One of the most followed tech visionaries in the market, US venture capitalist Mary Meeker, has just posted her annual ‘State of the Internet’ report – and in it, she states unequivocally that, “brick-and-mortar retail is on its deathbed.” Yet, the leader of online retail, Amazon, has just opened an experimental physical book store in Seattle and plans to open 400 more, suggesting there’s still plenty of life left in the traditional model. So, what’s going on? Can both of these contradictory facts be true? Sanjeev Sularia, co-founder and chief executive at Intelligence Node, discusses the most important trend affecting the potential profitability of retailers – the legitimate way to make online work with offline
After all, we are used to traditional offline retailers moving some of their operations online and the majority of consumers have realised the change in their shopping habits, where online sales increased by approximately 15 per cent in the first quarter year-on-year in the UK. However, with this said, we have not just Amazon but other pure-online players, such as the US-based fashion site, Bonobos and makeup subscription service, Birchbox, making a similar move into ‘real-world’ retailing.
It’s a puzzling set of consumer trends – initially at least. So what’s the dynamic here, and what is its bigger significance for the retailer? The moving online trend we understand, but what about when it’s the other way around?
It seems that there is a coming together of two separate domains: retail offline and online. Online-to-offline is partly about setting up mini warehouses for home delivery and showrooming (allowing customers to browse goods but make purchases online) plus managing returns, which can prove difficult and expensive online.
It’s also, however, about valuing the physical shopping experience for its own sake. Let’s look at what Amazon is doing to see why: the world’s biggest ecommerce firm reportedly only stocks 5,000 books at any one time at its trial store. But it can stock so low with full confidence, as it uses analytical intelligence garnered from website sales to decide on what stock to feature – giving customers exactly what they want, even before they get through the doors.
We shouldn’t be surprised; after all, great online intelligence and clever personalisation are what make an Amazon website visit the success it is, and so the same technologies are shaping the Amazon ‘physical’ experience too. What Amazon and other online retailers venturing into brick- and-mortar are doing right is recognising that these are not separate – let alone competitive – businesses. Rather, they are fused into one coherent omnichannel shopping experience.
The best of both worlds?
The way these retailers are doing this is through smart use of retail analytics. Analytics can tell you what the competition is doing, and enable a rapid turn round in pricing strategies with product lines. It can also pinpoint trends and allows ordering to keep in line with demand and target promotions and customer preferences. Advanced features include offering sophisticated and highly personalised at-the-till ‘smart cart’ discounts to customers or using multilingual pricing to help firms gain merchandising intelligence no matter the geography: increasingly important as country boundaries disappear.
And as Amazon is showing, all this is what you need to inform a logical online-offline proposition – something we can expect more and more of, going forward.
Sanjeev Sularia is CEO and co-founder of Intelligence Node, where he focuses on client acquisition and delivering on the vision behind the company, as well as becoming a global partner for leading retail brands. Sanjeev has worked as part of the founding team at fashion brands Exclusively.in and Shersingh.com, where he was the CFO.