Story: Transition of physical store
Brick and mortar (also bricks and mortar or B&M) refer to the physical presence of an organization or business in a building or other structure. The term brick-and-mortar business is often used to refer to a company that possesses or leases retail shops, factory production facilities, or warehouses for its operations. More specifically, in the jargon of e-commerce businesses in the 2000s, brick-and-mortar businesses are companies that have a physical presence (e.g., a retail shop in a building) and offer face-to-face customer experiences. – Wikipedia
When I came to Canada, I saw huge Sears in downtown (currently, Nordstrom took over the place). Across the road, there was Chapters, book store. Future Shop and Target were in Richmond, Lansdowne Centre. Since the late-2012, some of them are bankrupt, some of them are marge to parents company.
The rapid change in shopping behavior is creating massive strains on brick & mortar retailers, who need to not just adapt but get ahead.
McKinsey & Company: The future of brick & mortar retail in the digital era
The Canadian Business Journal: The Future of Bricks & Mortar Retail
PwC: The new retail ecosystem: From disrupted to disruptor
Pros and Cons
Why Customers Purchase Online?
Aside from the ability to compare product specifications and browse reviews, online shopping has a number of other advantages:
・Being able to shop 24/7
・Saving money – online shopping allows the customer to compare pricing and find the best possible deals
・Not having to use a personal vehicle and deal with parking and other issues or take transit to shop in-store
・Saving time – in-store shopping can be hugely time-consuming, particularly if it involves visits to multiple stores in different locations
・Convenience – many people dislike crowds, cashier lineups, etc. and prefer to shop from home
・Availability – hard to find items are much easier to source online
・Free shipping is sometimes available from online vendors. For example, for a small yearly fee the Amazon Prime service includes free shipping on most items ordered through Amazon.
Why Some Customers Prefer Brick-and-Mortar Shopping?
・Being able to physically interact with an item before buying, particularly with personal items such as clothes, cosmetics, furniture, etc. or with grocery items that need to be checked for quality and freshness
・Goods can be obtained immediately rather than waiting for shipping
・Customer service – the ability to speak directly to a sales representative and get further information and advice about products or services
・Avoiding shipping costs
・Avoiding the hassle and complexity of returning unwanted items
・Much faster and easier to return a defective or unwanted product in-store rather than shipping back to an online retailer
・The experience – many people enjoy a shopping outing in retail stores, often with spouses or friends and conjunction with other activities such as dining, having a specialty coffee, etc.
the balance: Brick and Mortar Stores vs Online Retail Sites
Example: Future Shop
Future Shop was a Canadian electronics store chain. It was established in 1982 by Hassan Khosrowshahi. By 1990, the chain had become the country’s largest retailer of computer and consumer electronics. In January 2013, the company operated 139 locations across Canada.
In November 2001, Future Shop was acquired by the similar American chain Best Buy for C$580 million. Although Best Buy began to establish Canadian locations under its own name following the purchase, it continued to operate the Future Shop stores as a separate chain. Even though many of the new Best Buy locations were in close proximity to existing Future Shop stores, the two chains were differentiated primarily by their in-store experiences.
On March 28, 2015, Best Buy announced the dissolution of the Future Shop brand and the closure of 66 of its locations. The remaining stores were converted to the Best Buy branding and format. – Wikipedia
Example: Chapters
Chapters Inc. is a Canadian big box bookstore banner owned by Indigo Books and Music. Formerly a separate company competing with Indigo, the combined company has continued to operate both banners since their merger in 2001. As of July 2017, it operated 89 superstores under the banners Chapters and Indigo, and 122 small format stores under the banners Coles, Indigospirit, SmithBooks and The Book Company. – Wikipedia
I cannot find Chapters in Downtown Vancouver, BC which is the third largest city in Canada. Used bookstore is still exist, but a few. This is quite unusual situation. The city should has a good bookstore, at least one. For example, Munro’s Books at Victoria, BC. The Elliott Bay Book Company at Seattle, WA. Powell’s Books at Portland, OL. I feel little sorrow to it.
Example: Target Canada
Target Canada Co. was the Canadian subsidiary of the Target Corporation, the second-largest discount retailer in the United States. Formerly headquartered in Mississauga, Ontario, the subsidiary was formed with the acquisition of Zellers locations from the Hudson’s Bay Company in January 2011. Target Canada opened its first store in March 2013, and was operating 133 locations by January 2015.
Target Canada was ultimately unsuccessful, with an overly-aggressive expansion initiative, in addition to higher prices and a limited selection of products compared to Target stores in the United States. The retail chain racked up losses of $2.1 billion in its lifespan, and was widely viewed as a failure, termed a “spectacular failure” by Amanda Lang of CBC News, “an unmitigated disaster” by Maclean’s and “a gold standard case study in what retailers should not do when they enter a new market” by the Financial Post. Target Canada commenced Court-supervised restructuring proceedings in January 2015, and finally shut down all of their stores by April 12, 2015. – Wikipedia
Target came and go within a few years. I could shop only one time. They gave up business in Canada quickly. It’s a failure, but it might a good decision for them. I’m wondering how they researched the Canadian market before they started a business. It was a big investment, I guess. They, of course, knew what happened to Sears, for sure. Just I want to know the decision process for learning business of design.
Example: Sears
Sears Canada Inc. was the Canadian subsidiary of the American-based Sears department store chain. In operation from 1953 until January 14, 2018, and headquartered in Toronto, Ontario, the company’s roots were in Simpsons-Sears—a joint venture between the Simpsons retail chain and the U.S. Sears chain—which operated a national mail-order business and co-branded Simpsons-Sears stores modeled after the U.S. Sears chain. – Wikipedia
I think e-commerce has impacted brick and mortar year by year. At first, this type of business got quite a big interfere with e-commerce. Sears owned a huge store and a lot of staffs. Sears might have a lot of products, but compare to Amazon, it’s impossible to compete with them.
Think about Sears in downtown and Amazon at a suburb warehouse. Comparing running costs are no brainer. It’s not easy to cover all the expenses at the store sales. A building is one of an asset. It might compensate a debt of bankruptcy. It sounds irony.
Case Study: Netflix & Blockbuster
Netflix, Inc. is an American media-services provider headquartered in Los Gatos, California, founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California.
Netflix’s initial business model included DVD sales and rental by mail, but Hastings abandoned the sales about a year after the company’s founding to focus on the DVD rental business. Netflix expanded its business in 2007 with the introduction of streaming media while retaining the DVD and Blu-ray rental service. The company expanded internationally in 2010 with streaming available in Canada, followed by Latin America and the Caribbean. Netflix entered the content-production industry in 2012, debuting its first series Lilyhammer. – Wikipedia
In 2012, I saw Redbox in Safeway. I’ve never seen Blockbuster in Vancouver at that time. Netflix kicked them out since they have started video streaming service. When I was in Japan, there is a similar store, it calls Tsutaya and I quite enjoyed the rental service. I often rental DVD and CD. Sometimes, I paid a penalty for an extension.
Did Blockbuster really impossible to run a business? What if Blockbuster organizes outside movie event during the summer with city? What if Blockbuster provide movie even with local community? Not only for entertainment but also they could provide educational document movie at school. FYI, I could rental CD in Tsutaya. I don’t think it’s possible for Netflix.
I don’t want to increase monthly expense. That’s why I don’t subscribe to any, such as Spotify and Netflix. It might depend on service. Paying subscription fee in whole life is so painful to me.
Case Study: Music Streaming & HMV
HMV Canada Ltd. is a defunct Canadian entertainment retailer, owned by Hilco. The company was originally a subsidiary of HMV in the United Kingdom until it was sold to Hilco Capital in 2011. HMV itself would later be bought by Hilco in 2013. HMV Canada’s head office was located in Etobicoke. The retailer ceased operations in Spring 2017.
Sunrise Records which is Canadian record store chain based in Ancaster, Ontario, announced that it had negotiated to purchase the leases for 70 of HMV’s locations from landlords to convert them to Sunrise stores as well as plans to retain as many former HMV staff as possible. – Wikipedia
Music streaming service, Spotify, Apple/Google/Amazon/YouTube Music etc.., give big impact to traditional CD shops. HMV decided to withdrawal in Canada in 2018.
One of an idea what I came up with from this news. There are 2 big music stores in Japan, HMV and Tower Records. They have often held a live event in store. Qualification is just buying a CD which was released recently. People can meet a musician very closely. It’s a exclusive customer experience, quite small space. It’s quite pushed motivation to buy a CD instead of streaming. I have a couple of experience and it’s a good memory for me.
The store makes a community, for sure. Music is a great topic of talk. If they sell only CD, people don’t have to visit the store. People can listen to the latest music every day and easily by cell phone. The store must provide value more than music.
Case Study: Amazon Go
01. A Showcase for Gadgets
02. Serendipity
03. Make Customers Do the Work
04. Retail Technology
05. Building Loyalty
Fortune: 5 Reasons Why Amazon Is Experimenting With Physical Stores
Amazon currently invaded brick and mortar business. It calls Amazon Go. I feel traditional brick and mortar can learn from it. They cannot install the latest technology to the store, but they can try to build omnichannel even 1 local store. It’s possible to operate efficiently.
The Future of Retail
Memo:
– Internet of Things
– Conversational commerce
– A consumer can design own shoes soon with 3D print
– Online store opens physical store
– Purpose of brick and mortar
– Media is becoming a store, a store is becoming media
– Distribution experience
– Building a story at a store
– 50% retail, 50% community and hospitality
– Millennium buys experience rather than products
– Experience can share easy
– One single change will change everything
Rebecca Minkoff’s Store Of The Future
This is a good example of customer experience.
Opinion: Future can build now
I could say a still majority of people get used to traditional shopping. That’s why statistics show people feel comfortable with shopping at brick and mortar. Logistics make possible same day shipping soon. Objections will be fewer by fewer. Once generation shifts, e-commerce will be the majority in the world.
Brick and mortar have to learn from history, these failures which I wrote above. Brick and mortar have to create new value and put on tremendous effort into their business. Brick and mortar have to show meaning why they are at local. Future can build now.
Reference:
Uqnic Network Pte Ltd.: What Do You See as the Future of Brick-and-Mortar Stores vs. Online Retail in 2019?
zuora: Why the retail problem is not e-commerce vs. brick and morter.
