The impact of mobile on multichannel retail. The store

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Research commissioned by Webloyalty looks at the impact of mobile on multichannel retail. This section looks at new consumer shopping habits in store.

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The impact of mobile on multichannel retail. The store

  1. 1. 3The store
  2. 2. New consumer shopping habits will impact store’s share of retail Stores remain at the forefront but their share of overall retail spend is declining as other channels gain ground with more consumers shopping online and on their mobiles All retail spend Non food retail spend While physical stores remain the dominant channel for retail purchases, their Store Non store Store Non store share of total retail spend is declining as consumers increasingly use other 4.9 (£8.0bn) 8.5 (£7.9bn) channels to realise the transactional part of the shopping process. 12.3 (£39.3bn) 17.9 (£31.7bn) Since the late 90s, physical stores’ share of total retail expenditure has been slowly on the wane. We estimate that stores’ share of total retail spend will have fallen to 87.7% by 2014. The demise of store purchasing is even more pronounced when food is removed from the equation. We expect non food spend through non physical channels to be approaching one fifth of all non 95.1 (£154.1bn) 87.7 (£280.3bn) 91.5 (£85.1bn) 82.1 (£145.3bn) food expenditure by 2014. Online is the main channel ‘stealing’ share from physical stores, with internet sales accounting for 7.9% of total retail spend in 2010 (up from around 1.0% at the start of the decade). The rapid growth of shopping online has been facilitated by greater broadband penetration and more retailers launching transactional websites over the last decade. 1994 2014 1994 2014 Percentage share of retail spend through stores and non stores for all retail Non store retail expenditure has grown at a rapid pace over the last decade expenditure and non food retail expenditure far outstripping sales through traditional stores. We estimate that non store retail will continue to grow at a faster rate than physical stores as more Store retail sales growth Non store retail sales consumers become accustomed to shopping online and through other over last 10 years growth over last 10 years channels such as mobile phones. As more spend migrates online we predict that sales through non store retail will grow by 41.5% between 2010-2014 versus 7.3% for sales through stores. However despite the significant growth of sales online and through other non store channels over the last decade and their projected growth in the years ahead, it is important to put all this into context, as physical shops, which +24.8% +149.5% have been the mainstay of retail for centuries, will continue to take the (+£126.2bn) (+£31.3bn) majority of retail spend for the foreseeable future. Total growth rates of the different channels for retail spend from 2000-201012 Non store retail includes all spend through non physical stores such as online, catalogue, mail order, mobile, television and telephone.
  3. 3. Stores are losing ground Retailers aren’t opening as many stores as they were in the past as the focus turns to development of new channels and their integration Stores Y-on-y growth % 270,000 0.5 The number of stores in the UK has fallen by around 40,000 over the last 0.1 -0.2 decade. The recession highlighted overcapacity in a number of retail sectors, 260,000 -0.3 0 especially in clothing & footwear and furniture & floor coverings, which saw -0.8 -0.8 -0.5 weaker players drop out of the market during the downturn. 250,000 -1.0 -1.3 -1 We estimate that total retail space declined by 1.8% in 2010, a downward 240,000 -1.7 -1.5 trend that has lasted for the past three years as retailers attempted to control -2.0 costs during the downturn by closing underperforming stores and scaling 230,000 -2 back significantly on expansion plans. We predict space growth to return to -2.7 -2.5 the market in 2012 as some mothballed pre-recession projects are reinitiated. 220,000 However overall space expansion is likely to be anaemic at best and the long -3.3 -3 run average will see a gradual reduction in space as retailers continue to 210,000 -3.5 close outlets to consolidate bloated store estates. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Store numbers 2004 to 2014 and growth rates The demise of the store is not universal across all retail sectors. In recent years and going forward there is likely to be significantly more store fallout Space (millions sq ft) Y-on-y growth % for retailers that sell products that are becoming increasingly digitised such as 590 1.2 1.5 music, video and games. The growth of digital downloading and media-on- 0.9 demand will make the traditional music and video store (in its current state) 580 0.7 1 redundant. Meanwhile clothing stores are likely to be more resilient as ‘try 0.4 0.3 0.2 0.5 before you buy’ remains important for many customers. However the growth 570 0.1 of pureplay clothing retailers such as Asos and Net-a-Porter, which have no 0 560 physical store presence means that even retailers in this sector are not -0.5 exempt from the growth of online retail. 550 -0.9 -1 -1.5 One of the benefits to retailers of opening less new stores in the future is that 540 -1.8 -1.5 their existing space will become more efficient. We expect sales densities to -2.1 increase 8.7% to £514 per sq ft between 2010 and 2014. 530 -2 520 -2.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201413 Retail space 2004 to 2014 and growth rates
  4. 4. Strengthening the cross channel platform Focusing on developing other platforms at stores’ expense While sales through stores continue to account for the majority of physical retailers’ revenues, the growth of their online sales is significantly outpacing store sales. We forecast physical retailers’ online sales will grow 69.8% from 2010 to 2014 compared to just 7.3% for sales from their stores. Unsurprisingly, with such rapid growth coming from online, this channel has been a major focus of investment for many bricks and mortar retailers in recent years, often at the expense of new store openings. Furthermore with Physical Retailers the onset of a slow recovery from recession, retailers have significantly scaled Online Sales back on physical expansion plans, and many are instead focusing on their websites to drive sales growth. 69.8% Online retail sales are growing at such a rapid pace across most sectors it Physical Retailers makes more sense for retailers to focus on developing and integrating this Store Sales channel rather than opening expensive new stores. 7.3% If retailers haven’t already released an app they are increasingly launching mobile optimised versions of their websites in response to the growth of smart phone usage. These developments have significantly improved the functionability of browsing and purchasing from devices with small screens Total growth rates for physical retailers’ sales through stores and such as smart phones. online from 2010-2014. Now the focus has turned to creating a seamless cross-channel shopping experience – a model that Apple has excelled at so far. While stores remain critical for many retailers as they are still the primary channel for purchases, increasingly other channels will have greater roles in the purchasing process. Rather than stores disappearing from the purchasing process altogether, the focus will turn to their integration into a multichannel world.14
  5. 5. A store’s role in a multichannel world Leveraging technological developments and new channels to drive customers to stores New channels and technologies are increasingly complementing traditional stores rather than threatening their survival as retailers can use them to attract people to their physical stores and engage customers with the brand. Stores remain critical for many retailers as they are still the primary channel for most purchases and an integral part of the brand. Despite the growth of ecommerce, stores are unlikely to disappear completely from the purchasing process or the retail scene for the foreseeable future. Instead the focus will be on integrating traditional physical stores into the new multichannel world through initiatives that make visiting them more convenient, informational and experiential.Convenient Informational Experiential In a multichannel world it is essential that retailers Service and support are vital ingredients for all Stores will always offer aspects that the non physical offer flexible fulfilment options. The store will retailers. In store sales staff and assistants offer a channels find difficult to emulate, such as the ability continue to be accessible to many consumers as much more personal level of service than is to see, touch and try products before purchasing. they go about their daily lives. With the growth of currently provided online and through other non Retailers are increasingly beginning to capitalise on online shopping, physical stores could increasingly store channels. Promoting this in store expertise can this by providing more experiences as part of their act more as a collection point for online purchases give retailers a competitive advantage, especially in store retail offer. There are a number of retailers to be picked up at a customer’s convenience. against pureplay competitors. that are already excelling in the experiential area of retail such as Apple which offers product training Currently around 32% of consumers use Click and The rapid pace of smart phone uptake also gives workshops in its stores, Nike which organises group Collect type services, making it the second most retailers the opportunity to leverage increased running sessions from its flagship stores, while popular way of receiving physical goods purchased mobile internet access amongst its customers as a Disney hosts in-store play days for children and its over the internet. Its usage continues to grow as promotional and informational channel for their new flagship store in Times Square New York, has more retailers offer the service and consumers stores. US retailers such as Best Buy and Macy’s been designed to offer a highly immersive and become more comfortable at using the system. As have tied up with Shopkick, which sends coupons interactive shopping experience through digital Click and Collect penetration grows we expect pick direct to customers that have the app installed on displays such as a talking ‘Magic Mirror’. up points to become more prominent in stores and their mobile phones when they enter a store. have a greater presence. Currently they are often Meanwhile other retailers have teamed up with Interactive shopping experiences give customers sidelined or hidden at the back of a store. In the location-based social media platforms such as the opportunity to engage with a brand in a whole future collection points could become a key area in Foursquare and Facebook Places to offer similar new way. Stores could become more like interactive stores. discounts to entice customers into stores via their showrooms, allowing a hands on experience that smart phones. Retailers can use this technology to can’t be replicated through non physical channels. promote store events and exclusive store discounts15 to help drive footfall to their physical outlets.
  6. 6. Stores of the future What will be the key attributes of stores in the future?The store The staff Mobile POS increases interaction with customers –Retailers will open fewer stores as more Specialist sales staff with expertise Eases congestion in store,retail spend migrates online and the focus and trained in excellent customer customer can realise transactionturns to consolidating existing store estates. service will be free to roam the store with a sales assistant anywhere and not stuck behind a till. in store and avoid lines. Receipts can be sent electronically to customers’ Larger stores – retailers will extend existing email accounts. stores or open new larger outlets, which are more profitable and give retailers more space to provide improved shopping environments to customers – key for the experiential and Specialist knowledge – Staff are trained to know the product better than interactive role of future stores. anyone else. They are on hand to give demonstrations and answer customer queries – key for the informational role of future stores.Multiple smaller footprint stores – Retailers will keep The layout Retail technology integrated to improve store experience – Ina voluminous store estate but downsize the overall store technology will improve the way customers interact with Stores will be designed as brand hubs toamount of retail space as stores focus on providing a the store. Upon entering customers can ‘check in’ with theirstripped down offer of core products. The full offer will offer a highly immersive and interactive smart phones to receive discount coupons. Customers can usebe available online and can be browsed in store shopping experience mobiles or computer terminals to look up product information.through computer terminals, where customers canorder to pick up from the store or for home delivery –key for the convenience role of future stores. Retail theatre – Stores of the future will include a vast array of retail theatre to make the shopping environment more Collection hub for online interesting and visually compelling purchases – pick up points will including interactive displays, product have a much more prominent demonstrations and virtual showrooms – positioning as the store key for the experiential element of future becomes a convenient means stores. of collecting online orders.16
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