Shop till you drop
Stores are being hit by online retailing网络购物冲击实体店
The painful metamorphoses of physical shops
Oct 26th 2017
WHEN AMERICA’S RETAIL bosses gathered in New York earlier this year for the annual shindig of their trade association, the National Retail Federation, there was much talk about new technology to improve the industry’s prospects, from sensors that read consumers’ facial expressions to machine-learning software that can optimise prices.
The ghost at the banquet was the company that gave no presentations but made its presence felt everywhere:
Traditional retailing has had a tough time lately.
Traffic in shopping centres in Europe’s biggest markets has been declining.
In America, which has about five times as much space in shopping centres per person as Britain, the pain is acute.
Chains that were faltering even before Amazon’s ascent are now in even deeper trouble.
Macy’s, a department store, last year said it would close 100 of its 728 shops.
Fung Global Retail & Technology, a consultancy, expects nearly 10,000 stores in America to close this year, about 50% more than at the height of the financial crisis in 2008.
And there will be more to come.
Shops used to compete by offering a combination of selection, price, service and convenience.
E-commerce’s most obvious edge is in selection and convenience.
Even the biggest store cannot hold as many items as Amazon can offer.
Walmart conquered America by saving consumers money; Amazon is doing the same by saving them time.
Shops still provide immediacy and a personal experience.
But though getting attentive service at Gucci may be fun, waiting to pay at the supermarket is not.
E-commerce firms are also competing on new kinds of service and pricing.
A website knows more about you than any shop assistant can, enabling it to offer personalised recommendations straight away.
Online, a shopper can easily compare prices between retailers.
More intriguingly, merchants can quickly move prices up or down, using bots to match competitors’ offerings.
Eventually this pricing may become more personalised.
Alibaba and JD already use their troves of data to offer discounts on particular products to some of their customers.
All this has meant that consumers are now buying a wider range of goods online.
The shift has been most dramatic in America, home to both a relentlessly disruptive e-commerce giant and a herd of entrenched retailers (which China lacks).
Consumers still buy certain types of goods in stores, such as food and building equipment.
But many shops have had no choice but to follow consumers online, setting up their own e-commerce businesses as they maintain their bricks-and-mortar ones.
In the short term, this only exacerbates their problems.
Building an e-commerce business on top of a traditional one is costly; firms must create websites and ship products to individual consumers, rather than to stores in bulk.
It does not help that Amazon has conditioned consumers to think delivery should be free.
Moreover, online sales often cannibalise those from existing shops.
Analysts at Morgan Stanley reckon that for each additional percentage point of shopping that moves online, a retailer’s margins shrink by about half a point.
Bricks-and-mortar shops also often have trouble recruiting technology staff.
For a hotshot data scientist, working at a department store is not an obvious choice.
Traditional chains must routinely pay a premium to lure skilled tech workers.
Amazon has no such difficulty.
Startups, tech firms and consultants are offering tools to help smaller retailers adjust.
Some of the more interesting ones promise to narrow the gap between what e-commerce sites and physical stores know about their customers.
Floor mats can measure store traffic, video analytics will track shoppers’ age, sex and mood, and beacons can gather data about what customers do in the shop once they have signed up for free Wi-Fi.
For now, though, many American firms are reluctant to invest in such expensive new technology for shops that may not be there for much longer.
In China, those offering to remedy retailers’ woes include some of the big e-commerce firms, and retailers may be happy to work with them because their platforms are so pervasive.
In the West, small merchants already pay Amazon to list products on its site and store goods in its warehouses.
The small sellers can reach more consumers more easily; Amazon earns fees and, thanks to sellers’ listings, can offer a broader selection.
Big retailers, on the other hand, seem much less likely to team up with Amazon.
Target and Toys“R”Us chose Amazon to handle their e-commerce businesses in the early 2000s, but both ended the partnership, with Toys”R”Us doing so in court.
Unlike Alibaba, Amazon owns much of the stuff it sells, so competes directly with any seller that uses its services.
Despite such troubles, there are examples of how bricks-and-mortar shops might thrive.
One strategy is to offer distinctive products that are not available elsewhere (as does Zara, a clothing chain owned by Inditex), or which are difficult to sell online.
A second is to give shoppers a great deal.
TJX, an American firm, offers manufacturers’ surplus goods at bargain prices.
Another option is a great experience: champagne at Louis Vuitton, perhaps, or personalised advice at Nike.
The most difficult route is to try to match Amazon’s retail standards and offer more.
Walmart, once the undisputed king of American retailing, is mounting the boldest counteroffensive.
It can no longer simply open stores to boost growth; 90% of Americans already live within ten miles of a Walmart.
So the company is seeking to protect its margins by making stores even more efficient—saving $7m by printing shorter receipts, for instance—while investing online.
Last year it spent $3.3bn buying Jet.com, an e-commerce site founded by Marc Lore, who now oversees Walmart’s suite of online businesses.
He is not trying to match Amazon’s breadth.
“We are focused on being a retailer,” he declares.
But Walmart is trying to catch up with Amazon in other ways.
The company now offers free two-day shipping.
Just as JD’s integration with Tencent is helping it challenge Alibaba, Walmart may succeed by partnering with tech giants.
In August it said it would sell through Google’s voice assistant, in a bid to counter Amazon’s Alexa.
Walmart can also use its vast network of stores to do things Amazon cannot.
In one experiment, Walmart staff drop off customers’ orders on their way home.
And as America’s biggest grocer, it has developed an easy way for customers to order food online, then drive to a Walmart where staff load it into their car.
Even as Walmart adapts, however, Amazon continues to morph.
It is using machine learning to measure the ripeness of a peach and to determine how many blue shirts to stock in which size.
Constant innovation gives it a huge competitive advantage which many retailers will struggle to match.
Too many physical stores lack the strategy or distinctive merchandise that might help them thrive in retail’s new era.
And in the main they still rely on the customers coming to them to choose their purchases, whereas their rivals deliver.