Can Brick and Mortar Consumer Electronics Stores survive for long?

As rapid technology advancements change consumer behavior with respect to their shopping habits, one format that is at the center of this vortex of change is the brick and mortar consumer electronics segment. In fact, the writing has been on the wall for quite some time with the untimely demise of Circuit City a few years ago. I believe the cause of Circuit City's woes and ultimate shutdown had a lot to do with their inability to adapt to the rapidly changing e-commerce market and rising consumer expectations.

In today's world, consumers have tremendous amount of information at their fingertips, esp. when it comes to technology products. From social media to blogs to opinion sites to expert product reviews to videos to price comparison sites, consumers have access to a plethora of sources to research, browse, purchase and receive a product of their choice. So where does this leave traditional brick and mortar retailers selling technology and consumer electronics?

Best Buy's strategy, one of the last surviving retailers in this space, offers some clues. They recently announced that they are tying up with Microsoft to open store-in-stores offering a variety of Microsoft's consumer products. After the success of Apple's retail stores, many brands have followed suit. These new-age stores are big on the experiential factor offering potential buyers a chance to try the devices and gadgets before they buy. They also provide true expert advisers (not sales people!) on site to help answers customer's queries. And finally they make the whole shopping experience a breeze with wireless payment options and other services. Successful brands like Samsung (Smart Cafe) and Google (Android Nation) are embracing an aggressive brick and mortar strategy too. These stores are turning into both experiential destinations such as large flagship stores(again taking cue from the Apple Manhattan store) that make a statement about the brand experience etc but also have smaller stores in partnership with existing smaller retailers that carry a localized portfolio of products, as it may always not be economically feasible to open physical stores across many geographies/cities. 

As there are a handful of brands that dominate each category such as mobile phones etc, I believe the future consumer electronics store will be an amalgamation of exclusive brand stores (like a department store) that are managed by the brand and allows the consumer to provide a real immersive experience into the brand. However, these retailers will also have to be innovative enough to not depend on the brands entirely. Technologies like 3D printing, augmented reality shopping. omnichannel shopping options etc will provide an opportunity to offer unique buying experiences that are tailored to their customers needs and preferences. Lesser known brands and not-so profitable product categories will gradually move to online sites and marketplaces as retailers can neither justify the store space allocated to such categories nor will customers find these brands exciting enough for them to want to actually experience them before they buy.

The age of the big box consumer electronics retailer is nearing an end.

The Curious Case of Offline Retailers going Online

I was recently on a panel discussion at the Etailing Expo Conference in Mumbai, India. The subject of discussion was about offline retailers going online and consequently the challenges they face etc. I wanted to elaborate on the subject as I received many basic questions about going online from the audience.

Fundamentally, for me there is no question that going online should be one of the key elements of a traditional brick and mortar retailer's strategy to expand and grow their business. There is a lot of apprehension among offline retailers in India to take this essential and critical step for various reasons. Some of these include lack of understanding of the e-commerce business model, lack of precedence in their operating segment and to some extent fear of the unknown - Unlike a physical catchment area, where will my customers come from, how will i attract them etc etc.

Let me try and allay some of these fears but also try and highlight certain "specialties" of an online channel. Certain capabilities which are possible only in the digital world.

1. In an online channel, the number of products/categories that can you sell is virtually unlimited as you are simply not constrained by the physical space available in a retail store.
2. The moment you go online, you instantly become a global in terms of being able to reach and service customers. While there may be legitimate reasons not to service customers based on acquisition costs, specific product categories etc. you now have the ability to reach a worldwide audience. 
3. Unlike offline retailing, where the catchment area around the store is your target market and you have to strive to attract as many customers as possible in that physical area, online retailing does not impose those constraints. Let's say you need to attract 50000 customers in a catchment area around the store, in online you could attract 5000 customers in 10 different cities and still get 50000 customers to your website.
4. Online offers the ability to completely personalize the experience of shopping which is quite difficult to do offline. Right from the moment, visitors come to site, elements such as content, merchandise, recommendations, promotions and offers and even prices can be personalized and made extremely contextual and relevant to that individual shopper visiting the site. all of this is possible due to the deep level of granular data that can be collected online.
5. Online offers a fantastic array of tools to collect deep information about visitors and potential customers when they search, browse, research, compare, ask/share, decide and transact online. Information about customer's behavior in a lot of these critical activities of a shopping process cannot be collected in an offline world.
6. Online also offers a tremendous amount of flexibility to adapt to changing market conditions and business models. Whether it is B2C or B2B or B2B2C or Marketplace aggregation models, online provides a relatively cost-effective avenue to pursue these models.

If one is convinced about these advantages that online offers, the most important and first step, that offline retailers need to do is to actually take a step back and map out a customer journey that includes both offline and online channels. Some critical questions to answer early on are:

• How do they see their customers interacting across these channels?
• How do they use technology and devices in the shopping process?
• What information do they expect at various stages of the shopping process?
• How can a brand provide a seamless experience to its customers as they weave in and out of channels and touch-points?
• Can customers shop Anytime Anywhere Anyhow?

Finally, the key for offline retailers is to NOT treat online as an "IT project" to be run by the IT guys. It has to be an essential component of an overall business growth plan and strategy and should not be dealt with in isolation. It should include all stakeholders from the organization such as marketing, supply chain, operations, finance, customer service and of-course technology. Once the strategy is clear, a blueprint of the design and building the foundational elements is critical. A phased road-map approach in terms of developing the basic blocks and delivering functionality from a customer perspective would help in the long run.