Re-examining the Place of the Physical Store During the Digital Retail Era

Abstract

The fundamental role and purpose of retail stores is changing. The growth of e-commerce is forcing physical stores to evolve in order to stay relevant and meet shifting consumer demands. This chapter re-examines the role of physical fashion stores during the digital retail era by outlining these stores’ traditional role, by discussing the role of online stores and by providing a comparison between physical and online stores’ roles vis-à-vis consumers. At the end of the chapter, the consumer view of stores of the future is demonstrated in the results of an exploratory study. The chapter shows that physical stores need to be inspirational, to have knowledgeable staff, and to make sure that consumers get personal service and care when visiting stores. The study has also shown that consumers today value stores of the future having other attributes (e.g. local connections and inspiration) than those previously recognized in research.

Introduction

The retail industry is constantly changing and undergoing significant transformations which require retailers to adapt in order to survive. Over the past couple of years, the rate of store closures has rocked the retail industry, with more than 8600 stores being expected to close in 2019 (Business Insider, 2019). However, according to the report “Retail Renaissance—true story of store openings/closings”, 5.2 new stores open for each company that closes a store (IHL Group, 2019). In other words, some types of stores have almost completely disappeared, while in other industries these have increased (Amcoff et al., 2015). The emergence of new channels has been part of the transformation of the retail industry over recent decades (Egan-Wyer et al., 2021; Hultman et al., 2017), and this shows that physical retail is not dying but merely changing.

Another factor that has influenced this transformation is the expansion of e-commerce, in 2018 accounting for 10% of total retail sales and continuing every year (Statista, 2019). Even though e-commerce is growing, physical store shopping is still very much alive: However, the growth of e-commerce is forcing physical stores to evolve in order to stay relevant and to meet shifting consumer demands. Today, many companies are aware of the importance of integrating channels in order to provide a seamless experience. Such integration has both received attention in research during recent years and resulted in more complex consumer behaviors and customer journey patterns (Liu et al., 2018). Today, consumers largely alternate their shopping behaviors between both online and physical stores, choosing the channel that best fits their needs at the time (Bell et al., 2014) and provides the highest value (Flavián et al., 2016).

With the ongoing transformation of retail, and the ever-evolving development of digital social media, the virtual place has become increasingly important (Ballantyne & Nilsson, 2017). With this, the digital service offering challenges traditional concepts of what constitutes a customer experience and customer value (Ballantyne & Nilsson, 2017). Hence, physical stores are being challenged to become smarter and to provide greater value to both consumers and retailers (Bäckström & Johansson, 2017). With the transformation of retail, consumer expectations are rapidly changing, making it important for retailers to keep up in order to meet consumer needs. In a multichannel world, physical stores can serve a completely different purpose: However, to do so, we need to know more about what consumers want and expect from stores of the future. The need thus exists to re-examine the role of physical stores during the digital retail era.

This chapter sets out to show how the role of the physical store needs to be adapted during the digital retail era. First, the traditional role of the physical store is briefly outlined. There then follows a discussion about the role of the online store. A comparison is made between the role of physical and online stores vis-à-vis consumers. The chapter then presents results from a study focusing on the consumer view of fashion stores of the future, along with some conclusions.

Classic Role of Physical Stores

Retail is constantly evolving to meet the needs of the market and the wishes of consumers. These shifts can be seen in how customers take and pay for products. In the beginning, this was done over the counter, with customers then picking up their products themselves in-store and paying at the checkout. Today, customers are both picking up and paying for their products more and more themselves. We have gone from the small family-owned store to the superstore and now there is a tendency toward more local and sustainable stores. Even though digital commerce has increased, previous research has shown that most retail sales still take place in physical stores (Hagberg et al., 2017). For many retailers, this is still their most important channel. However, given the transformation of the industry, physical stores also need to evolve in order to stay relevant and to meet their customer needs.

Previous studies have proposed that, for the consumer, stores have two roles to play: (1) Conspicuous capabilities—meaning the immediate satisfaction of making on-site purchases, product information arising from direct interaction with the product and/or sales staff, no shipping costs and so forth. (2) Experiential capabilities—meaning that a store is generating brand awareness and association, and increasing the reach and frequency of brand messages over time (Wang & Goldfarb, 2017). With the transformation of the retail sector, the physical store has evolved from a point of transaction into a place of interaction and entertainment. The physical store thus meets consumers’ product information needs in a socially-interactive setting. In the traditional way of shopping, the consumer goes to a physical store mainly to get information regarding a product’s specifications from the sales staff. Previous research has shown that customer service is one of the most influential reasons for going to a physical store (Bäckström & Johansson, 2017). It has also been shown that store selection is very much affected by location, along with price, range, and store environment (Nilsson, 2016). The importance of atmosphere, along with the sense of touch and feel, non-existent in e-commerce, is also very important (Nilsson, 2016). In a physical store, consumers have the possibility of touching and feeling products, thus reducing any uncertainty and also providing the instant gratification of getting to take the product home with them immediately. The convenience of being able to take products home is considered a factor that is important to consumers. Cao and Li (2015) argue that the dominance of physical stores has decreased due to the growth of online retail.

The Role of Online Stores

E-commerce is rapidly growing today, taking market share away from traditional retail (Postnord, 2022). The rapid development of technologies, along with their application to retail over the past decade, has made the online channel an important touchpoint for the consumer. The main reason for buying online is said to be convenience, saving time and money. There is a big advantage to being able to shop from home, and this also makes it easy to compare various models and brands as regards quality and price.

E-commerce has made competition greater since the customer can buy his/her products from a global marketplace, and not just from his/her local marketplace. The spread of the COVID-19 pandemic across the world, from early 2020, increased online shopping even further. However, overall online spending is still limited compared to offline. Even though the adoption of e-commerce is still in its infancy, it is already obvious that it has changed both consumer behaviors and the retail landscape. This transformation is forcing retailers to rise to the demands made by the changing consumer, as well as the opportunities that will follow, by developing some sort of digital offering (Reinartz et al., 2019).

One of the most crucial advantages of online stores is their ability to overcome geographical constraints, from the perspective of both the consumer and the retailer. Many consumers around the world, thanks to online stores, are able to purchase the products of brands and companies that are not available for purchase in their own countries. Two more reasons why online shopping has become popular are avoiding crowds and not needing to travel in order to buy what you need. Hence, online shopping is a more convenient channel for consumers because it offers greater savings in terms of time (Syzmanski & Hise, 2000). There is also an endless variety and range of products available online, usually at lower prices than in physical stores. Previous research has shown that online shoppers can demand more product information, more product variety, and more personalized or specialized products than physical store shoppers do (Syzmanski & Hise, 2000; Tzeng et al., 2020) since these consumers are used to finding everything they need online.

Combination of Online and Physical Stores

As can be seen above, it has been shown that consumers want different things from their online and physical shopping experience. However, they expect the purchasing experience to be consistent, both online and offline. Today, consumer demand is putting pressure on physical stores since consumers are now becoming accustomed to the immediate, personalized, and convenient experience which online shopping has entailed and which they consequently also want in the physical store. As the COVID-19 pandemic spread, businesses were forced to digitalize. Ballantyne and Nilsson (2017) argue that digital service offerings challenge traditional concepts of what constitutes a customer experience and customer value. Hence, physical stores are facing other expectations today.

Even though many physical stores have had to shut down, online retailers such as Amazon and Alibaba have opened physical stores and showrooms (Egan-Wyer et al., 2021; Hultman et al., 2017), realizing the importance of providing customers with the blended experience they want. Also, several different types of shopping behaviors have developed because of consumers combining online stores with physical ones. For example, showrooming occurs when consumers use bricks-and-mortar stores to evaluate products in person, subsequently finding better prices online and purchasing that way. Webrooming, on the other hand, is when customers research products online before visiting a physical store to purchase them. Instant showrooming is when searching and purchasing are done at the same time in the showroom. Bops (buy online pick up in store) combines both environments. This shows that consumers are using both online and offline tools in their purchasing behaviors. Also, given the continuous increase in technology-based solutions, consumers frequently search for information on their smartphones before, during, and after visits to stores (Grewal et al., 2018).

Previous research has mostly dealt with online shopping and physical shopping separately: However, as discussed above, customers do not have a clear boundary between these different types of shopping today. According to Flavián et al. (2016), where consumers shop is based on what channel that fits their needs at that specific moment. The basic premise of this study is that most consumers are shopping both online and in physical stores today, making them accustomed to the pros of both types of shopping. The question then arising from this basic premise is how this will affect the consumer view of the physical store of the future.

Methodology

An exploratory study was conducted using the attendees of a fashion and design week in a mid-sized Swedish city. A short survey was conducted using 103 respondents. The questionnaire contained three modules, the first of which included questions about the respondent’s socio-demographics and an open-ended question regarding what they do when visiting the city center and/or a shopping mall. The second module contained questions about their shopping behaviors, both online and in physical stores, about where they find information and inspiration regarding products and about their shopping habits. In the last module, the respondents were asked to imagine the stores of the future. In one open-ended question, they were asked to describe their dream store of the future in five words. In the last question, they were provided with a list of attributes (taken from previous research), for example, opening hours, prices, atmosphere, product range, sustainability focus, product displays, parking spaces, loyalty club, and knowledgeable staff and so on. The respondents were then asked to choose the three most important attributes a fashion store of the future should have in their opinion. The respondents were able to both choose from the list and make their own suggestions about attributes in this ranking. The respondents in the study were aged between 19 and 70 and 75.2% of them were women. The study was conducted during the fashion and design week in the hope that the respondents would be more open-minded and not too focused on a specific shopping task they were about to undertake.

Results

The descriptive analysis results is divided into three sections. The first section covers the respondents’ shopping behaviors, both online and in physical stores. The second section indicates where consumers find information and inspiration when shopping for fashion products. In the last section, a descriptive analysis of the attributes’ ranking is presented, together with the answers from the open-ended question regarding how a store of the future should look.

Shopping Behaviors

The study showed that only 1% of the 103 respondents do all their shopping online, while 15.5% do more shopping online than in physical stores. An equal amount of both types was done by 23.3% of the respondents while 36.9% do more shopping in physical stores than online and 22.3% do all their shopping in physical stores. These results support the argument that most people use both e-commerce and physical stores when shopping, which is why it is important not to talk about online customers and physical customers as two separate groups but to see instead that the customer journey is a mix.

Of the respondents, 9.7% visit the city or a shopping mall every day, while 32% do so several times a week, 25.2% do so once a week, 22.3% do so a few days a month, 7.8% do so one day a month and 2.9% do so more rarely than once a month. When the respondents visit the city or a shopping mall, they argued it was to go window-shopping, to walk around, and to waste time. Other respondents in the study wanted to be updated about what is new and to gain inspiration. For most of the consumers, the social aspect was important, going there to socialize over coffee or to have lunch.

Information and Inspiration

Most consumers in the study use both e-commerce and physical stores when shopping and also search for inspiration online. As seen in Table 20.1, the respondents search for information both online (57.3% often/always) and in physical stores (43.7% often/always). Of the respondents, 34% ask others about their experiences, while 35.9% find information about e-commerce and 37.9% make price-comparisons. The results show that consumers use several outlets to find information and compare products, both online and in physical stores.

Table 20.1 Where consumers find information in order to compare products (N = 103)

As seen in Table 20.2, most consumers (62.1%) either often or always search for inspiration using Internet sources, while 60.2% search for inspiration in physical stores, making it important for retailers to be able to inspire these consumers in-situ (online and in physical stores). Only 28.2% gain inspiration or ideas regarding a product from tips from friends, while 32.1% gain these from e-commerce and 34% gain them from magazines, TV shows, and papers. This result shows that consumers have often started their shopping journeys before visiting stores or e-commerce sites, making it important for the sales staff to understand how far consumers have come in their journeys in order to create value for them in-store. If a store fails to inspire its consumers, they will seek out other stores, either online or physically, to gain inspiration.

Table 20.2 Where consumers find inspiration or ideas regarding a product they want (N = 103)

Stores of the Future

Important Attributes

Table 20.3 shows the attributes that the respondents argued were the most important for a store of the future in fashion and design to have. When asked about the most important factor, 36.6% of the respondents answered that the store had to be inspiring, followed by a local connection and product range. In other words, inspiration is very important for consumers today. For 53.5% of the respondents, the second most important factor was personal service and care. For 29.7% of the respondents, the third most important factor was knowledgeable staff. Compared to previous research into important factors regarding store choice, the result of the study is that “soft” factors such as inspiration and service are more important, with previous research tending to be more focused on “hard” factors such as price, location, and quality.

Table 20.3 Most important factors for a store of the future in fashion and design (N = 103)

Due to the results of this study, it is argued that the role of the store today has changed and that consumers want something more in the stores of the future. To survive and remain important during the tough times ahead, retailers need to make their stores inspirational, to have knowledgeable staff, and to make sure that consumers get personal service and care when visiting their stores.

For 19.4% of the respondents, a local connection was the most important factor, something which has not been shown in previous research. Consequently, this could be a great thing for a retailer to emphasize in its marketing, if a store has this factor. The study also demonstrates that there is no clear division between physical shopping behavior and digital shopping behavior. Most customers do both and thus do not see the clear-cut distinction between the digital world and the physical world that companies have often made in their business models. To give value to their consumers, retailers need to integrate their online and offline offerings so they may be better able to follow these customer journeys.

How the Store of the Future Should Be

When the respondents were given the opportunity, in an open-ended question, to state what they thought about physical stores, and what they want in a store of the future, it became clear that they found physical stores important. When the respondents were asked to describe their dream store of the future, other attributes were mentioned than those previously recognized by research in connection with physical stores. Figure 20.1 shows a word cloud containing all the attributes mentioned in the open-ended question. The most mentioned word was inspiring. Then come words that we recognize from previous research, for example, service, available/accessible and products. However, after these attributes, we also see other softer attributes connected with the in-store atmosphere, for example, cozy, warm, unique, welcoming, empathetic, exceptional, open, luxurious, calm, experience, personal, relaxing, and originally. Retailers thus need to dare to stand out when it comes to inspiring their consumers, and they also need to create an in-store atmosphere encouraging consumers to spend time there.

Fig. 20.1

Word cloud containing the important factors of a store of the future

The results show that the respondents want to be inspired when visiting a store and thus they also enjoy stores that do not look like all the others. One respondent said:

Unfortunately, there are so many boring stores today. I want to be inspired and receive personal service and help.

Another respondent argued:

I want something that doesn’t already exist and not the chains you find everywhere. I want to get inspired when I shop—and to find what I’m looking for. I want proper service—there should be someone to ask if I need help and they have to be knowledgeable. I want to touch the products for real and take them home, but at online prices!

The respondents also mentioned other words connected with service, for example, dedicated and knowledgeable staff, showing commitment and friendliness. It was also clear that the respondents want stores to evolve in order to better serve their needs. The results of this study show that stores might need to re-evaluate what service in a physical store means to the consumer today, and the fact that consumers now want more from the service they are given. As an example, one respondent said:

I come to a store just to have a look and talk to people, just to say hello.

Another respondent wrote:

Stores need to become better at personal relationships! The social aspect is the most important thing, otherwise I can shop online from my couch. It’s not just about service, for me it’s also about personal relationships!

In the open-ended question regarding stores of the future, the sustainability aspect was covered in several different ways using words such as emission-free, reuse, and good environment. This shows that consumers are more interested in shopping in stores that have a sustainability focus. Other issues raised in the open-ended question were the local perspective and handmade products. The respondents wanted stores that were more unique and had a local connection, something which has not been shown in previous research.

Conclusions

The development of digital commerce has changed consumer shopping behaviors and the landscape of the retail industry. As the retail industry moves further into the digital age, what role the physical fashion store will play in the future becomes an important question. This chapter is one of the recent studies re-examining the role of physical fashion stores during the digital retail era, focusing on the consumer view of the stores of the future.

The results showed that only 1% of the respondents do all their shopping online, while 15.8% do more shopping online than in physical stores. Also, 22.8% of the respondents do an equal amount of both, while 37.6% do more shopping in physical stores than online and 21.8% do all their shopping in physical stores. Hence, the results clearly show that the physical store still plays an important role for the consumer. The results also show how much consumers use online tools, both to shop and to gain information and inspiration. In line with Bell et al. (2014) and Flavián et al. (2016), the results show that most people use both e-commerce and physical stores when shopping. This study demonstrates that there is no clear-cut distinction between physical store behavior and digital shopping behavior. Hence, stores need to find a way to integrate their digital and physical presence in order to create more value for their customers. It is important not to talk about online customers and physical customers as two completely separate groups. Also, consumers search for information both online and in physical stores, making it important to be able to inspire them in-situ. Since consumers do not have a clear boundary between online and offline, they think more in terms of a shopping need or a brand, and thus their shopping behavior is integrated (Bell et al., 2014). Therefore, stores need to have a more integrated view of consumer behavior and to integrate both store and online availability as a company. In the media, a lot of focus in the retail sector is on high-tech solutions, while this study show that those factors are not as important to consumers. If high-tech solutions are to be included, they will need to contribute by adding value for the consumer. Also, the store will need to think about the function of its processes and why these are doing, or adding, different things, and not just because it is a cool technical feature. It will need to help the customer on his/her journey.

An interesting finding of the study, compared to previous research, concerned important factors around store choice. Previous research has shown that “hard attributes”, for example, location, price, range, quality, and store environment, affect store selection by the consumer (Nilsson, 2016). This study, however, has shown that “soft” factors, for example, inspiration, warmth, coziness, and service, are important attributes to the consumer. When asked what the most important factor was for the store of the future in fashion, 36.6% of the respondents said that the store had to be inspiring, followed by a local connection and product range. Inspiration, in other words, is very important to the consumer today. The second most important factor for 53.5% of the respondents was personal service and care. The third most important factor for 29.7% of the respondents was knowledgeable staff. To survive and remain important during the tough times ahead, retailers need to make their stores inspirational, to have knowledgeable staff, and to make sure that the customer gets personal service and care when visiting their stores. Since one important value of the physical store lies in interactions with sales staff (Bäckström & Johansson, 2017), it is important for these members of staff to focus on developing the value they provide to their customers. Today, the customer’s shopping journey has mostly already started online before he/she visits the store, so the role played by staff is changing. Staff need to understand that the customer journey does not start with an in-store greeting; it has already started online before the customer has even entered the store. Also, this study has shown that consumers want personal service and care. Therefore, it is important that the only interaction staff have with the customer is not just when he/she pays for products, at the end. Rather, there needs to be some other in-store interaction between customer and salesperson. The physical store has some unique propositions, for example, customer service and the creation of a space for socialization, but it needs to work with this in order to keep these advantages.

Other attributes the consumers in this study mentioned as being of importance as regards the future included a local connection, sustainability, and the store being unique. What they would rather see is inspirational, warm, and unique stores. On the basis of the results of this study, it can be argued that the role of the store today has changed and that customers want other attributes in the stores of the future than has previously been found in research. One interesting topic for future research is what consumers argue that they can get from digital stores but that they cannot get from physical stores today. Another interesting topic for future research is how physical stores view themselves, and what their purpose is. It would be interesting to compare the view that consumers have of stores with the view that retailers have of themselves. This would be in order to analyze whether or not there are any differences between what consumers want stores to be, and what retailers see as the purpose of their stores.