Opinion: COVID-19 and the re-birth of brick-and-mortar stores

"Platinum? Wow, I am a platinum member!" exclaimed my wife, surprised by the fact that she reached platinum membership on Tokopedia, one of Indonesia’s largest eCommerce platforms. Platinum membership requires more than 180 transactions per year, or close to one transaction every two days. I nearly wasn’t as surprised as her, as I had noticed a package delivery almost every day since the start of the (partial) lockdown in Jakarta.

I am sure my wife isn’t the only one doing more online purchasing since the COVID-19 outbreak. A study from market research firm Kantar, shows that a massive 55% of the Indonesian population is planning to shop online, a month on month increase in the past six months. The same study mentions the closure of a number of stores and health concerns as key drivers beyond promotional offers. The type of products ranges from food and beverages to clothing, all the way to home appliances. A staggering 56% of online shoppers have bought medication online in the past months. No category is immune. This obviously impacts the revenue of more traditional brick-and-mortar stores.

Is COVID-19 the death of retail?

I first heard about the death of retail in the early 2000s and again around 2008’s global recession. Recently its name has changed to the even more sinister "retail apocalypse", describing the demise of physical retail in the years 2010 to 2020. With the coming of COVID-19 and the strict lockdown procedures around the world, is this finally the long-awaited death of physical retail? The final nail on the coffin?

Lippo Mall Kemang in South Jakarta had seen many better days last year. During the initial lockdown, I estimate traffic was down to only 10-20% versus the previous year. While Google data shows a steady increase towards the normal mobility rates for retail in August 2020, the real magic happened last week. On 9 September, the Jakarta governor announced plans for a new lockdown starting September 14th. I visited Lippo Mall Kemang on Sunday the 13th, and it was as crowded or even more compared to a regular pre-COVID-19 Sunday. Other malls across Jakarta showed similar traffic, all up to standard or even higher traffic numbers due to the new lockdown announcement. Could it be that people longed for one more physical retail shopping experience before going back into full lockdown? Could it be that they are not getting everything they need from the eCommerce shopping experience?

Brick-and-mortar thrives in shopping

Much buying happens via eCommerce, but a lot of shopping still happens in physical stores. Shopping is a (social) activity where people are looking for information regarding products, price, and value, among other things. Buying is the transaction that happens when a person has already decided what to spend their hard-earned money on. Shopping is an event, an experience, where buying is much more transactional. To battle the threat of eCommerce, brick-and-mortar shops will either need to be able to compete on a price level (same price and convenience) or an exceptional shopping experience level. The former is where pure eCommerce players thrive, the latter is where pure eCommerce players cannot compete.

Depending on the category, physical shops provide many benefits that online shops cannot match, such as being able to touch, feel, and test the products. These kinds of offline activities tickle the senses and invite shoppers to imagine the role of the product in their lives. And of course, offline brings with it a lot of certainties, one of them is being able to return the product. This is especially essential in Indonesia, where return policies are not always guaranteed, especially not on eCommerce marketplaces.

Not to mention the fact that bricks-and-mortar are forced to curate selection of products, creating a far more comfortable shopping experience than the infinite shelf you will find online. While customers might think they want more choice, psychologist Barry Schwartz argues in his book The Paradox of Choice that shoppers might experience a lot of (subconscious) stress because of all the (wrong) choices they can make. While the limited space in brick-and-mortar stores seems a disadvantage, it actually delivers a much more pleasant shopping experience due to the fact that retailers are forced to put only the best products forward or risk wasting precious retail space.

Retail cannot live in silos

Forrester data shows that offline retail drives online retail and vice versa. People are exposed to the retail brand on the brick-and-mortar store when they pass it on their Saturday mall visit, or even when they go in and inquire about products. While they might not directly purchase in-store, there is a correlation to an increase in online sales. It also works the other way around. When people research online, they are very likely to purchase offline. The problem is that most retailers are thinking about physical store, online store, marketplace, advertising, and brand as if they were separate in the customer’s mind. They are not. They are merely different ways a customer might be shopping and buying from you. It is one retail experience.

While brick-and-mortar store sales might be down, and eCommerce sales might be up due to the lockdown, retailers need to think carefully before abandoning the concept of brick-and-mortar. Instead, they need to analyse where those online purchases are coming from. Are they coming from the same geographic area as your physical store? Have consumers merely switched channels due to lockdown? Are they the same customers or are there different segments and types of shoppers? Do they buy more of the same? Or more diverse? How can you get your other brick-and-mortar customers to switch to online for the time being?

Seamless retail experience wherever customers are

One thing is for sure; brick-and-mortar stores will need to transform the way they work. Post COVID-19, there will be a strong role for the physical store, but it needs to work seamlessly with the online version of the store. In fact, customers should have a seamless experience shopping at your store - physical or digital. If a salesperson in the brick-and-mortar knows a customer by name, the eCommerce should be able to deliver the same service.

If the salesperson in-store knows that this person likes a particular category of products, the online store have the same knowledge about this customer. But it also goes the other way around. If the online store knows that person’s entire purchase history, so should the physical store. The physical and digital should be interconnected and share the same systems and data to deliver better customer experiences. Currently, data mostly sits in silos across different departments, leading to different strategies based on channel specific data, creating a fragmented customer experiences across the retailer.

For example, brick-and-mortar retailers can think about including custom QR codes in-store that shoppers can scan for more information. Not only does it give the shopper access to more in-depth information and maybe the reviews they were looking for, it also lets the retailer connect the data of this person’s phone to their database – feeding right into the single customer view - regardless of their shopping channel.

As COVID-19 continues to drive extreme digital adoption of eCommerce, brick-and-mortar retailers should leverage the opportunity not by going full on online-only post COVID-19, but by serving customers with an integrated and extraordinary shopping experience that no digital-only retailer can match, and the shopping depraved Indonesians are craving for.

COVID-19 is not the death of physical retail. It’s a re-birth.

The writer is Daniel Hagmeijer, MD of Wunderman Thompson Indonesia.

Photo courtesy: 123RF