Only a few months ago, I was discussing the longevity of the high street with an e-commerce director at a luxury furniture retailer. Recalling the closing down sales in my local House of Fraser, I suggested it was just the beginning of an industry-wide revolution. His response surprised me.
“It’s hardly news that the world of bricks-and-mortar retailing is threatened,” he said. “The question is, is there enough growth in retail as a whole to enable bricks-and-mortar retailing to grow as well?”
As the competition between traditional e-commerce departments and digital native companies like Amazon intensifies, we’re seeing this attitude rise to prominence amongst today’s retailers. Forecasters have prophesied the death of the high street for several years now, and retailers are responding with the mantra: “the high street is not dead; it just needs reinventing”.
However, attitudes seem to be at odds with the stats. More people than ever are buying online: the Office for National Statistics assessed that UK e-commerce spending jumped by 15.9% from 2017 to 2018. A similar leap is forecasted for this year. While only £60 billion was spent online versus £306 billion in-store in 2017, the growth of e-commerce looks like it could be exponential.
The times are changing…again
Just as newspapers faced rapid digitisation in the late 90s, retailers could be facing a similar shift: falling income, fixed prices and the wrong skills. As a partner from Andreesen Horowitz notes, “when internet reading or buying was at 5% it felt as though that might be an additive to newspapers or retailers. At 10 or 20%, it becomes an existential problem.” That existential problem for retail is now the same question being asked of the modern physical store.
So where exactly does traditional in-store retail fit in within the context of today’s huge digital growth? Members of the retail sector are now asking themselves that exact question. In new research, only 50% of them considered a physical location to still be a method of customer access by 2022; replacing it were websites, mobile apps, chatbots, voice assistants and even augmented reality (AR). Digital clearly holds the promise of transforming customer interaction, far beyond e-commerce.
Efforts to knit physical and digital experiences together to create the optimal experience are now being heavily invested in by retailers as a result. For example, AR is an extremely promising area which can act as a digital filter for physical reality The ability to project an AR coffee machine onto your kitchen worktop, for example, adds another dimension to the modern retail experience: the buyer can see what that precise item looks like in their own room – rather than on the expansive shop floor where things always seems smaller than they are.
AR has the potential to breathe new life into the physical store and the technology is now being widely taken up across the retail industry. Taking this one step further, breakthroughs in image-based machine learning software may also lead to products which can project clothes onto photos of prospective buyers. Now, global cosmetic brands like L’Oreal and Sephora are already experimenting with projecting make-up onto users’ faces, in a digital try-before-you-buy initiative.
But the disruption of physical stretches beyond retail and into every industry there is. For example, the financial services sector is responding particularly strongly to the question of customer access, with 80% citing mobile as the most common method of access by 2022 in a recent digital trends report. In every industry, a movement online is shaping how commercial products are both accessed by and distributed to users. This in turn has a huge effect on the way customers actually encounter the product in the first place.
Maintaining the experience
Returning to my conversation with the furniture e-commerce retailer, he gave me another gem of insight that encapsulated the nature of encountering the product. He argued that serendipity is an aspect of in-store experiences that simply cannot be recreated online.
Online shopping consists of searching for the type of item you want and scrolling through the results until you find it. On the other hand, walking into a bookshop means a certain book cover can catch your eye, even if it isn’t the one you originally set out to find. A consumer’s encounter with a product retains the random discovery of serendipity in-store: a pointed contrast to the algorithms of the digital marketplace, that automatically massage product discovery into an individual user’s feed.
The conversation around the death of physical in retail is vast, deeply nuanced and wide-ranging. Now, the extent to which it impacts retailer decision making as well as consumers is also coming to light, as we delve deeper into the digital trends of tomorrow. Making the time and space for an industry-wide discussion is now more important than ever if leaders are to eradicate uncertainty, and work to find answers to the growing questions over the future of physical retail.
“Physical” is gradually taking on new meaning as technology evolves and the terms around it shift and undulate. What does it mean to inject augmented reality into the consumer experience? Where can costs be cut on obsolete, outdated methods of customer access? What is the future of the high street? It’s a conversation that is, only now, truly beginning.
By Emma Taylor, Founder and Managing Director at Nimbus Ninety