Wednesday, November 14, 2012

Changing face and strategies of retail shopping


With booming m-commerce, big box stores have been compelled to reconsider their strategy vis-à-vis their online competitors. Almost all of the large brick and mortar stores have a website and mobile app(s). Unfortunately though, their sales have dwindled tremendously, especially in the technology sector. The situation is so bad that Best Buy’s profit dropped by 91% from May to August in 2012 and the situation doesn't look any better still.

One of the biggest challenges for the big box stores has been to match the price and variety of goods available online. Price in such stores is generally dictated by the cost incurred in maintaining an article in the store along with the logistics of getting it there and the staff salaries to name a few. Such external factors do not affect the online stores so drastically and hence the customers are able to buy the products for a lower cost and the stores make a bigger profit. Another factor that has been an irritant for the brick-and-mortar stores is ‘showrooming’. It is the practice where customers try out the gadget in the store and then buy it cheaper online. This essentially turns a store into a mere showroom for online sales.

With these factors in mind, the retail sector is transitioning towards what is known as ‘omnichannel’ approach by embracing showrooming. Omnichannel refers to the ability of managing different channels (web, mobile and brick-and-mortar) in a way that they complement each other. To give an example:

Andy walks into a Best-Buy store after looking up various ‘ear buds’ on their website, a service agent meets him with suggestions to meet his requirements. As soon as he picks it and is decided on buying it, he gets a discount coupon for a related product. He also does not need to stand in a long line to buy his items and can pay through his phone and head out.

It is currently too early to predict if these changes will really turn it around for the conventional stores, but with the tremendous investments that companies have made, it is a perform-or-perish model for them. One only hopes that they succeed for the sake of competition.

What do you think about the current state of retail? Do you think the approach of Omnichannel will make a difference?

Sources:
 http://blogs.wsj.com/digits/2012/11/14/best-buy-ceo-we-love-being-used-as-the-internets-showroom/?mod=WSJBlog&mod=
Motorola: How Brick and Mortar Stores Can Win Omnichannel Battle

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