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.
But is physical retail really dead?
COVID-19 | Putting pressure on brick-and-mortar retail
COVID-19 has been a disaster for brick-and-mortar retail over the last few months. But, right now, it’s hard to measure exactly how much of an impact the global pandemic has had on the sector, says Ben Voyer.
As a professor at ESCP Business School and qualified behavioral scientist, Ben draws on his research within organizational behavior and consumer behavior to analyze the trends we’re seeing in retail right now.
“One can say that many people have discovered the convenience of online shopping during the pandemic.” he says. “But we’ve also seen a lot of people complaining about missing delivery items and increased wait times.”
Associate professor of marketing at Imperial College Business School, Rajesh Bhargave (pictured above), points out that the brick-and-mortar businesses most likely to be affected by the pandemic are the department stores already on the downturn.
“Changes in consumer behavior are obviously going to affect stores that are already on the margin,” he says. “They’ve already been struggling with low profitability and declining footfall.”
118-year-old department store chain, J.C. Penney, filed for bankruptcy in May after a decade of losses, losing out on more than $4 billion since 2010. Stores are closing across the US, with the retailer announcing it would be cutting 1,000 jobs across executive and regional offices.
UK department store chain, Debenhams, has also been struggling, and COVID-19 looks like the final nail in the coffin. It filed for administration in recent weeks––the second time in a 12-month period—with the closure of 22 stores in 2020 and further plans for 28 more closures in 2021.
Both of these retailers were struggling before the pandemic. Not bolstering their online offerings at a pace fast enough to match the emergence of e-commerce competitors has stung them. COVID-19 isn’t the source of their problems, though it has exacerbated them.
Using experiential retail post-pandemic
It’s not all doom and gloom for brick-and-mortar, argues Rajesh, 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 shops are allowed to reopen, they need to look for ways to entice customers.
Trinity Business School professor in marketing, Laurent Muzellec (pictured), uses IKEA as an example. Shopping there goes beyond simply purchasing products, it’s an experience. People may spend an entire day at an IKEA warehouse, navigating the maze of showrooms and products.
There’s also a café for customers to take a break during their shopping excursion, and most products are labelled and easy to find on their online site. Queues outside IKEA stores on the days following the relaxing of lockdown measures proves the importance of consumer experience in the post-lockdown recovery for brick-and-mortar stores.
This happened within the book industry a few years ago. Barnes & Noble was struggling to keep up with the book sales made by tech giant, Amazon. People were choosing convenience. So, booksellers had to innovate, and they introduced interactive events with authors, more diverse product offerings, and exclusive signed copies of texts to entice customers in store.
“These stores can focus on the experience rather than the selling of the product, whether the transaction is completed online or offline,” Laurent explains. Going forward, he says there are definitely opportunities for brick-and-mortar retail to benefit from and utilize the convenience of online.
Complementing brick-and-mortar with digital retail
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 ‘showrooming’. 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.
“Online retail is here to stay, but that doesn’t mean the bricks-and-mortar sector is going to disintegrate,” says associate professor of logistics and supply management at Trinity Business School, Sinéad Roden (pictured).
It’s undeniable that the pandemic has forced retailers across all sectors to reevaluate, she adds. Traditional retail hasn’t been possible, with international store closures, social distancing, and a steep drop in demand for in-store products.
But we’re seeing traditional stores being reused and repurposed. Blending online and in-store retail is made possible by the technology built into the smartphones we carry around with us every day. Digital transformation grants huge opportunity for traditional retail.
UK department store chain, Selfridges, is an example of a brick-and-mortar business introducing a more digital fusion to its business model, Ben explains.
“They work with social media influencers, and are really marketing themselves as a source of new trends.” In doing so, Selfridges is able to maintain a steadier footfall at its stores compared to its competitors.
“The point is to make the sale, no matter what,” Rajesh adds. “I think there will be a long-term improvement in revenue generation if bricks-and-mortar retailers improve their ability to gather more data from customers, by blending online and physical retail stores together.”
Is brick-and-mortar retail really dead?
The short answer from our business school experts is no.
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,” Ben (pictured above) concludes. “And that means there will always be a level of demand for bricks-and-mortar.”
Nonetheless, the demand on the high street is currently declining––the pandemic has made that downturn all the more apparent––and physical retailers are likely to continue to see a loss in revenue, job cuts, and store closures in the short-term.
The large department stores who have become the victims of the pandemic were already suffering losses beforehand, and so COVID-19 isn’t the sole cause of their demise. For the survivors, it will take innovation and a reimagining of traditional business models for them to prosper post-pandemic.
There’s the opportunity to reshape the bricks-and-mortar infrastructure, but this will take time and there will likely be growing pains. The industry now needs future-focused visionaries who are able to provide fresh perspective and reinvigorate bricks-and-mortar retail in the years to come.
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