For nearly two years, retailers have faced COVID-19 lockdowns and restrictions, with e-commerce changing consumer expectations and the role of physical stores and online channels.
The desire to return to physical retail can be seen in pockets of the world where lockdowns have eased. When stores in the United Kingdom reopened in April 2021, sales rose 9.2 percent month-over-month, with a 218 percent jump in foot traffic in the first week after reopening. In the United States, retailers like TJ Maxx have credited consumers’ desire for “treasure-hunting” experiences for strong post-lockdown sales.
Why do you want to shop in a physical store?
(select all that apply)
Motivation for shopping in store is driven by desire for speed, convenience and discovery.
Making a memorable and meaningful brick-and-mortar experience requires a modern-day take—one that combines the convenience of the digital tools and services consumers have become accustomed to with an inherently unique experience. Here, we explore how retailers are evolving their store footprint to bring new experiences to digital-first shoppers, using data and technology to connect online and offline journeys.
Part One: Brick-and-mortar locations will get more strategic
The pandemic has changed everyday life. The realized potential of remote work has led to an exodus from city centers that once thrived from a commuting workforce, with populations of shoppers swapping rituals of the road for at-home comforts.
Traffic to coffee shops, bakeries, convenience stores and service stations
According to consumer location data from Publicis Sapient AI Labs, U.S. traffic to coffee shops and bakeries – a staple of a typical morning commute – plunged at the height of lockdowns in April 2020, with some uptick as physical locations began to reopen. Convenience stores and service stations, frequented by those who may drive to work, saw a similar trajectory.
“People have relocated, and a lot of people are working from home—they don’t come to the office as often,” said Thierry Elmalem, senior managing director, management consulting, Publicis Sapient. “Retailers will have to change the number of stores they have or relocate stores to where new demand is.”
In 2020, an estimated 12,200 store locations shut down throughout the United States, up from nearly 10,000 in 2019. Coresight Research estimates that another 10,000 stores will shut down in 2021, with 4,000 new store openings in the U.S.
COVID-19 restrictions were a catalyst for companies already struggling to maintain profitability at low-performing retail locations. These closures also created space for new entrants into the brick-and-mortar market, with digital natives like Netflix, TikTok, and Amazon announcing plans to expand their physical footprint. Other retailers are using this period to repurpose existing stores to increase profitability, either as dark stores, click-and-collect outposts or experiential spaces.
“This is demonstrating how companies are re-evaluating the business case for their retail footprint,” said Andy Halliwell, international retail strategy lead, Publicis Sapient. “It’s no longer just about sales, but looking at stores as a very large investment in out-of-home media to create brand awareness.”
Organizations must understand how stores fit into the broader needs of the business and the consumer to create a competitive attack plan and gain market share.
“Combined, this intelligence will help retailers make the right decisions on how to evolve their footprint,” Elmalem said.
Leading the change
Loblaw has been changing the way Canadians shop since 1919, and it was the first grocer to offer click-and-collect to shoppers in Canada. The strategic rollout of express click-and-collect pickup has put 75 percent of Canadians within 10 minutes of a Loblaw location, making order collection easy while expanding the grocer’s footprint.
Part Two: Store layouts will adapt to digital-first consumer demands
The environment a retailer creates within the storefront is paramount when meeting consumer demand for new types of digitally integrated shopping experiences.
“The store environment has to align with what your shoppers are expecting, but most companies are targeting more than one type of shopper,” Halliwell said. “So, how do you build an environment that supports the different kinds of experiences that your audiences want? More experiential stores, with more inventive and unusual décor, and better support for omnichannel consumers are key.”
The e-commerce shopper
Click-and-collect and buy-online-pickup-in-store (BOPIS) give consumers a hybrid approach to shopping and returns. Insider Intelligence estimates that U.S. shoppers will spend up to $83.4 billion on click-and-collect purchases in 2021, up from $72.4 billion in 2020.
Directing shoppers to retail locations cuts down on delivery costs and boosts in-store traffic. Retailers should consider how to adapt their store model to elevate these experiences.
What kinds of digital screens or tools do you expect physical stores to have?
Consumers expect connected experiences when managing BOPIS purchases and returns.
Fulfillment by category and motivation
BOPIS and curbside fulfillment are a preferred method for shoppers across several key categories.
“If you’re driving people to the store, you must have dedicated space so people can come and collect the things they purchased,” Halliwell said. “If you don’t, then you get a lot of people standing in the way of those who are at the location to buy. It adds complexity to the layout and how traffic is going to flow.”
Some retailers, like Nordstrom, are adding amenities like coffee shops or restaurants close to pickup and return areas, giving shoppers a comfortable place to wait for their turn, while also encouraging transactions. Other brands leverage digital queues that let shoppers schedule pickup times or offer product lockers for contactless collection—all managed on a mobile device.
“Little things like this are a nice way to build the environment to manage different kinds of customer journeys coming into stores,” Halliwell said.
Fulfillment and inventory
Retailers are also converting existing retail floor space into fulfillment centers with increasing levels of automation, using smaller spaces to prepare orders at scale with limited human intervention. Retailers can use micro-fulfillment to manage order preparation for curated SKUs, allowing them to quickly move products that may be in high demand.
As consumer habits continue to move toward click-and-collect, retailers are implementing new models to manage demand, provide better customer experiences and improve profitability.
Creating one-of-a-kind brand moments
Retailers should view stores as an opportunity to provide experiences that differentiate their brand from the rest. Digital-first concepts that move beyond the transactional are a way to keep shoppers engaged while strengthening brand awareness.
“Delivering experiences that shoppers want is as much art as it is science, as those experiences need to balance convenience with branding and marketing, connecting them more closely with the retailer for the long term,” Guy Elliott, senior vice president, retail, Publicis Sapient.
Leading the change
When Audi wanted to bring its showrooms to crowded city centers, it introduced Audi City, the first all-digital vehicle showroom. It is an experience powered by seamless gesture control and one-to-one rendering of life-size vehicles, combined with real-time pricing and availability that give buyers a completely new, transformative approach to car buying.
Part Three: Store experiences will be digital and data driven
Technology and data will serve as the backbone of these new store experiences. By seamlessly integrating data across web, mobile, storefront and inventory channels, retailers can digitally expand their physical footprint while providing the connected, personalized experiences that shoppers want.
“It’s about using data to maximize the experience of the customer through personalization, using techniques like employee awareness of customer preferences and history, personalized promotions, and discounts for genuinely high-value customers,” Elliott said. “Getting to a true understanding of customer profitability across all channels is becoming increasingly important.”
Spotlight on Data
What informs the modern algorithm?
- Historical sales data
- Seasonal purchases
- Sporting and cultural events
- Competitor events and promotions
- Gas prices
- Exonomic outlook
- Biographical data
- Demographic data
- Behavioral data (including clickstream and browsing data, social media activity, as wel as in-store data)
- Attitudinal data
- Demand forecasting
- Offers and conversion rates
- Additional operations
North AmericaHilding AndersonHead of Strategy, Retail