Thanks to tech, stores are evolving into showrooms
- 18 January, 2016 22:08
In 2025, a shopper will walk into a store, try on clothes, pick the colors and a clerk will use a handheld device to have those items shipped to the customer's home address.
The store won't have a big inventory of clothes so shoppers won't walk out with big bags. The inventory will be held in a warehouse and then shipped out as if the items were purchased online.
This, according to a report from IBM, is the future of retail.
"We're on the cusp of a lot of change," said Stephen Laughlin, a vice president and general manager at IBM. "It's not just about the technology, but it's about business models… You need brick and click together, but the roles are going to evolve in terms of how they work together. We'll see the role of the store becoming a showroom."
By the middle of the next decade, according to Laughlin, many stores will be giving customers an experience and providing insight and information. Want new pants? Find your size and the style you like in the store. Looking for a new smartphone or tablet? Try them out at a store and have a clerk walk you through the different features.
"Today, a retailer has 10% to 15% of its business as Internet sales or consumer direct, meaning it goes straight from the warehouse to the consumer," Laughlin said. "In the future, that will be upwards to 50 or more percent. The store will be more of a showroom and a fitting room. That will mean there will have to be significant transformation in terms of retailer supply chains. Supply chains have been tuned for the majority of volume to go from warehouse to store, so there will be a lot of work to adjust to this."
It also means store associates won't be stocking inventory. They'll be focused on helping customers.
Laughlin's findings come from IBM's Retail 2025 report, which is set to be completed in February. Laughlin will be presenting some findings from the report at the National Retail Federation's Big Show conference in New York this week.
For years, shoppers have increasingly moved more of their purchasing to online. Now they are increasingly using their mobile devices to supplement their efforts.
If, for instance, someone wants to buy a new television, the buyer is likely to read reviews online. If the shopper decides to go to a brick-and-mortar store, it's likely the shopper will a use smartphone or tablet to compare prices and options at other stores before buying.
As Laughlin noted, "brick and click" have come together.
The changes that Laughlin sees coming will be in how that merging of physical stores and technology evolves.
Brian Kilcourse, an analyst with RSR Research, agreed that the time when some stores will switch to showrooms instead of traditional stores isn't far off.
"I think the demise of the store is close at hand," he told Computerworld. "By 2025, I think the number of stores that have turned into showrooms will be significant, but not a majority… I believe that [will call for] nothing short of a total wall-to-wall replacement of all the technologies they have in there."
According to Kilcourse and Greg Girard, an analyst at IDC, a retailer that wants to move from a traditional store to a showroom will need to overhaul the company's technology and physical infrastructures, such as how it handles warehouses, shipping and inventories.
That would be expensive, and could be overwhelming in terms of time, planning and execution.
Kilcourse said for many retailers, the answer will lie in the cloud. By using cloud computing services, retailers won't need to buy new technology, learn how to use it, set it up and manage it.
"There's no way many companies can afford to do that," he said. "It would be like changing the tires on a car while it's rolling down the freeway. The good news is the solutions, like marketing or pricing or merchandise managing, actually do work. They are very complete and work out of the box, and many are available on the cloud."
For CIOs working with cloud providers to get the technology they need for such a switch, it should be an exciting time, Kilcourse said,
But most companies will have time to make this switch, if that's the way they're heading, IDC's Girard added. "I think IBM is a little aggressive with their timeline. This will be incremental," he said. "We're heading that way already. By 2025, some retailers might only have 10% or 20% of the assortment that they have for sale available for purchase in the store."
Major national or global retailers are unlikely to be making this change in the next nine years. It's too much of a technology change to be done so quickly.
"There will be niche players coming in with this model as their foundational business model," Girard said. "That will be the disruptive force, not the incumbents shifting to this model. For the incumbents, it's not just about taking inventory out of the store, but backend processes will have to be built out to do this. They'll have to know they have inventory at hand. They'll need to know they can deliver it to a consumer at a particular time."
Laughlin agreed that small specialty retailers may be the first to make this move. However, Macy's, a major retail presence, has been experimenting with having limited inventory in certain stores and having products shipped to customers.
"I don't think we'll see a massive move in the next two to three years, but in the next five to seven years this will allow people to invest in technology in their stores to serve customers and get inventory moved out," Laughlin said.