Mobility and the high street: Retailers face up to the digital challenge

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High street retailers may be forgiven a tinge of nostalgia about life before online commerce. In the United Kingdom, the year 2013 has seen the bankruptcy of Blockbuster, the movie-rental chain, Jessops, the venerable camera retailer, and HMV, the even more venerable entertainment retail chain. These businesses—and others before them—proved unable to adapt to the wide-scale of shift of consumers’ shopping activities from high street stores to the comfort of the sofa, via a computer or a mobile device.

The Internet has not necessarily slashed consumer traffic into stores. It has fed the growth, however, of “showrooming”, where shoppers view a product in a store but then buy online, often with a cheaper online retailer. In a recent report on digital retailing, Amaze, a UK-based digital agency, says that “showrooming is here to stay, and retailers have little choice but to work out how to serve a growing group of customers who only want to visit a shop to experience a product but will ultimately purchase it online”

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Mobility and the high street: Retailers face up to the digital challenge

  1. 1. Mobility and the high street Retailers face up to the digital challenge* Written by the Economist Intelligence Unit Mobile showrooms H igh street retailers may be forgiven a tinge of nostalgia about life before online commerce. In the United Kingdom, the year 2013 has seen the bankruptcy of Blockbuster, the movie-rental chain, Jessops, the venerable camera retailer, and HMV, the even more venerable entertainment retail chain. These businesses—and others before them—proved unable to adapt to the wide-scale shift of consumers’ shopping activities from high street stores to the comfort of the sofa, via a computer or a mobile device. The Internet has not necessarily slashed consumer traffic into stores. It has fed the growth, however, of “showrooming”, where shoppers view a product in a store but then buy online, often with a cheaper online retailer. In a recent report on digital retailing, Amaze, a UK-based digital agency, says that “showrooming is here to stay, and retailers have little choice but to work out how to serve a growing group of customers who only want to visit a shop to experience a product but will ultimately purchase it online”.1 Mobile is playing a somewhat different role in this trend than the fixed Internet. According to the GSM Association, a lobby group of mobile operators, in showrooming “consumers are increasingly using their mobile devices to bridge the online and offline worlds.” Indeed, retailers can turn digital to their advantage if they treat their bricks-and-mortar store as just one channel among many. Alasdair Macdonald, vice-president of analytics at Genpact, an IT services firm, explains: “Smaller retailers see digital and mobile as a route into products—retail is always part of the channel mix. [For many consumers], it’s hard to get away from a desire to touch and feel a product.” Mr Macdonald cites the example of sofa.com, which has a handful of physical stores. “They’re there,” he says, “because sofas are an infrequent purchase, and people want to see the product before they buy.” Customers will usually end up buying online, however, because they can specify precisely the combination of sofa style, size and fabric. Vince Russell, managing director of The Cloud, a Wi-Fi hotspot provider, adds: “It’s a tactile thing. People want to try stuff on: the physical store can provide a link and then tie in with online assets—a customer could try something on and then use in-store tablets to order an item online. Or they can order from home and go in-store to collect it; or buy in-store and have it delivered to their home.” Drawing them in Bricks-and-mortar shops clearly provide a service that cannot be replicated online. However, retailers who understand how customers use mobile devices to shop are finding opportunities to improve the shopping experience. Says Kim de Ruiter, head of mobile and entertainment partnerships at marketing agency Cheil UK: “The use of digital in bricksand-mortar stores has greatly increased in recent years. Retailers should be using mobile and digital to create immersive, interactive experiences for shoppers which both enhance the environment and incentivise customers to go in-store.” Examples abound of retailers developing creative applications to entice consumers into stores and enhance their shopping experience. Game, a UK video-games retailer, has built an app which allows customers to view the latest game charts, scan barcodes of their unwanted games to get their trade-in value, and receive promotional codes to use spo n sore d b y : *This and other articles about the challenges and opportunities of mobility, sponsored by EE, can be found at http://eefutureconnections.economist.com/. Amaze, Connected Retail—The Future of the High Street, July 2013. 1
  2. 2. in-store. Target, a US discount retailer, has developed an app with which customers can create shopping lists and scan barcodes to view availability and prices. At Paperchase, a UK stationery retailer, sales staff can take payment from customers anywhere in the store using tablets or mobile phones. Nieman Marcus, a US department store chain, uses a custom app, NM Service, which can arrange for items to be put in a changing room while shoppers browse as well as apprise them of new arrivals and sales promotions. Fears have long existed in the mobile industry that consumers will find mobile marketing intrusive. When it comes to augmenting the retail experience, however, this may not be the case. Research conducted in 2012 by Latitude, a media research firm, found that 79% of the shoppers they surveyed are interested in having digital content such as demo videos and product recommendations delivered to their mobile devices while they’re in a shop.2 Mobile has also played a role in fuelling the “pop-up” phenomenon, where small shops set up for relatively short periods in retail spaces vacated by larger, traditional stores. Pop-up shops not only enable small retailers to create a form of high-street presence at low cost, but they also help larger retailers and brands to test new products or concepts. Customer traffic is driven mostly by word of mouth and social media. Popup shops provide another example of how physical stores can benefit Latitude, Next-Gen Retail: Mobile and Beyond, December 2012. 2 from social media buzz and word-of-mouth recommendations, although bigger, established retailers know how important social media is, too. Mr Macdonald also points to a benefit of social media that retailers may be less aware of: after-sale service. “We’re seeing consumers increasingly looking to peers and other users to solve problems, which deflects them from going into the stores to get things fixed.” Rising to the challenge With all the growth of online commerce and the demise of some big highstreet names, retailers can take comfort from the fact that consumers still value the experience of going shopping. Research has shown that many consumers view their online and in-store experiences as complementary rather than mutually exclusive. With that knowledge, and the reality that virtually every consumer now carries a mobile device, many high-street retailers are coming to view mobile as integral to their strategies for attracting and retaining customers. The wisdom of doing so may be reflected in comments one shopper offered to Latitude in its aforementioned study: “My smartphone goes everywhere with me. I can look up information or buy something the instant it occurs to me, wherever I happen to be then. Honestly, it’s hard to imagine what life was like before.”

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