The winning food and drug retailers of the future will not think of their brick-and-mortar stores in terms of competing against online sales, but instead integrating the stores into the online sales experience.
“The retailers we see being most successful right now are actually the ones that I would say are least likely to be fighting the shift from in-store to online,” said Tory Gundelach, senior vice president at Kantar Consulting. “They are really thinking about it from a shopper-centric view, letting the shoppers fulfill their needs in whatever way is most convenient for them at that moment.”
Shoppers tend not to adhere exclusively to any one channel for buying consumables, she said. Instead, they use a combination of home delivery, traditional in-store shopping and, increasingly, shopping online, and picking up their products at the store as that service becomes more widely available.
“We shouldn’t think about it as the channels competing,” Gundelach said, citing the potential to use physical stores as fulfillment centers for online orders. “We should think about it as the channels augmenting each other.”
Food and drug retailers increasingly need to think about their stores as serving multiple purposes for consumers, she said. Their networks of brick-and-mortar boxes must provide more engaging experiences that make consumers want to spend time shopping there. At the same time, they must provide efficient shopping trips to meet increasing demands for convenience, as well as serve as warehouses for digital order fulfillment.
Gundelach said she sees retailers rethinking their layout and design going forward, making more use of back rooms to stage orders for delivery and click-and-collect shoppers.
“People ask me a lot of times, ‘We’ve got these retail footprints that are, in some cases, 150,000-plus square feet. What’s going to happen to that?’,” Gundelach said. “Over time, I think, particularly in the grocery space, we’ll see some of that get remodeled and become backroom space. For example, why would you pick milk and eggs off the selling floor [for online orders] when you can have your highest-selling items already pre-staged in the back room?”
Meanwhile, on the front end, retailers are experimenting with more checkout options, from traditional cashier-assisted checkout and self-checkout terminals to scan-and-go options using a retailer’s app — and, in some cases, creating special areas for in-store pickup.
“At the end of the day, it makes the store a really viable part of the retailer’s overall logistics and ecosystem,” Gundelach said. “For most retailers, brick-and-mortar assets are the biggest assets on their balance sheet, so being able to support new fulfillment methods and new selling methods with that large asset is actually really important.”
Bill Duffy, research director at consulting firm Gartner for Marketers, formerly called L2, said Walmart is setting the standard for optimizing its massive store base to provide online purchasing, pickup in-store shopping and fulfillment. The service has been rolled out to about 3,000 locations.
“It’s been a major driver of their digital growth year over year,” he said, noting that Walmart also continues to expand home delivery from its store locations. “While this is not driving customers into the stores, they’re leveraging their store footprint as a way to directly compete against Amazon, saving on the fulfillment costs associated with same-day and next-day delivery.”