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Key Strategies for Retailers Facing Online Competition

Operators must combine unique value proposition, tech to create unforgettable omnichannel retail experience
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To outmaneuver online stores, retailers must offer an in-store experience that persuades customers to go out of their way just to visit their store.

In the face of rapidly declining big-box stores, retailers are under rising pressure to stay ahead of the curve or risk getting crushed. Meanwhile, e-commerce giants like Amazon are opening physical stores and leveraging the power of the in-store shopping experience. 

With almost 40% of European consumers making a weekly store purchase, while only 27% shop online with the same frequency, in-store purchases still dominate. This indicates that physical retailers still hold sway over consumers, despite the convenience of online shopping.

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While the popularity of online stores poses a great threat, it also comes with an opportunity to evolve. Brick-and-mortar stores can still prosper — but only if they’re willing to innovate and adapt.

To truly thrive amidst online competition, retailers must integrate key strategies that combine their unique value proposition with technological offerings to create an unforgettable omnichannel retail experience.

Battle for Retail Dominance: Impact of Online Shopping on Physical Stores

The imminent closure of thousands of retail giants this year proves the disruptive power of e-commerce. While online stores were slowly taking over, the global pandemic only accelerated their growth, making them a necessity instead of a luxury.

Consequently, worldwide e-commerce sales exceeded USD $5.7 trillion in 2022, and by 2026, the value is set to rise by 56%. With such a huge market share monopolized by online retailers, physical stores that fail to recognize and overcome the oncoming challenges will slowly wither away. Some of these unique challenges include:

  • Ever-evolving customer expectations: According to surveys, 80% of Gen Z and Millennial shoppers have purchased a product advertised on their social media news feeds. With trends coming and going in the blink of an eye, retailers need to constantly evolve to meet changing customer expectations in an exceedingly fickle landscape.
  • Unlimited price options: Due to the sheer volume of online purchasing options, the power to compare pricing is at the customers’ fingertips. This makes physical stores vulnerable to “showrooming,” where customers visit the store to preview a product and then purchase it from an online retailer offering a cheaper price.
  • C2C is on the rise: Not only are physical stores competing with other B2C retailers online, but they may also be head-to-head with C2C platforms such as eBay and Etsy. The used items sold on such marketplaces would once be donated or returned to the store. Now, however, they can be resold, inadvertently decreasing the value of new products.
  • Reviews and ratings influence buying decisions: Online stores provide ratings and review options. The presence of reviews increases the chances of a sale by 18%. Physical stores lack the benefit of this deciding factor that influences most buying decisions.

Strategies for Physical Stores to Stay Competitive

The stores that continue to thrive despite the retail apocalypse are following key strategies that target areas in which e-commerce fails to deliver. These realms include on-the-spot convenience, immersive experiences, relationship building and hands-on exploration.

Prioritize Instant Gratification and Convenience

One of the strategies is to target and exploit the biggest downside of online shopping: the time it takes for a product to get delivered. The goal is to minimize the time between consumer craving and purchase. Physical stores can achieve that by:

  • Offering the same efficiency as online marketplaces:  Make the in-store experience as easy as possible by providing options such as Amazon Go’s Just Walk Out model. This allows users to pay online and skip the troublesome checkout process. Other time-saving measures include having digital tools to help navigate the store or in-app features to guide customers through aisles.
  • Covering a wider area: Reduce the amount of time customers spend traveling to the store by building minimarts in multiple locations. Retailers such as Nordstrom and Bloomingdale’s have deployed this strategy, building small stores to reach a wider consumer base.
  • Providing multiple fulfillment options: Walmart uses its store supply warehouse network to provide online order fulfillment. Retailers can use the same model to provide same-day delivery or partner up with delivery platforms to outmatch e-commerce fulfillment services used by online stores.
  • Becoming a one-stop shop: Most online stores function in multiple verticals, often selling products from other companies. Retailers should also broaden their product categories and stock items from a range of brands to offer greater convenience to customers.

Add Value Through Personalized Customer Service

Customer service can sometimes feel like a long and lonely road in the realm of online shopping. Even with the presence of chatbots, customers prefer a more human touch. Physical retailers can turn this potential disadvantage into a game-changing opportunity.

By creating such a level of customer service experience, they won’t only continue to buy with you, but you can also win their hearts and loyalty. The key to delivering such exceptional experiences? Personalization.

One impressive example includes Nike’s new live concept store, Nike by Melrose. The store puts emphasis on customer service, with innovative features such as an in-app service that enables customers to come in and try on pre-reserved shoes.

Nike Plus members can even reserve 15-minute-long consultations with experts, along with a chance to test the product in action on their treadmill. With this concept store, Nike aims to combine online insights and tangible customer service to provide a one-of-a-kind experience to each customer.

Leverage Tech to Attract In-Store Customers

Brick-and-mortar retailers like Nike, Lowe’s and even grocery stores such as Whole Foods Market are turning to technology to elevate their physical stores. This is the next big move for retailers to gain an edge over purely online marketplaces. The key is to seamlessly merge technology with your existing strengths to create a truly unique experience.

Through digital upgrades, retailers can help customers find products more easily within the store. Interactive signage provides information about products, including competitor pricing, and can add a visually appealing touch.

H&M gives us a chance to see retail technology in action. Its interactive touchscreens allow customers to browse collections and access additional product information, while its mobile checkout options offer more flexibility. H&M also uses technology to improve inventory management by tracking products in real time, allowing for faster restocking and minimizing back-orders.

Craft an Engaging In-Store Experience

Physical stores provide the ability to touch and feel products. For many buyers, this is the leading reason to skip online shopping. This is especially relevant with verticals such as clothes, grocery and electronics.

To outmaneuver online stores, retailers must offer an in-store experience that persuades customers to go out of their way just to visit their store.

For example, Build-A-Bear Workshop offers a distinctive experience that’s impossible to replicate online. A more popular example is Target, which has transformed more than 100 of its stores by remodeling, adding new lighting, and improving store displays to create a more inviting and attractive shopping environment.

Another emerging avenue is the use of virtual reality and augmented reality to create unforgettable immersive experiences. Examples include the Adidas mixed-reality-powered try-on app and Lowe’s augmented-reality visualization of furniture and appliances.

The Future Is Omnichannel: Going ‘Phygital’

In the fast-evolving world of modern retail, setting up an ordinary online store in addition to a physical one is simply not enough. Retailers have to go the extra mile. They have to go “phygital” by using the power of technology to enhance their tangible offerings. 

The future of retail is all about the convergence of physical and digital experiences to deliver convenience, personalization and efficiency.

To accomplish this balanced ecosystem, it’s imperative to innovate and invest in new technologies and strategies that offer customers memorable and interactive experiences, both in person and online. By prioritizing this approach, retailers can establish a strong foothold in the ever-changing retail industry and achieve long-term success.

About the Author

Alex Selwitz

Alex Selwitz is the director of SEO for Knoxville, Tenn.-based Red Stag Fulfillment, an e-commerce fulfillment warehouse that was born out of e-commerce. He has years of experience in eCommerce and digital marketing. In his free time, Alex enjoys playing guitar and learning about new trends in the digital world.
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