The future of retail isn’t digital OR bricks-and-mortar. It’s both.

This post is the third in our series counting down to the online shopping mega-holiday weekend of Black Friday through Cyber Monday.

So far in our series, we’ve looked at eCommerce trends for Black Friday / Cyber Monday sales, based on 2017 data. Because we believe in providing actionable insights, we’ve also used that data to highlight top customer frustrations with the online shopping experience, and what lessons should be learned from how online shoppers are actually behaving.

However, the question we’re tackling today is a bit more existential, and gets at the underlying story buried in the mountains of purchasing data: what is the future of retail?

Is the future digital? Will eCommerce kill the bricks-and-mortar store? Or are physical retail stores impossible to kill? There’s lots of data to support both views, so which side is correct?

What do shoppers want? To purchase online, or in-store?

If you look at the data, as we have, a very mixed picture emerges with strong data points supporting both sides. For instance:

Shoppers still prefer to purchase certain items in store.

While online retail is growing in popularity, that doesn’t change the human desire to see and touch something before we buy it, and that’s something that the online retail experience still hasn’t figured out how to replace.

Today’s shoppers still prefer the physical retail experience to online retail by very large margins in almost all product segments. Unsurprisingly, this is especially true for big-ticket purchase categories:

  • 88% of surveyed consumers prefer in-store shopping for automobiles
  • 85% prefer in-store shopping for major appliances
  • 77% prefer in-store for tools or hardware

But what is surprising is that this preference also holds true, albeit to a lesser extent, for digitally disrupted categories like electronics (69%), apparel and footwear (68%), and tablets and smartphones (61%).

BUT. Online retail is growing, while bricks-and-mortar revenue remains flat

If people prefer to purchase items in-store, then why are consumers increasingly turning to making purchases online? In terms of Black Friday / Cyber Monday sales, bricks-and-mortar retailers had a better-than-predicted year in 2017, but revenue remained flat from 2016. Meanwhile, online retail revenue not only continues to grow, but it is growing at a fast-accelerating rate: Black Friday online revenue grew 32% in 2017 over the previous year – which is up from 2016’s 21% revenue growth over 2015.

Additionally, there are core frustrations with the bricks-and-mortar retail experience that are difficult, if not impossible, for physical retailers to solve. 60% of surveyed consumers say that their biggest frustration with in-store retail is waiting in line. And while the pilot of the first Amazon Go store (Amazon’s checkout-free, fully automated grocery store) points to interesting possibilities for the future, the technology and infrastructure required to implement a lineless retail experience currently poses too much of a limitation for the majority of retail companies.

BUT: Shoppers don’t trust online retailers with their data

One of the key concerns that consumers still have about online shopping is the security of their personal information. According to CIGI Ipsos:

  • 22% of online respondents surveyed say that they never shop online
  • 49% of those consumers say they don’t shop online because of a lack of trust in online shopping

And with the incidence of high-profile data breaches on the rise, that lack of trust doesn’t look to be changing any time soon. In 2018 alone, we’ve seen major data breaches from: Darden Restaurants, Macy’s, Adidas, Sears, Kmart, Delta, Best Buy, Saks Fifth Avenue, Lord & Taylor, Under Armor, Panera, Forever 21, Sonic, Whole Foods, Game Stop, and Arby’s.

BUT ALSO: Shoppers would pay more money and share their information to get a fully customized retail experience

Increasingly, shoppers are willing to trade their information for a better shopping experience. According to Cisco, 86% of consumers would be willing to pay more for a better customer experience, and 53% of consumers are happy to hand over their data in exchange for a totally personalized customer experience.

HOWEVER: Shoppers say they can better evaluate products in person

While online retailers have largely shifted from having one zoomed-out product view to having multiple detailed product views, they still have not managed to address the core frustration with online retail; 74% of surveyed consumers said that they are able to better evaluate products in a store versus purchasing online.

BUT THEN: Shoppers want personalized shopping recommendations

Personalized shopping recommendations, as driven by online retail sites, are loved by both consumers and retailers:

  • 39% of retailers report that personalization has improved their customer acquisition
  • 46% of retailers say that personalization has increased sales
  • Only between 5 to 6% of online shoppers engaged with personalized recommendations during the 2017 BF / CM weekend, but those shoppers drove 32% of online revenue

Enough! What does it all mean?

How are you supposed to make sense of all this contradicting information? The answer is simple:

The future of retail is a blended purchasing experience

Online retail and in-store retail are often seen as mutually exclusive, in that the growth of one must naturally lead to the death of the other. This way of thinking is strengthened by the rapid pace of change, and the widespread adoption of (admittedly unnerving) customer practices like showrooming. But the reality is that by asking if shoppers prefer online or in-store retail, we are setting up a false dichotomy.

For retailers who can adapt to meet changing customer expectations, digital versus in-store retail is not a zero-sum game! The future of retail is a blended purchasing experience, where customers investigate products through a combination of digital channels and in-store investigation, and where digital engagement will be just as important as the in-person shopping experience.

So how should retailers respond to this increasingly blended future? The key is creating a cohesive customer experience across all channels, which we will talk about next week in our last pre-Black Friday post!

If you have any questions about how to improve your digital customer experience, contact us to speak with one of our digital customer service experts. Or click here to read more about the benefits of digital messaging for business.

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About the Author: Anna Kreider