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How E-Commerce Is Redefining the Retail and Distribution Industries

How E-Commerce Is Redefining the Retail and Distribution Industries

E-commerce has become a disruptive force in the retail and distribution sectors. E-commerce sales are growing by 15 percent every year. Amazon alone accounts for about 40 percent of online sales in the U.S. and drives 80 percent of online sales growth. What makes Amazon such a powerful force is services such as Echo and Amazon Prime that elevate the customer experience. The company has created an extremely smooth shopping process that other companies are rushing to mimic with features such as two-day shipping, sophisticated inventory control, product search and matching, data analytics and personalization.

As e-commerce continues to gain traction, traditional brick-and-mortar retail stores struggle to compete—which can unfortunately result in closing or bankruptcy. And it’s not just small or independent operators that suffer—it is also legacy retailers, such as Boston Store and Macy's.

As more shoppers buy their products online, the best way brick-and-mortar retailers can survive (or even thrive) is by providing a unique or innovative, high-value, in-store customer experience. Below are three strategies that in-store retailers are using to compete with the advancing e-commerce wave.

Personalizing the Customer Experience

A new class of retail stores provide in-store experiences that offer high value and cannot be found online. These include personal interactions through showrooming, webrooming, product demos and other in-store special events. Some retailers utilize brick-and-mortar stores to support their online stores. For example, Nordstrom Local sells clothes online and carries no dedicated inventory. Customers do, however, come to Nordstrom Local stores to pick up online orders and make returns. While there, they can sip a complimentary beverage and talk with onsite tailors. Canadian parka company Kanuk encourages customers to test their gear in real sub-zero winter conditions in a specialized cold room. Online menswear brand Frank + Oak has over a dozen physical stores in North America, all of which offer premium coffee and barbershop services to customers as a personal touch.

Analyzing the Data

Data is needed to enhance the customer experience—whether it is as simple as cameras and surveys to sophisticated, Internet of Things-style sensor technologies. And solutions are not always expensive or complicated. For example, candy retailer Lolli and Pops, "literally tracks the paths customers take once they enter its stores,” said Lin Grosman, director of communications for GoDataFeed, a multi-channel platform that helps retailers sell their products on more than 200 e-commerce channels. “The company found that one of its locations wasn’t seeing the same revenue coming from its high-sales sweets section. After checking in-store analytics, they found that there was a table in the way that deterred customers from exploring the area in which these items were located. These analytics also help them better train their staff to engage with customers, including offering them free samples.”

Digitizing Brick-and-Mortar

More brick-and-mortar players are digitizing their physical infrastructure with new store features and formats based on customer experience and convenience, with a strong digital flavor—especially the use of mobile technology.

recent study conducted by SOTI, an enterprise mobility management firm, discovered that 92 percent of shoppers prefer stores that offer mobile experiences, and nearly 75 percent want mobile point of sale for quicker checkout times.

“In this way, mobile and offline stores can work together to accommodate shoppers who are becoming more independent,” said Grosman. “They already know what they want when they enter a store. The retailer’s opportunity is in providing a mobile experience that makes it as easy as possible for them to acquire it as quickly as possible.”

While not all that digital media necessarily happens through mobile devices, it plays a significant role, she added. In addition, mobile technology isn’t just about the shopper: According to Grosman, 89 percent of retailers are expected to provide their employees with mobile technology by 2020, covering everything from customer identification to customer engagement to point of sale and payments.

The Future of Retail and Distribution

Competing successfully with Amazon and e-commerce requires a compelling customer experience. The brick-and-mortar stores that accomplish this will be those that offer a meaningful experience that online stores cannot provide—for example, the convenience of two-hour shipping at Frank + Oak or Kanuk’s cold room.

Distribution and inventory systems must be nimble enough to meet customer demands for faster shipping and delivery times for products. This will be achieved by using the Internet of Things to improve manufacturing, customization of products and delivery time—all of which help offline retail stores compete with their online competition.

Some opinions expressed in this article may be those of a contributing author and not necessarily Gray Construction.