Retail 2016: Fewer Stores, More Stuff
Blog: Software AG Blog - Reality Check
Retailers will reduce focus on brick and mortar stores in 2016 as they dramatically reinvent themselves to address omni-channel challenges. Brick and mortar retailers will add fewer new outlets, but the stores they do have (and add) will offer a bigger variety of goods and expanded services.
Existing stores will take a “hub and spoke” approach, acting as pick up and fulfilment centers and offer “gold-star” customer service. The hub and spoke approach to distribution gives them maximum flexibility when offering a wide range of products.
For example, if a customer orders a winter coat that is not in stock at the local retail outlet and wants it ASAP, the retailer can ship one from a nearby store rather than make him wait for delivery from a more remote warehouse.
The model is catching on; in October, UK retailer Argos took on Amazon with Fast Track same-day delivery, using a hub and spoke stocking model. Argos uses its stores as distribution centers, which act as both pick-up and delivery points.
Hub and spoke distribution means that a retailer can provide a wider assortment of items without actually having all the items in every store, thus maximizing inventories.
The “endless aisle” concept is another way retailers can better utilize brick and mortar stores. The endless aisle is where retailers use in-store kiosks or ordering stations to offer customers products that are not available in-store. They can peruse a catalogue of the retailer’s complete offerings and then order what they desire and have it delivered to their homes. This concept helps to grab customers while they are in your store.
As Adam Silverman, analyst at Forrester, said: “Considering that roughly nine out of ten retail sales still take place offline, a much larger opportunity exists when retailers leverage inventory while the customer is shopping within a store. By offering the ability to fulfill out-of-stock items from any location within the enterprise, endless aisle tools offer a scalable tactic for retailers to drive incremental revenue.”
Hub and spoke and endless aisle are both concepts that extend the capabilities of traditional brick and mortar stores into the realms of online competition, helping stores to offer a wider range of goods and faster delivery. This means that fewer stores will be needed, but they have to have more stuff.
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