Store of the future: a third of the physical store space will be “dedicated to online execution”
Ecommerce sales are expected to reach nearly 35% (34.8%) of the global retail chain market share by 2023, leading to changes in the way stores execute business, according to a new study. orders.
New data from Edge Retail Insight, the market research arm of Edge by Ascential, shows that in-store sales share will decline to 62.4% by 2025, from around 70% in 2021.
As online sales accelerate, the store of the future must become a strategic resource, enabling retailers to connect with consumers and reduce the costly ‘last mile’, as well as maximize online capacity and efficiency. .
This is one of the recommendations for retailers in Edge Retail Insight’s Winning Strategies: Store of the Future 2021 report, the third edition of the report that focuses on in-store retail, how physical retail must change to meet new customer demands and how vendors can perform successfully in a new and more complex operating environment.
With same-day delivery now a tabletop offering, the report suggests that retailers are using their physical assets as intermediate delivery distribution centers – as Waitrose and Sainsbury’s have tested with Deliveroo in the UK and Asda with Uber Eats – hubs of autonomous vehicles, ultra-fast delivery shelves and click-and-collect hubs to offer more convenience and proximity to customers.
Reallocating store space to accommodate new shopping habits could mean that up to a third of store space could be dedicated to fulfilling online orders across major channels and formats stores larger as e-commerce’s share of global chain retail sales increases – reaching 34.8% by 2023 and nearly 40% by 2025. E-commerce growth has jumped two years ahead of Edge Retail Insight’s projections made before the COVID-19 pandemic.
The report’s authors warn that the traditional store-based business model is now threatened by the changing consumer landscape and emerging technologies that are transforming discovery, selection and purchase.
Deren Baker, CEO of Edge by Ascential, said: âThe global pandemic has accelerated the adoption of online retail across all key categories. With a record number of store closings since the start of the pandemic, in-store retailing is now at a tipping point. However, there is still a lot of value in the brick-and-mortar model – one need only look at Alibaba and Amazon’s investments on Main Street to attest to this.
“But retailers and suppliers need to invest in a range of new capabilities to drive successful actions in the future store, which will have very different characteristics from the model that operated until around 2010.”
Edge Retail Insight’s Winning Strategies: Store of the Future Report 2021
The Winning Strategies: Store of the Future 2021 report indicates that retailers have no choice but to adapt their store formats to remain relevant in the post-pandemic retail landscape. It shows that from 2021 to 2026, the share of online sales in major markets is expected to grow rapidly – up to 70% in categories such as electricity, 10 basis points higher than today. . The leisure and entertainment category in the UK and US is moving towards a 50% e-commerce share, while Germany is more advanced, already at 50% and will account for 60% in 2026.
E-commerce share is lower in the health and beauty and grocery categories, especially outside the UK and US, but the overall trend is up in all major e-commerce markets in these categories .
In 2015, the share of stores in global chain retail sales was around 87%. In 2025, it will drop to 62.4%. This move jeopardizes the viability of a store designed for the pre-digital age.
David Gordon, Director, Omnichannel Insights, Edge Retail Insight, said: âIn a context that has never been so difficult for traditional retailing and in a new reality where online and offline channels will be increasingly more vague, to differentiate, the store of the future. must become a physical portal to brand and product experiences – become places where consumers can be inspired, learn, collaborate, socialize and experience new products, all using digital touchpoints, such as mobile phones and social media; and other technological advancements to drive in-store traffic and enable physical stores to function as part of a larger, interconnected ecosystem. This will mean, among other things, that the store network will become an increasingly essential part of last mile execution. “
The Winning Strategies: Store of the Future 2021 report highlights several key characteristics that will be essential drivers of a successful and profitable store of the future model:
â¢ Experiential – In-store experiences should generate traffic, generate excitement, educate and foster levels of customer connection between the brand and the consumer that are ultimately unmatched online.
â¢ Social – Retailers need to find ways to create spaces for connection and community engagement to maintain their future presence in the everyday lifestyle of shoppers. This could be done by promoting their status as a ‘community hub’ or destination for consumers, integrating key community services, from health centers to electric vehicle charging, and locating items in the store to connect with them. local communities.
â¢ Frictionless – Frictionless store initiatives will be a long-term trend to deliver simpler, faster and more transparent experiences and will intersect with digital integration and technology to evolve the buyer’s journey. This could be done through personalized promotions and trial tools, digital payments, and seamless execution options.
â¢ Curated – Momentum is built to differentiate in-store assortments through exclusive partnerships and faster innovation cycles. Cause-related curation is becoming a relevant trend.
â¢ Operational Excellence – The store’s operating model ultimately needs to be as profitable as possible, which means increased creativity in the use of space, a focus on categories and assortments improving margins and efficiency. increased automation of tasks through robotics and artificial intelligence (AI) technology.
â¢ Order fulfillment solution – redesign the physical store as an order fulfillment solution, adding convenience, such as curbside pickup, and additional capacity such as dark-store pickup areas, to take charge of the last mile offer.
Florence Wright, Senior Analyst, Edge Retail Insight, said: âPhysical retail will remain an integral part of the future of retail, but it will be increasingly fluid and digitally driven, like concepts launched by Amazon with its cashless Fresh supermarkets. and Alibaba’s high-tech Freshippo supermarkets being rolled out across China. Strategies will vary from market to market based on digital maturity and categories and there will be no one-size-fits-all approach. But regardless of the speed or nature of the transformation, the characteristics and end goal of the stores of the future will be universal. “