiences in which the store and online shopping complement instead of compete with each other. Too often, the transactional website is seen as just an extra "store," instead of being designed for a specific and complementary role.

Apple is a good example of this new business model. Apple only has few physical stores, and they carry only a limited selection of products and options, just enough to let customers handle their products, provide service and monetize the investment, while sending consumers to their website to buy exactly what they need. As such, they are optimizing their real estate investment and their inventory management.

For example, in the entire Greater Montreal Area, Apple has only four stores. Compare that to a typical clothing chain. And this is a product category whose online sales are growing steadily!

Which brings us back to the third option we offered consumers: visiting a store to familiarize themselves with the products and then ordering a specific product online for home delivery. An option that is not all that popular at the moment, but one that is set to take off in coming years.

Inevitably, the number of freestanding stores and stores in shopping centres is going to decline over time. Online shopping will render the current store model obsolete. With the exception of very specialized stores offering a high level of expertise from vendors, as well as those selling everyday products, such as grocery stores and drugstores (for the time being, because even these sectors may eventually undergo significant transformation).

There will definitely be no shortage of available commercial space in the coming years!

Transforming the in-store experience based on consumer hot buttons

However, all is not lost for stores, provided they radically transform the customer experience. By offering what the industry calls "experiential marketing"-creating a place where consumers can "experience" products and services in person, where they can have a pleasant brand experience. They are then sent to the website to see a broader range of products.

To drive consumers who prefer to shop online into their physical stores, stores must respond to consumers' motivations, values and hot buttons by providing a fun and enjoyable place-a destination-that is aligned with what is available on the website, which complements the store.

Online consumers are hungry for innovation, exploration and discovery. They want to play. They are willing to take some monetary risk to enjoy new, rewarding, stimulating and unusual experiences, or an experience that checks off at least one of these attributes. And the better job a store can do of offering this type of live experience, the more popular a destination it will become. A store no longer has to stock every product and every option, only what is necessary to provide a desired experience because its website is there to fulfill more specific needs.

Stores and shopping centres must become playgrounds! A place of discovery, a place to familiarize oneself with products, and especially with innovations. A place for entertainment, enjoyment, relaxation and escape. When we shop, we want to have fun, explore and enjoy life. We seek unique places of indulgence.

It is interesting that online consumers feel the same way. Obviously, there is a limit to what a website can do to meet such expectations! It seems to me that a physical locale with all its experience possibilities lends itself infinitely better to adequately responding to the needs expressed by the online consumer.

One of the rare traits that distinguishes consumers who prefer to shop in-store (given their still very large number) is what we call "polysensoriality," a desire for stimulating experiences that engage all the senses, not just sight. A desire to feel, touch, taste and hear, all things that a store can deliver very well (and certainly much better than it does now).

An opportunity, not just a threat!

The current trends in consumer habits, expectations and needs may appear to threaten the retail store, whether freestanding or in a shopping centre, but they may also represent a great opportunity! Transforming a store into a place of discovery and enjoyable experiences for customers does not necessarily involve a huge investment. You just have to make sure that you know what your customers need and expect, in order to make the correct modifications so that they can have a little fun! (Forgive the not-so-subtle plug for our services.)

L'Elisir d'Amore by Gaetano Donizetti

This post's musical clip is an excerpt from Donizetti's L'Elisir d'Amore (The Elixir of Love), where we find one of the oldest ways of delivering goods to consumers: the travelling salesman. In this opera, an itinerant "doctor" is promoting a cure-all elixir to the townsfolk!

Gaetano Donizetti : L’Elisir d’Amore, Anna Netrebko, Rolando Villazon, Leo Nucci, Ildebrando D’Arcangelo, Chor und Orchester der Wiener Staatsoper, Otto Schenk, Alfred Eschwé, Virgin Classics, Wiener Staatsoper, April, 2005.