Probably the biggest and most audacious change in retail is not e-commerce. This may sometimes surprise retailers, as they have spent a lot of time and investments in building up e-commerce over the past 10 years. The cure for the ailing retail business model appeared to be simple: Offline sales breaks away, but online sales grow double-digit. Ergo, retail’s salvation lies in online retail. Patient healed; business model saved! But the truth for many retailers is different. The fast growing online revenues are not able to compensate for the declining offline sales. And not enough. Overall, the business is bottom-line even less profitable, because the complexity in the required omnichannel business model costs money. Besides, sales in online platforms focuses on never ending promotions and high competition in prices and added services which, combined with high online platform fees, are significantly lowering margins.
What can be a solution? The transformation of offline shops; away from being points of sales, becoming points of brand and product experiences instead. Over the decades, supply logistics have been perfected so that customers can fulfill their needs at any time in shops. In times of digitization, product availabilities or competitive prices are no longer central to customers in offline shops, because they can fulfill their demands conveniently online, at lower prices and with home delivery.
Offline shops need to redefine their new roles in the new retail business concept. Offline needs to be radically reorganized, offer fewer products and creatively present them for customers. Products are presented to be experienced by customers but not to be immediately sold. Can this work? Apparently yes. An US study shows that a showroom strategy is not only cheaper, but also brings more spendable customers, who provide larger average orders, shop more frequently, and buy a wider range of products. Details described at Forbes: https://www.forbes.com/sites/pamdanziger/2019/09/29/how-zero-inventory-stores-like-bonobos-supercharge-customers-and-make-retailers-more-productive/#62ef02b219f8
ZIS (Zero Inventory Store) is the name given to this offline retail concept, in which the products are simply presented in a tangible way. They can be purchased immediately but cannot be taken away directly. Deliveries take place from a central warehouses.
The trend towards fewer, better presented products and stronger focuses on brand image creations on the shop floors is certainly logical. In times of almost total product availabilities, better reasons need to be found to keep customers loyal to brands. Customers often still want to touch, feel, tryout, taste and experience products before actually buying them. At the same time, they like to shop conveniently, without carrying huge shopping bags or even bulky boxes fore back to their cars or in public transportation.
Will in future take away products fully disappear from offline retail shops? In my opinion it is more likely that retailers will reduce their actual sales space and offer more space to customers for experiencing brands through products and senses. At the same time, offline shops will still provide the most relevant products to be taken home directly and will offer the full range complementary via digital shelf extension from central warehouses.
Certainly, customers soon can experience completely reinvented offline retail experiences.
