It’s that time of year when the eyes of the political world turn to a disparate mix of countries, all with their own preferred models for how to get the country onto the road to economic prosperity.
Brick-and-mortar retailers are frantically fighting to repel the increasing threat of online retailers like Amazon. At the same time, governments like Britain’s are being forced to decide how to balance trade with the global economy. All this puts a new strain on the industry’s well-established relationship with its customers, and is likely to shape the shape of the future relationship between bricks-and-mortar and online retail.
Britain’s competitiveness in this new economic landscape will depend on the speed with which the retail sector comes to an accommodation with online markets.
At the moment, we have an entirely traditional business model: the bricks-and-mortar branch. It is open on Friday, Saturday and Monday, and employees are paid holidays. That structure works because it takes the brick-and-mortar branch far beyond the demands of online competition. It serves customers from opening hours on weekdays, the weekends and Easter, and also ensures the staff have access to school holidays and special offers around weekends. It also gives customers access to reviews, advice, and goodwill discounts. And, crucially, it offers some access to quality customer service.
However, bricks-and-mortar stores are far more susceptible to the tide of online competition than traditional businesses in other sectors. The next 12 months will see Amazon’s reach grow exponentially. It will start selling the products of many big companies – including Marks & Spencer – as well as becoming an even more powerful retailer of physical products. It has moved quickly to build a catalogue of millions of products, and will send its own reviewers and expert testers around the country – unaided – to test them.
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With such a vast and relentless competitor looming large over their businesses, traditional businesses in Britain’s retail sector are taking a radical approach: they are looking beyond bricks-and-mortar stores and the classic physical store model. They have started to switch more investment into online stores – essentially virtual stores, or omnichannel brands – in a bid to achieve greater levels of profitability. This is already translating into fewer hours at branches for retailers. Yet there is still plenty of work to do to ensure that bricks-and-mortar models can withstand the pressure of online competition. To face this new threat of fierce online competition, bricks-and-mortar retailers will need to build a supply chain that optimises their flow of products, inventory and staffing, so that not just their physical stores are relevant in the online retail age.
It will also be vitally important for bricks-and-mortar retailers to better secure, track and share sales data online to allow customers to compare prices with those of their peers. As more companies explore new online-only models, bricks-and-mortar stores will need to ensure they are adept at dealing with the information demanded by this new era. For example, any retailer looking to compete online will need to be able to ensure that their products can be bought from around the world. This is no small task, but it will put bricks-and-mortar shops on an equal footing with their online rivals. As with any new challenge, the basic rules of the game need to be understood by everyone.
While bricks-and-mortar retailers can take heart from the fact that not everyone in the industry is frightened of Amazon’s advances, there is no reason why every bricks-and-mortar shop should assume that its current physical model will hold up against the new wave of digitally-savvy competitors. It would be foolish to assume that to succeed, brick-and-mortar retail will have to accept the changes that digital means it must make.
Brick-and-mortar retailers should be working harder to fit to a changing market, and protecting themselves against competition. Digital consumers often make purchase decisions over the internet – and expect better service if they do. That’s why brick-and-mortar retailers will need to try out the new models that will help them survive and thrive.