Key takeaways

  • E-commerce retailers such as Amazon and Warby Parker have begun opening bricks-and-mortar retail stores.
  • While there is interest in new digital retail technologies, customers still value physical stores and helpful staff.
  • Retailers that seek to close the gap between online and offline will prosper.

Late last year, to the surprise of many, Amazon opened its first bookstore. Not an online bookstore, either: a 510m2 bricks-and-mortar space in the company’s hometown of Seattle. Why is an e-commerce giant only now venturing into the offline retail space – a sector that it has spent the past two decades disrupting? Data.

Amazon’s foray into the physical realm is backed by vast stores of digitised customer information. This data informs the new store’s inventory and partially dictates the layout of the shop floor. Alongside the usual bestsellers and ‘staff picks’, several of the store’s book sections have been arranged to feature top-rated titles from Amazon’s online user-base. Another section is for books that were most frequently added to users’ ‘wishlists’ – a list where customers can save items for later purchasing.

Even the way the books sit on physical shelves has been altered by Amazon’s digital offering: all the books face outwards, rather than being densely stacked with only the spines visible, just like how books are viewed on the website. Indeed, the offline store sets out to closely match the experience of its online predecessor.

Crossing the
retail Rubicon 

While the rise of e-commerce has seen bricks-and-mortar sales shrink dramatically, Amazon’s move to ‘reality retail’ is a sign of the growth opportunities available when physical is aligned with digital. It’s not just Amazon, either. Other e-commerce retailers have also opened up shop in the real world, including eyewear manufacturer Warby Parker, cosmetics subscription service Birchbox, and mattress manufacturer Casper.

For established Australian retailers with long histories of bricks-and-mortar outlets, these stories of transitions from cyberspace to retail space are case studies for the importance of bridging the gap between online and offline. Indeed, consolidating these two channels is becoming increasingly intrinsic to long-term success.

remains important

According to PwC’s Total Retail Survey 2016 report, the offline store still plays a central role in the purchasing journey for many customers. Just over half of respondents (52%) preferred to purchase consumer and electronics products in-store, while 40% valued sales associates with a deep knowledge of the product range. Less than a quarter of respondents, meanwhile, said they were enticed by an inviting ambience.

While customers continued to value the more traditional services offered by retail storefronts, more digitally-enabled services were also sought after by some respondents. For instance, 35% valued an easy checkout process, while 32% wanted to be able to check online stock inventory quickly.

is king

So how does an established retailer begin to integrate these mixed traditional and digital preferences across the available channels, and more importantly, best optimise these channels to drive conversion throughout all touchpoints?

Part of the answer can be found in the concept of Connected Retail, which utilises a customer’s prior browsing behaviour to create an experience personalised to individual tastes and preferences. Using Connected Retail, consumers can be empowered to conduct separate aspects of their purchasing journey across multiple touchpoints. This could mean researching on social media and shopping in-store, buying online and returning in person, or any other variation thereof.

Use the physical
to your advantage

While integrating a Connected Retail solution within a single site is relatively straightforward, things become increasingly complicated when the retailer consists of a large, geographically dispersed chain.

Rather than roll out these solutions as turnkey packages across the entire network, a practical alternative is to first invest in single flagship stores that offer immersive experiences and become destination locations. Alternatively, if investment in a flagship site is unfeasible, a buzz-generating ‘pop-up’ concept is also an effective (albeit temporary) strategy.

Once these parameters are defined, larger-scale technology investment throughout the rest of the sites will be simplified and streamlined, delivering the desired customer experience (and increased conversion levels) faster and with a more economical bottom line.

Turn your store
into a hub for community

A final interesting insight unearthed by the Total Retail Survey was the potential drawing power of physical stores when they closely integrate with the local community.

According to the survey, customers both desire to be part of an engaged community and will frequently seek these community spaces to counteract the digital world. Retailers with surplus store space can provide these environments, quickly converting areas to better serve the community. In 2013, UK supermarket chain Tesco put this concept into practice, renovating excess store space into cafes, beauty salons and even community rooms offering complimentary yoga. By fostering a communal connection with customers, retailers incentivise return visits by adding a whole new dimension of value to their offline channel offering.

the gap

Ultimately, the always-connected and tech-savvy customer will keep embracing the convenience of online channels such as online shopping. They will also continue to seek out new digital service offerings, whether it’s portable or self-service checkouts, online inventories, or even augmented or virtual reality.

However, physical stores still remain extremely relevant to most shoppers. So while some retailers may be tempted to shut up shop and invest in a comprehensive online experience, as e-commerce giants like Amazon are showing, a bright future can still be found in digitally enabled bricks and mortar.


Chris Paxton


Chris Paxton

Chris is a Partner at PwC’s Strategy&, working primarily in the retail and consumer space.

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