Prime time for brick and mortar innovation: Why stores matter

Prime time for brick and mortar innovation: Why stores matter

1. Brick and mortar is core to the shopper experience and will continue to dominate sales for years to come

E-commerce has been on a tear lately, with the latest excitement around Alibaba’s impending landmark IPO marking the continued flourishing of online commerce. E-tailers may be eating brick and mortar’s lunch in innovation, but it doesn’t mean that stores aren’t here to stay. Physical retail still represented 94% of U.S. retail sales in Q4 2013, and it’s prime time for brick and mortar to innovate and rise to the higher bar e-commerce has set.


2. What’s important isn’t online vs. offline, but the fact that e-commerce has set a higher bar

At the last Goldman Sachs Global Retailing Conference, Blake Nordstrom described the challenge that retailers are facing. He said:We’re showing a little bit of softness in the full-line stores. There’s different issues that it is not fair and appropriate to say, E-commerce is taking some of those sales. We just think there’s a higher bar from the customer about the customer experience that needs to happen in the store. So we have to create a more compelling reason why the customer would visit the stores as well.”


3. Successful retailers focusing on customers and investing in brick and mortar innovation 

A recent articles from Forbes summarizes why stores  matter to Macy’s: “On the earnings conference call with investors, CFO Karen Hoguet stressed the importance of stores in this age of mobile and Internet shopping. While customers shopped aggressively on the web, fulfillment at stores was an important factor for many of the transactions. Either a customer picked up the merchandise at their nearby Macy’s, or the store may have fulfilled the order and shipped it directly to the customer’s home. In either case the store was still an important cog in the wheel that serviced a specific sale. Omnichannel at Macy’s today means that orders can fulfilled in multiple ways.  It also means that every associate in the company is trained to make customers feel welcome and important.”

Other innovative retailers that are investing in the customer experience are thriving offline as well. Take Michael Kors’ worldwide expansion plans or Fast Retail’s aggressive U.S. growth strategy for Uniqlo. Both retailers are being well rewarded by investors and growing their customers relationships. E-commerce slaying brick and mortar? Not so much.


4. Data is the key competitive advantage

Big data is running the world, with companies that harness its potential at the forefront of building better customer experience and driving sales. Jeff Bezos’ secret? A huge data engine that anticipates customers’ needs and keeps them returning.  As McKinsey’s influential big data study summarized:

“The amount of data in our world has been exploding, and analyzing large data sets—so-called big data—will become a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus, according to research by MGI and McKinsey’s Business Technology Office. Leaders in every sector will have to grapple with the implications of big data, not just a few data-oriented managers. The increasing volume and detail of information captured by enterprises, the rise of multimedia, social media, and the Internet of Things will fuel exponential growth in data for the foreseeable future.”

While the online world has an influx of tools to measure, analyze, and improve operations, brick and mortar is mile behind in harnessing the power of big data. In terms of understanding customer behavior and building better experiences in stores, retail will need more than just sales and transaction data.


5. Location analytics will transform retail

As a recent article from the Harvard Business Review and Forrester states: “Any company building an online presence wouldn’t think twice about the need for sophisticated web analytics…Just as web analytics is an essential tool on the Web, location analytics will become a must-have for designing, managing, and measuring offline experiences”.

The implications for the ability to understand customer behavior in physical locations are huge.

“The difference between how firms operate their businesses today and how these efforts will change with location analytics is profound. Beyond creating more efficient, effective and meaningful services, firms will begin to rethink the notion of customer value. The ability to identify, track, and target customers in physical locations will enable companies to extend preferential status and rewards to customers based on their behaviors.”

With smart executives taking the first steps to necessary innovation.

“Location analytics will also exacerbate the growing digital divide within companies. It used to be that those with operational experience were on the fast track to the C-suite, but no more. Leaders with digital chops and an understanding for how to translate digital-age innovations such as location analytics into compelling analog world experiences are now the ones to watch.”


6. Google Analytics is to e-commerce as Euclid Analytics is to brick and mortar

According to a 2011 study from iPerceptions, 98% of the top 500 internet retailers use some form of web analytics. Google Analytics is the 800-lb provider, with almost every retailer relying on GA’s metrics to measure and manage performance. The founding team of Euclid included advisors from the creators of Urchin (the foundation of Google Analytics). We took on the challenge of measuring behavior in the physical world four years ago, and invented the technology to make getting access to essential metrics easy for retailers. The future of brick and mortar relies on informed data usage as standard business practice. This January, we took the dinosaur step of making our analytics even more ubiquitous, by releasing Euclid Express, the world’s first free location analytics platform available across a wide array of Wi-Fi infrastructure. We’re here to make it easy for you to understand how your shoppers convert into customers, and raise the bar for brick and mortar performance.


Alexander Reichert, Insights

Alexander Reichert, Insights

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