Retailers are reaching the stark realisation that they need to establish themselves as destinations rather than outlets if they are to compete with online.
Global research firm Nielsen reports that almost two million New Zealanders are now shopping online, citing convenience, price and range as the biggest draw cards.
New Zealanders spend a staggering $4.6 billion per annum purchasing items online, with the most popular retail categories being flights and travel services and fashion apparel, such as shoes and accessories.
Despite this, data from international commercial real estate firm Cushman and Wakefield shows an overwhelming 79 percent of shoppers still prefer a tactile in-store experience of physically trying, feeling and seeing products in the flesh.
There remains a strong case for retailers to occupy a physical store, but one outside the traditional realms of retail. Instead, retailers are beginning to adjust their in-store compositions to accommodate the ‘omni-shopper’.
Cutting-edge retailers such as Apple, Lululemon, Superette and The Department Store in Takapuna have reconfigured their stores to offer more experiential elements to their customers, as opposed to just a shop floor filled with shelves, racks and a payment counter.
We are seeing the introduction of barbers and video game consoles in menswear outlets, personalised style assistants and nail salons in womenswear sections, and pharmacies or the likes of coffee bars and cafes in department stores.
Surveys conducted by Nielsen show that customers rarely shop exclusively online or in-store, but tend to use a combination of both to purchase products depending on their individual circumstances at the time. This has seen the birth of the omni-shopper.
These are well informed and purposeful customers. Many research their options online and by the time they enter the store they know their products, they know what constitutes a good price and they are less willing to spend time browsing, leading to fewer impulse buys.
Nielsen’s Online Retail Report shows more than 80 percent of online New Zealanders have engaged in ‘webrooming’ where they have been prompted to go in store to purchase an item, following browsing online.
Retailers who neglect to add either a physical or online store to their existing stable risk missing out on an important source of revenue. It’s a bit of Darwinism at play - evolve or get left behind. Those that are surviving and thriving in the era of internet shopping understand how both physical and online stores can complement each other.
Online shopping is a bit like on-demand television, as customers can pick and choose what they are exposed to. Temptation is mitigated and there are fewer opportunities to upsell.
Click-and-collect options are helping retailers to overcome these challenges by encouraging online shoppers into their physical stores where they are likely to spend more.
The physical store is seen now as more of a gallery or showroom to display products and teach customers about the brand, rather than a space to stockpile merchandise.
Omnichannel retail has spawned massive growth in third party warehousing and logistics enterprises, as well as in the courier and transport sectors.
In order to cater for the exponential increase in workflow, these firms must undergo major expansion and warehouse acquisition.
Cainiao, the Chinese logistics company charged with handling all of Alibaba’s deliveries, announced plans to almost quintuple its warehouse space over the next 12 months to around five million square metres.
When people think of internet-based retail, they think it means a smaller physical footprint, but this is just not the case. Whatever is being lost in high street retail property is being recovered in office and industrial property to the tune of millions, or in China’s case, billions of dollars.
It will be of particular interest to see how this changes the dynamics of our central business districts over the next five to ten years. What we can be confident of is not a dying off of physical retail, but rather a rebirth that will benefit the shopper and improve efficiency for the retailer.
This story was originally published in NZ Retail magazine issue 740, October / November 2015.