|Apple is an example of retailer that has made its stores more of a destination and less of an errand -- a model experts say more bricks-and-mortar retailers should copy to compete with online sales.|
The two big words in retail's future will likely be "customer customization." Retailers must begin to tailor products to the demands of individual customers in the same way popular e-commerce sites such as Amazon target customers based on purchase history. "The 'one size fits all' approach won't work anymore," Deloitte's Gomez said. "Retailers need to determine what will create value for the specific customer." While bricks-and-mortar stores may not be able to do this quite as easily as a website, they nonetheless have several tools at their disposal. Nigel Fenwick, the vice president and principal analyst at Forrester Research, points to the example of Tesco, a major shopping chain in Europe similar to Wal-Mart that has begun to use loyalty cards to track customers' shopping histories to recommend related products and services. At the same time, retailers can take advantage of social networks to get a more accurate sense of overall customer feedback and even respond to individual customer demands. "Retailers are getting closer and closer to one-to-one marketing because of social media," Gatti said. And the closer they get to this reality, the better stores will be able to give each consumer what they really want and keep customers coming back for more.
As stores get better at matching the products they offer to the products their consumers actually want, it will eventually allow many retailers to reduce the size of their stores while remaining equally or even more productive and profitable than with a larger space. "As stores begin to customize products more, the supply chain will get tighter and quicker, which means they won't need as much inventory or square footage to store that inventory," Gomez said. At first blush, the idea of shrinking stores may seem like the ultimate sign they are in a weaker position, but experts say bigger isn't always better. A smaller store may not only function more efficiently, but be more attractive to customers. "For a long time, stores kept getting bigger and bigger, thinking that more products meant more satisfied customers, but the problem is that stores became so big, they were actually hard to navigate," said Raymond Burke, professor of marketing and chairman of Indiana University's Center for Education and Research in Retailing. In fact, this year, Wal-Mart ( WMT) and Target ( TGT) plan to introduce dozens of smaller stores in cities around the country, customizing the products offered to fit the communities. And if recent history is any judge, once Wal-Mart does something, other retailers tend to follow. Turning shopping into an event
In the coming decade, the struggle -- and the opportunity -- for many retailers will be to find ways to emphasize the differences between the bricks-and-mortar experience and the online experience. "Retail is becoming less about stacking boxes high and selling items at the right price and more about building an engaging experience for the customer," said Fenwick, the Forrester analyst. "The store has to add some value to the customer's overall purchase, whether it be through in-store entertainment options or interactions with the staff." Fenwick points to retailers such as Disney and Apple ( AAPL) that have fashioned their stores to allow consumers to entertain themselves with products, see films and attend events in screening rooms and have access to a knowledgeable staff. If you want to get expertise on an Apple product, you have little choice but to go to the Genius Bar in the store; the Internet just won't cut it. This makes the store itself more of a destination and less of an errand. Retailers don't necessarily need to invest mountains of money into new technology to turn their stores into a destination. Burke highlights the example of Gallery Furniture, a store based in Houston, that has attracted customers by offering free food, jewelry exhibits, movie screenings and more. "People will drive for miles to get there because it's a fun place, and the store's inventory turns over much quicker than a typical furniture store," Burke said.
Ultimately, even if retailers make their bricks-and-mortar stores into exciting destinations and provide quality customer service, all this guarantees is that customers will choose to stop by the store to waste a few minutes before going elsewhere. To get customers to buy in the store rather than look for the same product elsewhere online, stores may need to begin offering items unique to the physical store. "More than ever before, stores, and the products they sell, must offer consumers a status story," said Henry Mason, head of research and analysis at Trendwatching.com, a firm that analyzes global consumer trends. This could mean private-label options that aren't available elsewhere, or a jazzed-up version of an existing online product that can only be found in the store. In this way, retailers not only provide an added incentive for consumers to make their way to the store, but any consumer who buys these products becomes a walking advertisement for the bricks-and-mortar store. >To submit a news tip, email: email@example.com.
Twitter and become a fan on Facebook.