Over the past several years we have seen an increasing trend of traditional brick and mortar retailers closing their doors due to a decrease in foot traffic caused by an increase in online competition. With the majority of the consumer population increasingly more comfortable with transacting online, more and more shoppers are turning to online to buy goods before thinking about leaving the comfort of their own homes. E-Tailers are also becoming more sophisticated with processing online orders, and getting their products to their customers within the same day, closing the gap on instant gratification.
The success of a retail business is usually determined by their ability to evolve and adapt to the constant change in their ecosystem. A good example of this is Amazon, the once upon a time online book retailer, that turned into a marketplace selling everything you can imagine, including cloud hosting services and streaming video, just to name a few.
Why is this happening?
How often do you check the prices online before you buy something from a brick and mortar retail store? Chances are if you are like me or everyone else who has a smart phone you have done this before. This makes it really hard for brick and mortars to compete, nowadays offline retailers have become glorified showrooms for smart shoppers looking for the best deals.
High Operational Cost
Rent is expensive if you want to be located in a prime location where you can get high foot traffic, you need to pay the premium. If you are going to have a store, you need to make sure you have the right products in store to display and have available to sell to your customers, sometimes forcing retailers to stock more inventory supply than demand which results in big markdowns at the end of the season.
From Ebay, to Amazon, to Alibaba, marketplaces have been around for decades, they have provided retailers with an alternative sales and logistic channel to convert inventory into revenue. This has its pros and cons for retailers. Marketplaces have the online presence that retailers lack in order to convert traffic into sales. The downside is depending on which marketplace, retailers do not own the customer relationship, the marketplace does; therefore you are inadvertently growing your competitors business in order to save your own.
The adoption of E-Commerce has changed the way we shop. It's much more convenient today to shop from the comfort of our home, rather than making the trek to the nearby shopping center. Times have changed, and so has the demographics of the modern consumer which has resulted in lower foot traffic for offline retailers.
The modern business need to adapt to change in order to survive the exponential transformation we are facing today. Weather is your products, demographics, strategy or technology, times have changed and so should your business. In order for a retailer to survive, they need to be able to forecast and predict the shifts in their market. Consumers today demand more for less and it's up to retailers to innovate and get creative to survive in today's market.
How to stay ahead...
With the shift of the consumer shopping behaviors and the adoption of technology, these days it's not enough to open a retail store and a website and have the “if you build it they will come” attitude. Your business needs the right strategy bridging the gap between the online and offline experience. Omni-channel is no longer a “buzzword”, it’s a necessity for every business.
Collecting data has become more and more a factor for success, understanding the customer’s behavior and patterns allows you to prescribe and predict customer preferences. Selling product online is not an art but a science, it’s all about mastering how to read and analyze the data behind what is going on in your stores, and knowing how to capitalize on it. In traditional retail you never really knew how often your customers came and visited your stores, or how much they were buying each time they visited, or have the ability to reach out to them regularly. In the E-Commerce world you have access to mass amount of data, but lack the customer interaction needed to build a lasting personal relationship with your customers, which leads to a transnational relationship.
Businesses need the right technologies at their disposal in order to stay current with the evolving market. Without the basic tools, it's very difficult for business to make the right decisions in real time. The lack of technology adoption usually results in higher operational costs due to the lack of insights and the inability to make data driven decisions.
The future of retail is bright and it’s constantly evolving, stay current and stay ahead, embrace change and continue to innovate.