With everything that’s been happening in the retail industry lately, one would be tempted to think that the brick-and-mortar store is over. But that’s simply not true. The National Retail Federation estimated that during the most recent holiday shopping period at the end of 2016, e-commerce represented approximately 18 percent of the $656 billion in sales. The physical retail store isn’t dead; it just needs reinvention — and recent store closures and bankruptcies only tell one side of the story.
So what’s the other side? Consider legacy players, like Wal-Mart and its 24-hour digital ordering with in-store pickup and Lowe’s use of robotics to improve employee productivity, as prime examples of retailers that are adapting their traditional business models in this digitally connected age. Digital players are also expanding into the physical space, like Amazon.com's move into grocery with its purchase of Whole Foods (as well as its experimentation with Amazon Go) and Snapchat’s Spectacles store, suggesting that the future of retail will likely be a seamless blend of bricks and clicks. That’s because people still value the ability to interact in person with the things they want to buy (just look at Bonobos). This "discovery" experience is the first moment of truth in the retail journey.
I’m a big believer in a concept we call "looking back to go forward," or what can be learned from the past to anticipate what the future should offer. Most of us remember walking into a music or video store, spending time to look at all of the titles available and actually listening to or reading the cover of each one before making a final decision. That in-store experience was one of the main reasons why companies like Tower Records and Blockbuster existed. Fast-forward a few decades and we can now browse music and movies directly from the phones in our pockets. The physical store experience for these became obsolete as the content itself became digitized. Without being able to adapt their business model or store environments with the move to digital, Tower and Blockbuster unfortunately disappeared. Compare that to innovative companies like B8ta and Samsung, whose mission is to show consumers how technology products fit into their life. B8ta and Samsung are changing the retail store and creating high-touch experiences where people discover, try and learn about new technology products.
In today’s digital age, retail discovery isn’t easy. Consumers are browsing across multiple channels, are inundated with choice and aren’t always armed with an intuitive way to find exactly what they want with the same emotional engagement as they had in Tower Records. This is why the in-store experience is ready for disruption.
Retailers’ interest in embedding technology into their physical environments is moving from concept into real commitment. An estimated 70 percent of retailers are actively investing in technologies that embed digital into their physical stores. These technologies including beacons, digital signs, tablet-based points of sale and RFID tags, and they're becoming new tools to augment the store infrastructure. At the same time, mobile apps and devices are being used as a way to give retailers the "permission to personalize" by removing traditional points of friction and ensuring each customer interaction is unique.
These connected technologies are the key to merging the digital and physical aspects of retail — and are driving the transformation of the industry by moving from the "single device, single experience" approach to a more streamlined and seamless shopping experience that spans multiple connected devices and leverages in-store technology.
For example, Mastercard and Oak Labs are working together to transform any in-store surface into a point of engagement, customer service and sales — from the fitting room mirror all the way to the storefront window. Another example is the work from Intel and Mastercard in creating a simple way for shoppers to browse and buy in a self-service environment.
These integrated experiences, regardless of the channel, enable consumers to transition effortlessly from smartphone to personal computer to physical store, and move between platforms such as apps to text messages and Facebook messenger, in their quest for the best products and services.
The future of retail isn’t something we have to look forward to — it’s already here.
Stephane Wyper is the senior vice president for new commerce partnerships at Mastercard.