Location and the modern retail ecosystem

It seems that every week we hear of winners and losers in retail, with industry commentators painting grey pictures of dismal, deserted high streets damaged by online shoppers.

E-commerce is blamed for their downfall — the Grim Reaper responsible for boarding up empty stores and blowing tumbleweed through our towns.

The ever-changing nature of retail is increasing at an alarming rate with the rise of e-commerce and the ever-growing trend of online and offline shopping. There is a growing need to think of retail as a single, interconnected modern commerce ecosystem.

Think about how you shop. Probably, you buy some things online to be delivered to your home or office. Maybe pop down to your high street if there’s something you need quickly, and you might buy groceries online but do a quick ‘top up’ shop in your local grocery store.

Now and again, you might take a trip to a retail park to visit a furniture store or sports superstore.

Maybe you go home and order the item online to secure a discount. We don’t think about how we shop – if we need something, we just buy it through the most convenient channel at the time.

Location: the critical success factor for a modern retail ecosystem

There is one critical success factor underpinning the modern retail ecosystem, and that’s location. Location influences a wide variety of factors, and the presence of a physical store contributes to a broader portfolio of consumer experiences and transactional and brand opportunities for any given brand.

If we explore how this works. Pitney Bowes has a retail client with a very successful e-commerce business. They found that over 85% of e-commerce business occurred from customers that lived within 30kms of the store. Membership exhibited the same pattern.

Wanting to boost membership, the company launched a membership sign-up campaign through their e-commerce channel, but results were poor. They took a risk and opened a handful of physical locations in markets below their established minimum population thresholds.

This would no doubt result in low revenue stores, though enough to be profitable and viable to stay open. The result was a massive increase in revenue and a significant increase in e-commerce revenue within those markets, easily attributed back to new members that first visited the new stores.

The clear finding was that membership is driven through store locations, not online. Membership onboarding at a physical store drives long-term e-commerce success. Online and offline integrate with each other.

Data: setting the foundation

The reality is the success of location relies on good quality data and for many this remains a struggle. Data as a service is gaining traction, and we are starting to see smart retailers begin to leverage data to make faster decisions. Data analytics capabilities are what will enable retailers to stand out from the competition and create business successes.

Understanding what attracts and influences customers will be heavily reliant on the data a retailer can gather and their ability to mine and apply it.

All in all, we shouldn’t measure the success of the store based on its own transaction volumes, based on old metrics, but as a critical part of a larger ecosystem of customer experience.

Remove the store, and you remove a massive lever you can pull to influence the customer, to shape and define the future of their experience and their profile, which leads to the way you compete with other brands.

Now is not the time to diminish the value of the store. Let’s forget talking about online or offline and spend more time understanding the new age of shopping.

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