Article written by Norrelle Goldring, Global Consultant, Omnichannel and Shopper at Ipsos.
The death of the physical store has been greatly exaggerated. Whilst the pandemic opened the digital commerce floodgates, there has been some return to physical store shopping.
Recent Ipsos data indicates that shoppers are spending a significant portion of their shopping time in-store. Alcohol has one of the highest in-store time and purchase levels of categories Ipsos tracks, with between 73 per cent of shopping tasks (researching, buying, browsing) and 74 per cent of purchases, depending on the category, happening in physical stores.
But this is not to say that everything has returned to ‘normal’.
Roles of the physical store expanding, not contracting
Some reports indicate that digital commerce sales will overtake physical store sales globally as soon as 2024. It would be easy to assume that the role of the physical store is shrinking in the face of the emergence and scaling of a number of types of digital commerce.
In fact, the reverse is true, as the roles the physical store plays in a consumer’s commerce ecosystem of channels, touchpoints, retailers and brands is expanding in some ways.
Historically the role of the physical store revolved around exploration, display, demonstration, transaction and perhaps some after-sales servicing. Over the past decade the experiential role of stores particularly has increased. The pandemic underscored both the experiential opportunities (AR, VR, metaverse) and limitations (tangibility, sensoriality, human connection) of digital commerce types. During and since the pandemic the role of physical stores in fulfilling digitally placed orders has also accelerated markedly. Whilst from a retailer’s or brand’s point of view the physical store serves both sales and marketing goals, from a shopper’s standpoint the store serves a number of functional, experiential and human purposes. The functional, experiential and human roles of the physical store have all increased.
Logistics functionality increasing
The COVID-19 pandemic accelerated innovations in delivery and collection in new ways including curbside and direct-to-boot pickup, online order fulfilment from physical stores using third party shoppers, and ‘dark stores’ for quick commerce on-demand delivery service providers.
Then there is the world of returns, exchanges and refunds, where shoppers now expect to be able to return a product bought online to a physical store. Across the world, retailers of all kinds are responding to this need.
Famed department store Nordstrom has launched mini service-oriented outlets where shoppers can’t buy anything, rather just return things or have them altered. Ikea recently launched its new small-format Plan & Order stores in Australia. Timberland has receptacles available in their physical stores into which shoppers can drop used products for repair and resale, or for breakdown into recycling parts as part of the chain’s Timberloop program.
From these, you can see translations to the B2C off-premise, given that B2B recycling bottles and kegs already occurs in the on-premise.
Obviously this increased logistical functionality requires operational improvements across a number of elements including signage and point of sale materials for navigation; staff and space allocations and locations for in-store and curbside pickup; and space, staff and processes for product returns, exchanges and refills.
The experiential imperative
The more inherently emotional customer experience elements – those of status, enjoyment and belonging – can be best leveraged in the in-store experience to enhance relationships, particularly through the human connection with store staff.
Physical stores have the capability to be immersive, entertaining and sensorial in a way that digital means such as AR and VR cannot fully deliver. This means activating all five senses, particularly touch, smell and taste (as sight and sound can be replicated digitally).
Personalisation talks to belonging and status by using customers’ names and knowing their sales histories. Providing store staff with both product and customer information and history enables them to add value to the customer’s experience.
Customisation of the product also talks to belonging and status. Kit Kat boutiques and M&Ms flagship stores, where consumers can create their own flavours, are examples of this.
Then there are the ‘flagship’ experiential permanent stores driven by brands which have been on the rise for the past decade. Samsung, L’Oreal, Canada Goose and Dyson all have variations combining the physical, digital and virtual. For instance at L’Oréal’s omnichannel concept store in Shanghai, visitors can take an immersive bike ride along Paris streets whilst collecting discount points along the way. They can watch and interact with influencers who livestream from the in-store set.
Brands and retailers of the liquor industry have yet to truly capitalise on immersive experiences in the same way, such as transporting people via VR experiences to cellar doors, vineyards, distilleries and offering virtual brewery tours. This begs the question – licensing issues notwithstanding – why brands haven’t done this yet, given they have experience in cellar doors already. Lindt have stores and cafes, Kit Kat have Chocolatories … I could see an experiential Treasury or Pernod Ricard store that rotates through different brands with a variety of immersive experiences. Liquor is behind other sectors in the instore experiential aspect – tastings currently are merely demonstration, not immersive.
Functionally, providing experiences includes moving away from one-size-fits-all to personalisation and geo-targeting; providing a range and experience tailored to the local demographics. ABC Convenience stores targeting tourists in Honolulu are one example. Similarly, in Singapore, 7Eleven recently partnered with Tiger Beer in a beachfront convenience store on Sentosa Island which features a reverse tap bar.
Putting humanity at the centre
Consumers visit physical stores for the human aspect. Only 25 per cent of shoppers currently turn to chatbots for help, and this is decreasing. People want to talk to a real human in real life, in a real environment. Not only can store staff recommend specific brands, they act as advisors. Burberry blends the physical and digital by scheduling video chats between customers and store associates in a physical store. Via video, store associates located in the store environment show customers clothes they have indicated interest in. This would obviously work for liquor stores for categories like wine, craft beer and whiskey.
Convenience, the dominant motivation behind most online shopping (six in ten people shop online for convenience, versus only three in ten for physical stores) does not necessarily equate to humanity – in fact, it may be the reverse. Convenience is the result of removing friction points that are not necessarily traffic-driving themselves. Ease, speed and simplicity are not channel differentiators; any commerce channel, whether digital or physical, is expected to provide a simple and easy experience. Consumers have come to expect seamless commerce experiences. Convenience is now merely the cost of entry, rather than the end game.
Fluid channels means changing store metrics, and possibly the model
Digital and physical commerce channels are no longer competing but merging, creating the need to redesign and measure customer journeys across channels based on their needs. Simple examples include the ability to access product information in-store via QR codes on stock, or the ability to buy online whilst in the physical store.
This fluidity, where shoppers move between channels and experiences whether online or offline and often don’t differentiate between them, means organisations need to think about how the physical store can support and incorporate digital commerce channels, and vice versa. Sephora for instance has merged their physical and digital retail teams in order to have a 360-degree view of the customer experience, and how best to operationalise it.
Given the multifaceted roles of the store, we have collectively moved beyond the fundamentals of sales per square metre, and display and price compliance measurement, although such metrics still matter as the ‘baseline’. The expanded role of the physical store means the expanded need for metrics and success measures to match the store’s new roles and objectives. What is the relative importance of each of volume, revenue, profit, trial? How will sales volume and fulfilment be tracked, including the store’s role as gateway to a digital sale? With investing in designing store experiences comes the need to measure customer experience and demonstrate impact on customer retention, advocacy, and share of spend.
It also may mean reassessing store network footprints based around the cost/benefit equation. How can the physical space pay for itself, if some or much of it becomes experiential (and the capital spend per outlet increase accordingly) rather than transactional, or if it serves as a gateway to a digital sale? How and where would the sale be attributed? We are already seeing retailers in other sectors ‘right size’ their store network footprints with fewer but bigger flagship stores, or shift to specific locations such as local high streets rather than city centres.
Then there is the ongoing challenge of seamless handoffs and a consistent experience between touchpoints in consumers’ commerce ecosystems, whether physical or digital. How can organisations build capability in a physical store to acknowledge the touchpoints and conversations a shopper has already had (likely online) with the organisation, in order to personalise recommendations?
The outlook and what it means
In a world with a plethora of commerce channels, where the lines between shopping IRL and URL are blurred, and in which shopping has become an activity not a place, physical stores need to provide more reasons to shop in-person than the convenience of shopping at home. And these reasons are a combination of functional, experiential, and human. The physical store is moving beyond being a primarily transactional space.
Physical stores must continue to evolve roles, formats, experiences and operations to meet consumers’ commerce ecosystem needs. Smart retailers and brands are looking at physical stores from a new perspective, understanding they are part of a customer’s seamless ecosystem, not separate to digital.
This means retailers and brands need to look at merged operations, rather than physical and digital teams operating in separate silos. It means understanding how shoppers navigate channels, and reassessing the roles of the physical store. It means determining what the store and wider customer experience need to look like, and designing that experience to drive those desired customer outcomes. As the roles of the physical store morph, so must models, experience design, execution, measurement and management.
The liquor sector is not currently capitalising on the opportunities that expanded store roles represent. Whilst there have been some moves in the logistics area with basics such as click and collect, experiential and human roles are not being tapped into as they are in other retail sectors.
The physical store is morphing as consumer behaviours change. Are you ready to evolve with it?
This article also appears in the 2023 National Liquor News Industry Leaders Forum, out in February.
- Ipsos Essentials, Wave 66 November 2022, AU sample n=500.