The evolution of retail in 2024: omnichannel becomes a necessity
In 2024, the retail sector remains cautious as the economic outlook remains unclear, with persistent inflation, high interest rates and heightened geopolitical tensions.
This uncertain environment is compounded by increased competition for retailers and rising consumer expectations of the shopping experience.
From product discovery to purchase, delivery and returns, consumers are looking for a seamless, fluid experience across all channels, navigating increasingly complex journeys where the lines between online and offline are blurring.
In response to this reality, the adoption of omnichannel selling strategies is becoming essential. They improve the customer experience while delivering significant benefits to retailers in terms of inventory management and additional sales. However, integrating these strategies represents a major transformation for retailers on several levels.
The evolution of retail: from channel separation to omnichannel
In its early days, long before the Internet, the retail industry relied mainly on physical stores. A meticulous organisation was needed to keep them running smoothly: sales staff, stocking shelves, managing stock, coordinating deliveries and computer systems for overall management. This infrastructure took years to build.
Then, with the advent of the Internet, retailers reacted by launching their own e-commerce sites, motivated by the emergence of new players, the pure-players, without physical stores. At the time, there was a clear division between the channels: retailers believed that online shoppers were different from those who visited their stores. This perception was based on differences in household adoption of the Internet, with young people and managers more likely to buy online than older people.
This segmentation of consumers by purchasing channel was deeply embedded in organisations: separate teams for e-commerce, logistics, payments and loyalty.
It has gradually become clear that consumers are often the same whether they shop online or in-store. Retailers have become aware of the importance of merging these channels to take advantage of their complementarities. This has led to the exploration of scenarios in which the channels interact harmoniously to the benefit of both the consumer and the retailer.
Omnichannel retail strategies: Click & Collect and physical showrooms
Among omnichannel strategies, Click & Collect has been widely adopted. It allows customers to shop online via a retailer's website or mobile app and then pick up their items in person, in the store or at a collection point. This method allows them to enjoy the convenience of online shopping while avoiding delivery times. For retailers, it's a way to leverage their physical infrastructure while meeting the growing demand for e-commerce.
A popular example of Click & Collect is the use of drives, particularly in the grocery sector, but also by giants such as Ikea, who set up dedicated areas in their stores. This approach requires careful planning as it affects the architecture of the store, the sales floor, the stockroom and the logistics. This kind of thinking is also very important in the DIY sector. This is because of the organisational challenge of home delivery, but also because of the very high costs associated with delivering heavy or bulky items. Offering customers the option to collect their purchases reduces logistics costs and complexity and preserves margins.
In contrast to Click & Collect, another well-known omnichannel concept turns shops into showrooms.
When a customer enters a department store, they are limited to the products offered by that store and do not have access to the entire range available on its associated marketplace. To overcome this limitation, the retail space is transformed into a showroom rather than a simple storage area, offering a virtually infinite selection of products from different marketplace sellers. Customers can be advised by sales staff on the products displayed in the store, as well as those available only online, via tablets or kiosks. They can then choose between home delivery or in-store collection.
However, the success of this concept depends on the ability to take advantage of the physical presence of the consumer in the store and to offer them personalised assistance to facilitate their purchase. Transforming a store into a showroom therefore requires investment in additional staff, trained in best practice and equipped with new professional skills. On the scale of a retail chain, this can involve thousands or even tens of thousands of people, at considerable cost.
Whether for Click & Collect or Showrooming, it is clear that the physical stores remain important. However, with the proliferation of online shopping platforms and advances in augmented reality, not only are customers no longer compelled to buy in-store, but the traditional benefits of the in-store experience (seeing and touching products) are becoming less important. Retailers therefore need to rethink the in-store experience and ask themselves what makes consumers want to come into the store.
The evolution of retail: turning the shop into an event venue
Personally, I find the idea of shopping in a suburban supermarket on a Saturday unappealing. Shops therefore need to evolve.
One strategy is to integrate entertainment into retail: retailtainment (retail + entertainment). Brands offer activities that go beyond the purchase, transforming the store into an event space.
The most innovative players are often manufacturers such as Lego, who are starting to sell directly to consumers. As well as buying the latest products, families can admire the constructions and take part in activities in dedicated areas. For some families, visiting a Lego store becomes an activity in itself, leading to purchases to extend the experience at home.
Nike has also innovated by turning a New York store into a virtual adventure zone. The brand is using augmented reality to interact with customers and extend its storytelling.
Click & Collect enables strategies that focus on the fitting experience. For example, loyal customers can reserve items from the new collection via the mobile application and come into the store to try them on. In this way, they benefit from the advice of sales staff and an enjoyable shopping experience. This approach also limits returns management and encourages up-selling.
The ultimate goal of omnichannel is to personalise the shopping experience by informing sales staff about customers' online interactions before they visit the store. This technique, known as 'clienteling', is being implemented by retailers such as Macy's through 'personal shopper' services, offering a more enriched and personalised customer experience.
Stock optimisation and logistics in omnichannel commerce: using shops as mini-warehouses
Traditionally, when a consumer buys online, home delivery comes from a centralised warehouse with stock dedicated to Internet orders. Each item is then shipped individually, with specific picking logistics.
At the same time, retailers often have stocks spread across one or more national warehouses to supply their stores. Take the example of a retailer with a surplus of green T-shirts in Lille, while the same T-shirts are selling very well in Marseille and are almost out of stock. Instead of selling the T-shirts in Lille and risking a loss of margin, omnichannel offers an alternative solution.
The idea is to use shops around the country as mini-warehouses. Sales staff can prepare orders there, which are then sent directly to customers. Instead of each item travelling hundreds of miles from a central warehouse, only the 'last mile' logistics need be managed.
There are set-up, operational and transport costs associated with this practice, but when it's done right, the short-term benefits are significant and tangible. By using stores as distribution points, retailers can optimise stock levels, reduce delivery times and improve customer satisfaction.
The battle for omnichannel transformation is yet to come
Overhauling shop structures, centralising warehouse management, adopting automation technologies and increasing staff numbers... Few companies are able to master all these aspects to optimum effect, due to the significant investment and effort required. Many retailers remain cautious, experimenting and making small adjustments before embarking on large-scale industrialisation. These changes are often implemented gradually, through pilot stores, as their economic viability is still uncertain.
The retail sector is a delicate one, with often low margins and a strong reliance on sales volumes, especially in periods of flat growth. Striking a balance between investment in the customer experience and its impact on the bottom line is therefore essential.
While innovative ideas are attractive, they need to be carefully evaluated to ensure that they will generate enough additional revenue to offset the investment.