Yesterday Best Buy announced its plans to shrink its U.S. big-box square footage by 10% to compete more effectively with Amazon and other digital competitors.
Expect to hear more announcements like this–at least from those retailers who get how hard the winds of change are blowing for brick and mortar retailers. Physical retail is not going away, but the assortment and prices advantages of pure play e-tailers are overwhelming for more and more consumers.
For retailers that do not offer a compelling omni-channel strategy the writing is on the wall. They have too many stores and the stores they have are too big. They risk becoming showrooms for consumers that ultimately will buy on-line or from more price competitive and more convenient brick and mortar competitors.
For some, all is not lost. Smart investments in a seamless cross-channel “bricks and mobile” offering can allow them to capture customers regardless of which channel they prefer. Instead of investing in building more and bigger stores, they should invest in making the stores they have more relevant and differentiated, taking advantage of the unique capabilities of a physical location. There are plenty of customers willing to shop in stores with great design, great service and an overall remarkable experience.
For others, the future is bleak. For them, I’m reminded of the memorable line from the movie The Sixth Sense.
“I see dead people.They only see what they want to see. They don’t know they’re dead.”
Maybe you have noticed that e-commerce has been growing far faster than brick and mortar retail. That’s been true for years and it’s not changing any time soon.
Maybe you have noticed the explosion in comparison shopping sites that allow customers to easily search for the merchant with the best price. The number and quality of these sites will continue to grow, with powerful mobile applications right around the corner.
Maybe you have noticed that as more retailers cut back on sales associates–or fail to train them so that they become merely order takers, baggers or direction providers–the “value proposition” of actually buying something in a physical store becomes less and less attractive.
So I have to ask you, is your store a relevant, differentiated and remarkable experience for your target customer? Or is it slowly, but inexorably, becoming a showroom; a place for the customer to see, touch and feel your product, but less and less a place to actually buy stuff.
The economics of leasing a store, fixturing it, filling it with inventory and staffing it are untenable if an increasing percentage of your customers are only there for research and will ultimately buy elsewhere because the experience or price is better.
Blockbuster and Borders may well be on the way to insolvency because they botched this transition. Best Buy is doing far better, but faces significant risks of their physical stores becoming more and more a showroom every day. And this is just the “B’s.”
Becoming a showroom is death.
Do you know what percent of your traffic uses your physical stores mostly for research purposes, only to buy elsewhere? I bet it’s higher than you think.