Innovation in Retail

One recent innovation in retail is e-commerce, which has totally altered the way that customers can shop and consume. For brick and mortar retailers, a crossroads of sorts has arrived. Should they turn to the technological advancement of e-commerce in order to appeal to consumers? Or has this innovation benefited from tax breaks that are now coming to an end, and which will therefore make this innovation far less appealing to retailers and consumers than it has in the past? Certain factors are at play, including cost and convenience, when it comes to determining whether this innovation is one to which companies should commit themselves. Although the Digital Era is here, e-commerce may have limited appeal now that the Supreme Court has reversed a decades old ruling that freed Internet-based retailers from the constrictions of state sales tax (Fiegerman & DePillis, 2018).

Problem

E-commerce giant Amazon has decimated the brick and mortar retail space in recent years (Grosman, 2018) leaving retailers to find new ways to stay competitive. For some brick and mortar retailers, competing with Amazon has been difficult: many companies have gone bankrupt—like Toys ‘R’ Us—and many more are on the verge of sinking into oblivion, even long-standing companies like Sears (Tuttle, 2017). Others, like Wal-Mart, have attempted to incorporate the e-commerce side of modern day life into their own business plan and have both a brick and mortar operation and an online sales operation (Thomas, 2018). While companies like Wal-Mart have millions to spend on creating a new e-commerce infrastructure, smaller companies may like the resources needed for such an investment.

At the same time, there is a need to do something. If brick and mortar retailers continue to sit on their heels allowing Amazon to gobble up all the sales, they could quickly go out of business. The trouble is that even if they do enter into the e-commerce space, they still have to differentiate themselves from the behemoth that is Amazon—which is essentially like the Wal-Mart of online shopping times 1000. For people who only care about ease of access, Amazon is a simple, one-click approach to shopping that saves a lot of time and hassle. How can a traditional retailer compete? Should a brick and mortar retailer even try to go the way of e-commerce?

Solution

The costs of entering into e-commerce can quickly pile up. There are storage costs, shipping costs, distribution costs, marketing costs, and so on—all of which adds up. While it may be tempting to think that if one cannot beat them, one should join them and thus enter into e-commerce and close the brick and mortar stores. But this is not actually the only solution—nor is it even the correct one given the new Supreme Court ruling that will allow states to begin charging sales tax on items purchased online. That means the cost-savings typically associated with online retail are now going to go away—which will give brick and mortar stores more appeal, especially if their costs end up being lower than those attached to e-commerce.

Another thing to consider is that brick and mortar retail can still offer something that e-commerce cannot: the human experience. As Freedman (2017) notes people “often want personal experiences when shopping”—and that is something that no e-commerce giant can give. Online retail is just a convenience—but for a real, personalized shopping experience, there is no replacement for a brick and mortar retail outlet. And that is the big factor that a brick and mortar retailer must keep in mind. In an age in which everyone is turning to e-commerce (right when prices and costs are set to go up for this industry, too), the human factor will be what makes the difference. Businesses have to differentiate themselves from their competitors. A brick and mortar retailer must not be limited to selling goods: it also has to be willing to sell an experience.

Recommendation

For the brick and mortar retail business, the recommendation is that it keep its brick and mortar business and hold off on converting completely to e-commerce—especially since states are going to be charging sales tax on Internet retailers now. People are going to be looking for an experience in the near future—something different from the one-click convenience of shopping on Amazon. They are still going to continue to be people, as Freedman (2017) notes, and that means they are still going to want human contact. The human factor in shopping, in consumption, in sales, and in the offering of an experience is what is going to drive brick and mortar retail success in the coming years. Instead of shifting feet and diving all-in on e-commerce, brick and mortar retailers should think of ways to offer consumers a great in-house experience while doing their shopping in their location.

Whether it’s great music, the chance to network, the opportunity to sit down and have a meal while the kids play like what Ikea offers in its mega-stores, those decisions are up to the individual store. The point is the brick and mortar retailers can get and must get creative with the goods and services they provide. Convenience shopping will always have its appeal—but so too will the human experience, the human touch, the human factor, and that is what will save brick and mortar retailers in the coming years. Offering a human experience is what a brick and mortar business must do.

References

Fiegerman, S. & DePillis, L. (2018). Supreme Court rules states can force online

retailers to collect sales tax. Retrieved from http://money.cnn.com/2018/06/21/technology/wayfair-vs-south-dakota/index.html

Freedman, D. (2017). Bricks, mortar—and experiences. Retrieved from

https://www.wsj.com/articles/bricks-mortarand-experiences-1503258657

Grosman, L. (2018). What the Amazon effect means for retailers. Retrieved from

https://www.forbes.com/sites/forbescommunicationscouncil/2018/02/22/what-the-amazon-effect-means-for-retailers/#3fb241c2ded2

Thomas, L. (2018). Walmart has a big year of ecommerce investment planned.

Retrieved from https://www.cnbc.com/2018/02/20/walmart-has-big-year-of-e-commerce-investments-planned.html

Tuttle, J. (2017). 22 retailers that are at serious risk of bankruptcy. Retrieved from

http://time.com/money/4812870/retailers-bankruptcy-risk-sears-amazon/