Brick-and-mortar retail isn’t going to go away, but it’s going to change driven by new technologies. It doesn’t make sense for brick-and-mortar stores to be exclusively dedicated to transacting sales. Sales can be made anywhere, but some things can only be done in a store and why not apply e-commerce techniques to brick-and-mortar stores well beyond what’s happening today.
The split between online and offline retail is blurring. Despite the fast growth of e-commerce (Nielsen estimates online business will grow by +20% per year by 2020), 85% of sales are still transacted in physical stores.
But digitalization created a global shopping mall. It’s a world with many good offers and channels. Choice and digital tools for comparing options have upped the bar for what consumers consider good service. A personalized experience is rapidly becoming the key differentiator.
An optimal link of online and offline “path to purchase” is crucial for a perfectly personalized consumer experience. In the near future this could lead to blending the physical store with a personalized digital overlay. This could mean personalized offers and promotions for each consumer or even moving away from standard pack sizing to customized distribution that’s personalized to the consumer’s own usage patterns.
There is a third area in retail, where technology could provide new solutions. In mature FMCG markets such as Switzerland, one of the only ways to increase sales for retail and manufacturers is to reduce out of stock items. Nielsen data shows that on average across the globe 8% of products are out of stock at any one time. In developed markets such as Switzerland, it’s about 2% out of stock. Clearing out -stocks at the shelf with field force is expensive and time consuming. Analytic algorithms and machine learning could provide an automated solution for this problem – with out of stock forecasts even before there is a gap. New technologies such as „smart shelves“ and „item tagging“ are still expensive, but could find wider usage in the near future.