Retail 4.0: High-Touch or High-Tech?

More stores closed their doors in 2017 than in any prior year. At the same time, a number of successful online retailers are becoming increasingly focused on the physical world.

Amazon has made a big push into physical retail, acquiring Whole Foods for $13.7 billion and opening its own AmazonGo store equipped with a proprietary technology which allows people to enter the store, take the products you want, and go. Other firms with large digital presences, ranging from Apple to Warby Parker, have moved into physical stores. 

So, clearly, the problem isn’t with retail itself but with the inability of legacy firms to adapt to a new model.

In their 2005 book, W. Chan Kim and Renée Mauborgne popularized the notion of a blue ocean strategy, which focuses on new markets, rather than fighting it out in “red oceans” filled with rabid competition. As MIT professor David Robertson points out, however, the current retail environment is neither a red nor a blue ocean, but more like a dead sea, killing off existing life but providing a new ecosystem in which different organisms can thrive.

Value never disappears — it just moves to another place.

In the 1950s and 1960s massive big-box stores, providing lower prices and greater selection crushed small-scale retailers in town squares. Today their endless aisles pale in comparison with what’s available online, and rock-bottom prices can be easily found at a number of e-commerce websites. Since then, stores have been optimized for driving transactions. Cash registers are plentiful and easy to find, and success is measured with metrics like sales per square foot and average size of transaction. Yet now a transaction can happen anyplace, at any time. From sitting at the kitchen table to waiting for a train, consumers have the power to browse, compare prices, and order from thousands of retailers competing for their attention. 

Today physical locations need to do something more.

To understand the shift, just walk into your nearest Apple store, where you will find a limited selection of products and no cash registers. Walk in, and you are greeted by an actual person, who has been trained to answer your questions and offer advice. The experience is far more high-touch than high-tech. The reason that Apple stores look as they do is they are not designed solely to drive transactions — they’re designed to do everything that can’t be done online, such as build relationships, offer service, solve problems, and upsell.

It’s time for brick-and-mortar Retailers to find their own answer to some crucial questions, such as:

a) What is our digital business transformation strategy?

b) How can we leverage digital technology to create unique moments of magic which make my store a “destination”?

c) How do we plan to use data to personalize the customer experience ?

d) How can we seamlessly integrate the in-store experience with every other brand touch-points (on and off line)?

What else would you add?

Sources:

https://hbr.org/2017/09/toys-r-us-is-dead-but-physical-retail-isnt https://hbr.org/resources/pdfs/comm/microsoft/TheFutureOfRetail.pdf  https://www.amazon.com/b?ie=UTF8&node=16008589011