06 Jul How Empty Storefronts will Fuel Brand Stretch
The explosion of e-commerce continues unabated. Ecommerce in Europe is expected to generate total online sales of goods and services worth €509B. And there is still enormous headroom, because despite its staggering growth, only 55% of the European population aged 15+ buy online.
Culturally we live in an age of convenience. Technologically, ‘on-demand’ will only become easier as services such as drone delivery become normalized. Meanwhile, brands are fueling the fire in an effort to survive.
As with so many things, much of this story can be linked back to Amazon. As the behemoth continues to expand, it is showing an insatiable appetite to move into seemingly every retail category. This creates huge ripple effects, one of them being that retailers born offline invest enormous sums in e-commerce to defend their market share. It’s an expensive, but vital means of survival – as Wal-Mart’s acquisition of Jet.com proves. This pattern of disruption can be seen in entirely different sectors like fashion too – because for every dollar Net-a-Porter or Farfetch spend, there will likely be a dollar spent by LVMH trying to protect its turf.
With this huge shift of consumer and commercial capital to the world of online, what’s to be done with the struggling bricks and mortar store? Closing them is one option. In the US, billions are being invested in shorting shopping mall companies. Shuttered stores seem inevitable.
But while closing stores will often be a financial necessity, there is also an opportunity to repurpose physical space. This can lead to the reinvention of what a brand is, and the business model it operates under.
Video game retailer Game Digital has seen its share price tumble by 30% as its business model started to fall flat. Its model was brutally cyclical – volumes soared when a new console was released, but crashed when this was not the case. With cash tight and investors nervous, a typical move might have been to simply close all its physical locations in the name of cost-cutting. It invested money in its retail outlets instead.
In doing so it stretched into a new space – from retail to entertainment. It’s transforming its stores from places where crates of consoles are stacked high into gaming zones equipped with cutting-edge equipment. These stores are stocked with high end kit it’s impossible for most gamers to afford in their own homes – therefore creating unique, immersive experiences that make visiting new outlets more like going to a cinema or concert venue than a big-box retailer.
Many Tech and FMCG brands that own physical outlets have some difficult questions to ask. Is my physical space best served selling stuff that is easier bought online? Or do I clear some stock, and turn stores into an interactive showcase for my brand? Increasingly, brands will start to lean towards the latter. The reasons are numerous.
The relationship with consumers shifts from being transactional to experiential. The role of physical stores versus online shops grows clearer. And as you edge closer to curated experiences in store, brands will sell things that enhance margin, while enhancing engagement.
This repurposing of physical space will not be for everyone. But for some brands it will be transformative. It will take a liability on their balance sheets and turn it into an asset. It will shift them from retailers to entertainers, from service providers to those who sell experiences, and from those who once feared the blurring of categories into those that champion the shift. It is a key part of how Brand Stretch has, and will continue to drive fundamental change.
Conrad is co-founder of Mash, a strategy studio based in London that helps global brands to grow
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