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Contents
Preface
Executive summary
11
Conclusions
12
Footnotes
13
Contacts
13
Preface
The retail industry is confronted with unprecedented change.
Economic turmoil and technological advances are combining to reshape
the retail landscape faster than some retailers are able to react.
Todays consumer has vastly different and more sophisticated expectations
of product, service, value and environment than five or even three years
ago. In the new multichannel reality, the boundaries between virtual and
physical space are becoming blurred and retailers are being forced to
question the role and function of stores in an environment where their
relevance to the connected consumer is increasingly subject to challenge.
While the role of the store is under question, even the most pessimistic
commentators do not seem to be predicting the complete demise of the
store. There will remain a role for physical space albeit in a different
format and potentially radically smaller scale. The process of resetting
the physical retail estate is likely to be an uncomfortable one for many
concerned and will require structural and operational changes that will
take time and innovation to address.
This is the first in a series of thought pieces that set out to examine the
implications of the impending changes to the retail landscape. This first
thought piece addresses the Store of the Future and looks at how
physical retail space and the experience it provides will need to adapt to
the multichannel environment. The next thought piece, Rightsizing the
Retail Estate will explore the challenges involved in defining and
reconfiguring the store portfolio.
Ian Geddes
Partner, Head of UK Retail
020 7303 6519
igeddes@deloitte.co.uk
The changing face of retail The store of the future: the new role of the store in a multichannel environment
Executive summary
The retail industry has reached a tipping point. Tough
economic times have brought into rapid focus the
reality of changing consumer behaviours. A shopper
today has vastly different expectations of product,
service, value and environment than even five years
ago. In this new reality, incremental adjustments to the
store format and portfolio will no longer be sufficient to
survive, a radical rethink of the purpose of the store in
the consumer shopping journey and the number of
stores required to reach the consumer is necessary.
The solution will not be the same for every retailer, but
those who fail to realise the fundamental
transformation required may struggle to survive.
The store becomes a brand and product
showroom
Retailers need to re-define the store proposition and
identify how they can best address the changing
customer needs within the four walls of the store.
Going forward, the store needs to be an embodiment
of the brand and a destination for consumers where
they can do much more than simply browse and
transact; it will no longer operate as a silo but as an
integral part of the multichannel experience.
2.
1.
3.
Consumer spending
is being squeezed
Technology is evolving
20%
VAT
17.5%
Exchange rate
devaluation
VAT rises
5.
Retailers
4.
Supermarkets
entering
non-food market
Past
Present
International players
enter market
The convergence of these challenges requires that retailers re-evaluate and adapt their store propositions to face the future with a commercially
sustainable proposition. To do this, retailers need to truly understand changing consumer requirements and assess how these can best be
addressed within the four walls of the store.
The changing face of retail The store of the future: the new role of the store in a multichannel environment
Connected &
empowered
Time poor
More informed
Promiscuous
Socially connected
Environmentally
aware
Learn/Share
Learn/Share
Consumers expect the store to enable an experience which online cannot deliver i.e. providing the in-store theatre and the touch and feel
experience around the brand and the product. But at the same time consumers expect to experience and have access to similar content and
information across all relevant channels. 75%3 of consumers research products both online and in store before purchasing, they expect
access to a wealth of information related to products, the brand and environmental credentials to inform their decisions.
Find/Select
Find/Select
Consumers now expect and value a personalised service and guided shopping experience which responds to their needs, allowing them to
access, browse and select a broader range than the store can physically showcase and be able to then order anytime, anywhere.
36%3 would find the ability to scan product bar codes and access product information when in store to be very desirable.
Purchase/Pay
Purchase/Pay
Consumers do not expect to see differences between a retailers channels, being able to use the same account, loyalty and gift cards in all
channels. As consumers increasingly adopt innovative payment methods in other parts of their lives they also expect retailers to keep up and
provide a simple, secure, quick and flexible payment processes in store. 14%3 of consumers would like to be able to use mobile device as a
substitute for credit card.
Pickup/Delivery
Pickup/Delivery
More and more consumers expect high levels of convenience, flexibility and immediacy around pickup and delivery of their shopping, even
when they buy in store. Being able to quickly collect ordered products in store and delivering goods anywhere and anytime through
extended delivery/pickup locations and shorter delivery times across all channels is becoming the standard in the industry.
Return/Service
Return/Service
Returns in store are expected to be handled efficiently and flexibly with different options to suit the customers needs e.g. product swap,
straight refund, credit that can be used in all channels. Most importantly consumers expect personalised and consistent customer service
across all channels and touch points.
Drive sales of
product in store
At the beginning of each season, Burberry turn their London store into an entertainment destination,
engaging with customers through an audiovisual experience featuring big screens and iPads.
Loyal customers are invited to the store for an exclusive opportunity to buy the new season range.
Customers view the new collection through catwalks showcased on big screens in store and are
able to order via iPads.
The changing face of retail The store of the future: the new role of the store in a multichannel environment
In South Korea, Tesco has created a virtual store in the subway where commuters can order
their groceries from a virtual wall.
This innovation and convenience has contributed to making Tesco the number one grocery brand
online in South Korea.
Low level
of inventory
Appealing delivery
proposition
The changing face of retail The store of the future: the new role of the store in a multichannel environment
Store portfolio
Considerations
Role of the channels
What role will the online channel vs. store play?
What is the value proposition of the store?
What store formats will you need?
Brand and proposition
How much pull does your brand have?
How unique is your proposition?
How many stores do you need in order to build brand
credibility?
Geographic spread
How far are customers willing to travel to make a
purchase?
What is the geographic spread of multichannel
adoption?
10
Manage inventory
across channels
Reassess sourcing and
owned inventory levels
Integrate range/
merchandising teams
Store
Brand and
product
showcase to
drive revenues
across channels
Integrate marketing
teams
The changing face of retail The store of the future: the new role of the store in a multichannel environment
11
Conclusions
Against the backdrop of this changing and challenging
retail landscape, what can retailers do to drive profitable
growth and value creation? Incremental adjustments to
the store format and portfolio will no longer be sufficient
to survive. A radical rethink of the purpose of the store
in the consumer shopping journey is necessary and the
number of stores required needs to be reassessed.
As retailers begin to grapple with the big issues identified,
they will already be losing pace with their customers as
they adopt new technology and change their shopping
expectations. Non-traditional retailers are leading the
way in providing innovative customer journeys, exposing
gaps in service and offering from traditional retailers.
Footnotes
1. ONS www.statistics.gov.uk
2. Colliers International
3. Deloitte Research, State of the Media Democracy (UK) 5th Edition, 2011
4. Deloitte Research, Green Shopper Study, 2009
5. Deloitte Research, The Multichannel Consumer Survey, 2010
6. Deloitte Research, Driving profitability through your store associates: the make or break factor for retailers, 2010
7. Deloitte Research, TMT Predictions, 2011
8. Deloitte analysis, Datamonitor October 2011
Contacts
Silvia Rindone
Director, Retail Consulting
020 7007 7284
srindone@deloitte.co.uk
Claire Trivett
Senior Manager, Retail Strategy
020 7007 2643
ctrivett@deloitte.co.uk
Hugo Clark
Director, Corporate Finance Real Estate
020 7007 3584
huclark@deloitte.co.uk
Mark Underwood
Director, DJD Retail and Town Centres
Planning
0207 303 4089
maunderwood@djdeloitte.co.uk
Colin Jeffrey
Director, Multichannel Retail Lead
020 7007 0194
cjeffrey@deloitte.co.uk
Christopher Gentle
Partner, Insights
020 7303 0201
cgentle@deloitte.co.uk
The changing face of retail The store of the future: the new role of the store in a multichannel environment
13
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