Has the Pandemic affected physical retail store’s prominence to a large extent or has it made the future of physical retail store become clearer?
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Over the past few years, "on-line ecommerce taking over physical retail store" has never been an ending debate among all of us. However, with the outbreak of Covid-19 and the following lockdown in many countries, it has accelerated most consumers’ habit of shopping online from home. According to a recent retail market survey issued by one of international commercial real estate consultants, the turnover of the physical retail store sales globally experienced an extremely rare double-digit decline when the Pandemic reached at its worst in April 2020, and 50% of the physical stores were forced to suspend its original expansion plans.
But in Taiwan, with the success of its preemptive measures against the spread of Covid-19 in advance, it was witnessed consumers quickly resumed a retaliatory consumption later in the year of 2020, bringing the total retail sales in the year to a historic high of TWD 3.86 trillion.
So what has happened?
In the past few years, some famous brands that were originally present in various physical stores have gradually digitized their services to their on-line platform. Well-known local travel agency such as Lion and Yiyou.com begun to promote online travel reservations way before the Pandemic occurred ; prominent international clothing brands GAP and Uniqlo also actively diverted some of their offline customers to place online orders , leading to the first wave of digital transformation for those leading consumer industry brands.
Then, the Covid-19 accelerated those trends to a further extent.
的確，線上消費成為了當今多數顧客的主要購買渠道，但從上述的市場研究報告 (1) 可以發現，卻有六成五的店家正準備在2021重啟原先的展店計畫。從這樣的趨勢不難看出，大多數的品牌正在從不同銷售通路的優劣勢中，不斷尋找平衡點以制定最合適的銷售策略．
Right after the Covid-19 occurs, online consumption has become the main stream of shopping for most consumers today. However, from the above-mentioned market research report , it is worth noting that 65 percent of consumer product brands are still preparing to resume their original expansion plans in 2021. It is not difficult to find from this trend that most brands are constantly looking for a balance between online and offline channels with an view to the advantages and disadvantages of different sales channel to formulate the most appropriate sales strategy. 就銷售成本而言，廣告成本與租金成本的取捨通常為店家最主要的課題，線上通路的架設成本通常較實體店面的租金成本低，價格也能因此具有⼀定的優勢，但若無一定規模的網路廣告投放或本身品牌具備一定知名度，其能⾒度不一定優於⼀個⼈來⼈往的交通要地；然而位處精華地段的店面卻也可能⾯臨著租⾦居⾼不下的龐⼤壓⼒。另一方面，從消費者體驗的角度來看，因為僅有照片與文字說明，並無實際接觸嘗試，電商可能讓消費者顧慮著送來的商品品質不符預期，不確定產品的使⽤體驗也影響著下單的可能性。
As far as online and offline sales costs are concerned, the trade-off between advertising costs and rental costs is usually the most pressing issue for many consumer product brands. The setup cost for online store is usually lower than that of offline store, i.e. the logistics over the rental cost, in which the price of on-line store can therefore have a competitive edge over off-line. However, for most online stores, if there is no significant scale of online pageviewtraffic diverted into their websites or its own brand does not have a high degree of popularity, then its sales performance would not be any better than that of a major physical retail store. Nevertheless, a physical retail store located in a prime location may also be facing an ever increasing rent leading to higher operation cost. On the other hand, from the perspective of consumer online shopping experience, since there are only photos and text descriptions, and no actual proactive sales interaction on those online platforms, e-commerce may cause concerns to some consumers over the product quality who are not sure about the experience of using the products, in which it may affect those consumer’s willingness to place an order online.
Therefore, there’s no one channel has an absolute advantage over the other, ideas such as "Omni-Channel" and "New retail" should be addressed to. Whether it is a major sales channel, a service place that focuses on consumer experience, or a pop-up store for advertising, many stores have begun to re-examine the positioning of physical retail stores in their sales channel strategy. When the Pandemic accelerates the integration of online and offline supply chain, it helps to complete the consumer’s buying process. This is not merely an responsive measure to the Pandemic, but also a prelude to the post-Pandemic era. Hence, the core problem facing the retail industry is no longer that the virtual store replaces the physical one. Instead, how can both the virtual and physical store be integrated to best meet consumer’s needs?
The “new norm” of integrating both virtual and physical retail store channels is changing the future retail industry
As mentioned above, integrating virtual with physical store channels has become a major topic for the retail industry, and physical store channel will need to play a different future role to meet ever changing branding sales strategy.
Take Taiwan's largest supermarket PX Mart as an example, unlike the common approach retail stores normally take, PX Mart promotes its own e-commerce platforms, and its primary marketing positioning is to become a life style supermarket serving local residents needs. Therefore, PX Mart’s first step is to optimize the consumer’s buying process in physical retail store : the launch of the mobile payment software PXPAY, which solves the long que problem resulting from constant changing cash during the transaction in the store; "One person One Card" plan can also better integrate each member's membership information and store data on the Internet. The advertisement can be more precisely tailor-made to meet each consumer’s needs.
Followed by the launch of PXGO’s mobile e-commerce stores, in order to catch up with the consumer’s habit of consumption via mobile payment, "order online, pick up offline" has become the next weapon of PX Mart , and because of its wide spread physical store network, consumers can easily place an order at once and pick up the goods in batches, even for buying online gifts for friends / relatives so as to make the consumption experience more diverse, and "offline pickup" is also expected to further bring the second round of consumer’s in-store consumption, allowing online and offline consumption to fully integrated with each other. In the future, PX Mart also expects to launch a physical e-commerce platform, which means that its customers can see the inventory in the store online and avoid coming to the physical store in vain.
從全聯⾝上，我們看到了⼀個 OMO (Online-Merge-Oﬄine) 的整合模式，線上下單並查看店內庫存，線下推出⾏動⽀付累積消費者資訊，進⽽讓廣告達到最⼤效益，讓線上線下成功整合，打破時間與空間的限制，讓消費者在哪，品牌就在哪的全通路⾏銷。
From PX Mart, we have seen an OMO (Online- Merge- Offline) integration model, placing orders online and checking in-store inventory, launching offline mobile payment and accumulating consumer information, so as to maximize advertising effectiveness, with great benefits such as enabling successful online and offline integration, going beyond the constraints of time and space, and allowing omni-channel sales – brands exist where consumers are located.
On the other hand, physical storefronts for advertising or service purposes have also become an indispensable part of the sales strategies for some online brands. Take the well-known accessory brand Vacanza as an example. They cooperated with Facebook to develop online AR tryouts in 2019. To eliminate as much as possible online consumers’ concerns over the fact that accessories may not be suitable for them, Vacanza increases the conversion rate of online orders by successfully creating online topics, taking the first counter next to the escalator in a department store to divert the heat from online to offline, and allowing a small booth with only 2-4 square feet attracting female customers to the counter, etc. Such strategy can service customers nearby, and easily attract more passing-by consumers.
It can be seen from the previous two cases that the positioning of physical stores is actually more clear with the integration of virtual with physical retail stores. The demand for physical stores may not be necessarily reduced, but is more associated with a change in the role it plays. The integration of different retail channels not only affects brand sales strategy, but also directly affects the industry's demand for physical store location requirements. Unless it is the main sales channel, many brand owners treat the physical store as pure advertising or provide the services to consumers . In the past, the service space required a large physical store with both a store and storage room. However, with online consumption, many stores no longer need to store a large amount of inventory, and only need space for product display. Such a change is also a topic that developers need to start thinking when planning their retail product for potential consumer brands.
The Pandemic is only a catalyst for the new retail model. More importantly, how do we adapt to the "new norm" and the changes in response to the Pandemic will continue to roll in the future. Covid-19 has accelerated the change of retail business models. In response to such change, brands may have different space requirements. For asset owners, one of the lessons learnt from the Pandemic regarding the retail product would be how to design a suitable retail space with a foreword thinking will eventually help to maximize their assets value in the market in the long run.
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