Is Offline Retail Dead ? What lies ahead…

Brick-and-mortar retail dominated the high street before the 1990s. But, with the invention of the internet, a whole new paradigm of sales and marketing changed the retail industry completely. Nowadays, brick-and-mortar retail is at risk of falling behind as e-commerce continues to grow exponentially, dominated by Amazon. 

COVID-19 has put further strain on traditional retail. There have been widespread closures of department stores around the world since January 2020. At the height of global lockdowns, the pandemic widened the gap between brick-and-mortar and online commerce as consumers were pushed fully online. 

COVID-19 has been a disaster for brick-and-mortar retail over the last 6 months or so.

Let’s take a look at brick and mortar stores.

brick and mortar store is a business or retail outlet that has at least one physical location. It refers to a traditional street-side business that offers products and services to its customers face-to-face in an office or store that the business owns or rents. It can also refer to companies that own warehouses, factories, or other spaces for operating and storing goods.

Understanding Brick and Mortar:

 Many consumers still prefer to shop and browse in a physical store. In brick-and-mortar stores, consumers can speak with employees and ask questions about the products or services. Brick-and-mortar stores have the ability to offer experience shopping whereby consumers can test a product such as a video game or laptop while shopping at the store. Brick-and-mortar businesses also provide consumers with instant gratification when a purchase is made.

Advantages of Brick and Mortar stores:

Local Attraction

To paraphrase an old saying, the first three advantages of retailing are location, location, location. Brick-and-mortar stores are uniquely positioned to reap the traffic associated with specific destinations or shopping patterns around them. In short, a location and the sense of community surrounding a store is its branding. Convenience is key. Studies show that 65% of shoppers actually prefer purchasing at a local retailer if an item is available in both a nearby store and online. They may start the buying process by researching and comparing products and pricing online, but they will complete their purchases at a brick-and-mortar location, especially if it’s clean, friendly, attractive and, most of all, convenient.

Knowledge

Whether by seeing a product up close, observing it demonstrated in person or finding answers to detailed questions, consumers turn to brick-and-mortar retailers for knowledge they can’t glean from the internet. In fact as per a media report 90% of shoppers are more likely to buy when helped by a knowledgeable sales person, and 63% of consumers surveyed indicated that they will shop the most knowledgeable source if the same item is available at four different retailers.

Trust

Along with knowledge comes trust and, ultimately, relationships—two other commodities that consumers can’t truly immerse themselves in online. Your brick-and-mortar store has an innate advantage: A physical location deepens trust by its mere physical presence. Consumers associate bricks and mortar with legitimacy. They can engage their seller face to face and work out difficulties or return products that don’t meet their expectations.

Service

Great service is something consumers highly value, yet it costs a physical retail establishment very little by comparison. Delivering a personal touch is what you can excel at, so make customer service your top priority.

Drawbacks:

Fixed costs

Fixed costs are a serious challenge for B&M businesses. Fixed costs are payments that a business has to make for elements such as rent of a store and monthly payments for services such as a security alarm. Fixed costs stay the same for a business even if it ramps up its operations or winds down its operations during a slow period. Start-up companies and other small businesses typically find it hard to pay all of the fixed costs that are part of their venture.  Research data as per public media shows that 70% of new start-up businesses fail within the first 10 years.

Inconvenient for customers with busy lifestyles

 

People have busier lifestyles, with more families having both adults working, and therefore they find it harder to find the time to physically go and shop at stores and services. As well, in many cities traffic jams and congestion on roads have made it more stressful and time-consuming to drive to physical locations to shop. Online shopping and online services, which consumers can access from an Internet-connected laptop or smartphone are more convenient for these people. With mobile devices, consumers can order take-out food, gifts and services even when they are “on the go”, such as stuck sitting on a bus or waiting in an airport lounge for a plane.

Expensive and luxury products

B&M increases the fixed cost for any business, therefore the products sold in physical shops tend to be more expensive compared to online shops. For stores selling expensive products or services in a B&M format, customers expect beautiful window displays, fine decorating in the establishment and well-dressed salespeople who earn high commission on their sales. Online shops, even those for luxury goods, do not have to pay for high-end retail stores and salespeople. Nevertheless, high-end online stores typically incur higher costs for their online presence, because they need to have leading edge Web 2.0 functions on their website, a professionally designed site, and in some cases, staff available to respond to phone calls, e-mails and online “chat” questions.

Wider stock availability online

Products may be out stock in relatively small brick and mortar retail stores and due to limited space in small business retail stores, these establishments may only be able to carry a few types of each product. Online shops are able to have a huge amount of stock in numerous large warehouses (e.g., Amazon.com has warehouses in numerous locations from which it ships its products) which it can quickly ship out. An online store may be able to order up products from a large number of geographically dispersed warehouses, even warehouses owned and operated by third parties (e.g., smaller companies), which are connected to the large company via the Internet.

Queues

Queues (line ups and waiting rooms) are part and parcel of B&M retail businesses, due to physical constraints and the limitations on how many staff the business can afford to hire. A physical store may only have a few salespeople to serve customers, so many customers may have to wait in line during the busiest hours. To lessen the stress of waiting, some B&M stores provide big-screen TVs with cable TV, free coffee and newspapers; while these niceties improve the customer experience, they add to the costs of operating a B&M establishment. On the other hand, an online virtual store in which customers select their own purchases in a virtual “shopping cart” and pay for them using e-commerce approaches may be able to serve thousands of customers at the same time.

COVID-19 and B&M

COVID-19 has resulted in more consumers shopping online. Now, it remains to be seen how the ecommerce industry meets the expectations of the ‘new normal’.

It’s not all doom and gloom for brick-and-mortar, but they do need to provide more competitive value to their customers when they enter their stores. There are ways physical retailers can innovate their businesses to keep them alive and attract fresh consumers. The importance of this has been heightened by coronavirus. Now that shops are being allowed to reopen, they need to look for ways to entice customers. 

Change in consumer behaviour due to Covid pandemic:

A recent study said that 91 per cent Indians changed their shopping behaviour due to the crisis. Many urban consumers, increasingly working from home and reluctant to deal with crowded public places, are moving online for their shopping needs. If demonetisation compelled people to shift toward cashless payments, Covid-19 has made them adopt online shopping.

There has been more than 10 per cent growth in online shopping across categories during the pandemic globally and it is expected that consumers will continue with this practice even if brick-and-mortar stores reopen. Globally, one in five consumers who ordered their last groceries online did so for the first time. For consumers aged 56 years and above, this figure was one in three.

Falling incomes coupled with low optimism about the economy is making Indian consumers spend more on essentials, such as grocery and household supplies, and cutting back on categories like apparel, footwear, and travel. A survey indicated that about 61 per cent of Indians are more mindful of where they spend their money, and 45 per cent are shifting to less expensive products.

Businesses that were traditional Brick and Mortar before Pandemic:

The impact of the pandemic are highly depressing and even hard to imagine in case of health, education, tourism and many other spheres of life, but when it comes to the E-Commerce business, the influence of COVID-19 is very positive and beyond satisfactory for those who are directly or indirectly involved in it. The pandemic has rendered a kind to great favour and service to E. Commerce business community. 

Education Sector:

  • The education sector is facing unprecedented challenges and needs to adapt and find solutions to keep children motivated and interested in their route to learning. The Covid 19 has resulted in all schools shut across the world. Globally, over 1.2 billion children are out of the classroom and being moved online. Though pace of adoption greatly depends on the affordability of the society. Thus, education has changed dramatically with the distinctive rise of e-learning, whereby teaching is undertaken remotely and on digital platforms.

Agricultural Products:

  • People are switching from malls and supermarkets to ecommerce for everyday commodities, online sales of companies continued to rise. Everyday commodities such as Fruits and vegetables are sold online in many platforms such as Big Basket, Grofers, Jiomart and by some of local supermarkets in metro cities.

Healthcare and Fitness:

  • Ever since the lockdown came into effect in the month of March and People during this lockdown concerned more about their health and fitness, the majority of fitness centres converted their mode to online and started guiding their members in electronic mode.

Entertainment sector:

  • The lockdown has had varied effects on the multiple sectors in the media and entertainment industry. With theatre releases postponed, shooting on hold, and cinema halls closed, absolutely nothing is certain. In what are clearly dark times for M&E, OTT media services appear to be a glimmer of hope. There has been increased usage of these platforms over the last few months. Many of the heavy expectations movies are being released in the OTT platforms. With unlocking of Entertainment business recently, the sector is expected to begin its slow and extended journey towards the “New Normal”.

Household and Personal care:

  • The composition of the consumption basket has changed due to COVID and some of these changes will be more permanent than others.
  • Online shopping is going to be the new norm. Local Sellers also started selling their products online in order to survive in the market. Initiatives like ‘no-contact delivery’ by key players are going to accelerate this trend in online. Local Sellers also started selling their products online in order to survive in the market.

Apparels:

  • The pandemic has changed the purchasing attitudes of consumers. 
  • The Indian apparel Industry is hit hard because of Covid crisis. Customers may hesitate to go shopping apparels even after stores open during Lockdown. Many of the Apparels sellers opened new websites and started selling online.
  • Shoppers are preferring smaller stores in place of large owns to avoid crowds.

Skincare and Cosmetics Industry:

  • The global beauty industry (comprising skin care, colour cosmetics, hair care, fragrances, and personal care) has been shocked by the COVID-19 crisis.
  • The industry has responded positively to the crisis, with brands switching their manufacturing to produce hand sanitizers and cleaning agents and offering free beauty services for frontline response workers.

Indicative mix of Offline and online sales in the above during Covid Lockdown phase:

  • The economic disruptions caused by the new virus are being reflected in e-commerce.
  • The Coronavirus pandemic has put e-commerce at the forefront of retail. For better or for worse, no industry has gone untouched by COVID-19. Overall, e-commerce seems to be in a pretty good place during the Coronavirus.

During the lockdown period, except for essentials, all other products sales are done online and is expected that this trend is going to be continued in future.

Permanent Change in consumer behaviour due to Covid Pandemic:

  • A recent survey has said that the COVID-19 pandemic is likely to alter the consumer behaviour permanently and cause lasting structural changes to the consumer goods and retail industries.
  • The demand for local goods and brands is growing as consumers are hesitant to step out of their safety zones to resume previous consumption patterns.
  • The demand for local products, digital commerce and Omni-channel services such a home delivery, chat features and virtual consultations is surging, and is likely to endure beyond this crisis. Consumers are now focused on their most basic needs while cutting back on nonessentials.
  • Brands will also need to explore ways to rebuild consumer confidence frayed by the pandemic — proof of good hygiene and safety is becoming a key part of brands ‘ability to retain shoppers’ trust.

Expected mix to be going forward:

  • People’s changing buying habits reveal that they have learned to live with the reality of COVID. To be more precise, they have accepted the ‘new normal’.
  • Large section of consumers have changed their way of life, work, and consumption. Besides, there has been an inclination towards online grocery shopping. 
  • It is expected that e-commerce sales continue to improve in urban areas as people adapt to changing conditions and for rural areas, in spite of COVID, it is expected that brick and mortar sales continue to dominate.

Conclusion:

Is physical retail really dead?  Not really!!!

“Online retail is here to stay, but that doesn’t mean the bricks-and-mortar sector is going to disintegrate”

In some capacity, people are always going to want a level of face-to-face interaction. They will want to try on clothes, go to the local bookstore, or meet their friends at the mall––online shopping doesn’t allow for that.

“There will always be a human dimension to commerce”.

Complementing brick-and-mortar with digital retail:

Brick or Click strategy: Is co-existence the way forward? - Exchange4media

It’s all too easy to pit physical and online stores against each other. If brick-and-mortar stores are going to survive post-pandemic, they need to remove that distinction.  

There’s an approach brick-and-mortar retail is beginning to implement called ‘web-rooming’ or ‘show rooming’. Retailers advertise products online as only available in store, customers will identify the product online, and then they will go to the store to physically buy the product.

The traditional stores being reused and repurposed. Blending online and in-store retail is made possible by the technology built into the smartphones people carry around. Thus Digital transformation grants huge opportunity for traditional retail going forward.  

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