High Street 2.0 - Understanding The Next Generation High Street

Overview:

Online and offline channels have complementary but currently exclusive benefits. On the internet, consumers can access related products, accessories, comparative price options, product information, communities, social interaction, reviews, simplified purchase, and delivery, while also being able to feedback to others about the experience. Consumers are therefore becoming used to a richer, faster, and more socially interactive shopping experience. What they cannot do is try out products for fit, look, feel, appropriateness and ease of use before buying, or even benefit from the immediacy of collecting the item at time of purchase, which are the core benefits of buying in-store.

In-store benefits unfortunately cannot practically be transferred to the online environment, or at least not until virtual reality goes a whole lot further than secondlife.com. However, there is no reason why online benefits cannot be brought in-store today. And that in a nutshell, is what I'm talking about in terms of a vision of the High Street 2.0. To stay competitive against online competition i.e. the pure plays, retailers must start developing a new generation of information and experience rich high street stores.

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Contents

1. The High Street 2.0 in a nutshell.
2. The offline-online consumer conundrum.
3. Why should retailers care?
4. What is the Key to Success?
5. How do you develop your Next-Generation Store?
6. Summary.

The High Street 2.0 in a nutshell

Jargon aside, this is primarily a discussion around cross-channel symbiosis, and the evolution of high street stores from one-dimensional product pushers into broader experience focused outlets. Somewhat in the way that the static ‘dial-up generation’ websites are now evolving along the rich experience web 2.0 route.

Some are doing this already, but more from the web-space into the offline world, like Etsy, who have just opened a real world store in Brooklyn; or ZoZa who tried a physical store for customers to try before buying online only (and failed); or former cosmetics pure play Bluemercury.com who've now set up physical outlets for customers who want to sample before buying. This shift of bringing the online experience offline is what I believe could be the start of the next generation high street – or as we call it, the High Street 2.0

The Offline-Online Consumer Conundrum

To start with let’s look a little closer at the reasons that drive customers to browse offline, only to then buy online (usually somewhere else) instead of in-store. This is hugely relevant to retailers whose primary revenue channels are their real world high street shops, not just because of the impact on conversion rates, but because the trend implies that their offline customer experience needs to be improved to provide customers with in-store access to the benefits of buying online.

Here are 10 reasons why I believe consumers browse offline but then buy online instead of closing the sale in-store

Functional Reasons for Buying Online instead of Offline

1. Bargains and cheaper prices (through general search and via shopping bots):
   If you just want to consider one primary driver for this trend, then I'd suggest this is it. Consumers want to know not just that they're getting the best deal, but also that they aren't being ripped off in any way. The proliferation of shopping bots (price comparison sites) like Bizrate and Kelkoo are making this so much easier that it is a real threat to any retailer whose customer goes online. It probably outweighs all the others to the point of making them little more than value-add considerations. For any product that is sold by multiple retailers, this is a major risk to consider, especially now that consumers have the internet on their mobiles and can pretty compare products while actually in-store.
2. Validate product quality and function (via online information and reviews before buying)
   For functional products, particularly electronics, I prefer to be sure I'm not wasting my money, particularly on items I can't really test out. I want to know the realities behind the sales blurb and the knockdown price, and right now there's no way of finding this or comparing against equivalents, except online at review sites like CNET.
3. Avoid in-store cashier queues:
   I hate queuing and unless I absolutely need the product then and there, I am very likely to just go back home and order it online from somewhere.
4. Delivery rather than carry home on buses or trains (convenience):
   If it's a hot day, or I've already got things with me, or I'm on my way to somewhere else, or I just generally am not feeling like trekking around laden with shopping bags, I'm very likely to head home and make the order online. Ideally from somewhere with free or cheap delivery/postage, or even somewhere that lets me pick-up in store at some later more convenient time.
5. Search for variant availability in other stores:
   If the store doesn't have my size, or the colour I want, or the specific variant of the product that's customised the way I want it, I'm most likely going to leave the store and go online to see if any other branches have it, or if another shop stocks it instead. As with all the other drivers to online browsing, the problem is that I may never actually bother with the product any further, or even bother to go that particular retailer's website instead of someone else's.
6. Leverage online promotions / vouchers:
   I know that retailers set these up to encourage people to go online, but essentially all this does is cannibalise offline sales, because the vouchers are not redeemable in-store. Personally I feel this is a major inhibitor to developing symbiotic revenue channels.

But this is not all. There are other compelling reasons for buying online rather than in-store, related to usability and social interaction. These are the new behaviours that consumers are taking for granted as an integral part of the shopping experience and one that offline stores are completely failing to replicate

Experiential Reasons for Buying Online instead of Offline

1. Easier payment through one-click accounts (e.g. Amazon):
   Who wants go through the whole business of queuing, waiting for someone else to scan and pack your product, handing cards over and waiting for it to register chip and pin and so on, when you can simply select the item, click once and then sit back and wait for it to turn up? Why don't stores have this facility?
2. Accessories for product listings:
   I find this very useful online. If I buy a camera in-store at PC World, I get a camera, but absolutely no information to help me consider useful accessories. If I buy the same product on their website I get a list of accessories that supplement that product – appropriate lenses, cases, leads, cards etc.
3. Related product listings and “Other people bought this” type information:
   Similar to above, I like shopping for things in spaces where I'm provided with ideas for complementary items. If I'm buying a badminton racket, then what about related bags, shoes, apparel, shuttles etc. I don't want to have to walk around some sports super-store to find the matching bag in the bag section, or shoes in the shoe section etc. If I'm buying jeans I want to see shoes or t-shirts that might go well – ok so I personally am not enough of a shopper to care about this on a clothes front, but I can imagine a whole bunch of people who do, and sometimes knowing what other people bought is excellent fodder for shopping ideas.
4. Auto-history of purchases – leading to seller recommendations:
   The problem with buying in-store, even from the same store, is that there is no history of what you bought. What if you wanted the same item you bought two years ago, but can't remember what it's called? What if you don't really know what you want to buy, but just feel like a quick bit of retail therapy? Isn't it great to be able to go onto your Amazon store and see lists of items that might just be interesting based on things you've bought before? Buying on a website like this is the equivalent of walking into a shop to buy an iPod, and the shop floor assistant suggesting an iRiver because it's more compatible with the speaker system you bought last week, and then handing you a selection of music that you just might like. How convenient, and how much more of an incentive to check the product out online after seeing it in-store?

Why Should Retailers Care?

The major issue for high street retailers here, is that once the consumer leaves the store and goes online, the only reason for them to visit the same store's website would be if the product identified is completely specific to that brand, for e.g. a particular clothing item. In any other case, the user's online journey will very likely lead them elsewhere… somewhere cheaper, with a more fulfilling retail experience. So understanding and countering these drivers will be key success criteria against online competition.

By highlighting the above drivers behind the trend of customers browsing in stores but then going online to purchase their items, what I'm alluding to is the need for cross-channel symbiosis rather than revenue cannibalisation as we currently have it, achieved by improving the offline experience to provide customers with in-store access to the benefits of buying online.

In other words, a shift towards physical stores offering the customer access to the benefits of browsing and purchasing online, and vice-versa, rather than developing more avenues for making each channel independently attractive to the consumer in ways that simply result in cross-channel competition.

I believe that at some point in the near future, forward thinking retailers must recognise the fact that the existing model of shops as one-dimensional rooms for showcasing products by category is fast becoming outdated by consumer familiarity with the online shopping experience. On the internet, consumers can access related products, accessories, comparative price options, product information, reviews, simplified purchasing, delivery, and bargains, while also being able to feedback to others about the experience. What they cannot do is try out products for fit, look, appropriateness, or ease of use before buying, or even benefit from the immediacy of collecting the item at time of purchase; so it is clear that both channels are not just relevant but highly complementary, and should be treated as such.

However, as far as I'm aware no one has made this leap towards a truly symbiotic, holistic online-offline customer experience. There is absolutely no reason why customers shouldn't be able to shop in-store with the same benefits as online. It just needs a little lateral thinking, starting with recognising that while the Web started out as a separate and independent commerce stream in order that companies could minimise risk while still learning about its capabilities and user models, it is now a well established and experience-driven business and usability model that can and should be leveraged to improve customer experience across channels in the physical world.

What is the Key to Success?

The key here is customer experience. Branding online is primarily about the experience, and it is making the passive, push marketing approach we've lived with since the start of capitalism obsolete. With price and quality becoming more and more homogenous on the high street, retailers must start moving towards experience focused outlets that are built around impressing and engaging their customers, rather than the traditional model of simply cataloguing or showcasing the products or services they can offer.

I feel there is significant scope to achieve this by making the in-store customer experience richer and more fulfilling by learning from the web experience.

Like Web 2.0 web-sites, the next generation high street store must demonstrate a better appreciation of the target consumer as a person rather than a product buyer. In other words it must make the shopping experience person-centric by providing space, comfort, information and social engagement, with easy points to call for help, and valid reasons to come in and enjoy the in-store experience for browsers; whilst also providing efficient entry and exit routes for shoppers who know what they want.

Retailers must conversely also appreciate the elements of the shopping experience that make store customers uncomfortable and look for avenues to cut them out, for e.g. not enough browsing space; product overcrowding; help not unavailable at the right time and place; and lengthy purchase queues.

So what could the High Street 2.0 physically look like? Well, one route might be where large stores evolve into experience-focused social spaces with products as a backdrop, while small stores leverage user computing and web technology to shift towards becoming product information hubs where consumers use touch screens to choose what they want to see, try, and buy.

How do you develop your Next-Generation Store?

Anyway, regardless of the avenue of evolution, the following are some high-level ideas that retailers could start exploring in the battle for effective channel-independent competitive advantage.

Shop Design and Layout

• Support the social experience. Create shops as places to relax and engage while browsing. Widen out browsing space by reducing products on display but still allowing consumers to view more items via screens and have these brought to them on request.
• How about providing comfy sofa seats for customers to relax with built-in pull out touch screens to browse product listings, or read reviews, or order and pay for items etc. in shop? Or even free lavatory facilities with interactive product information to capture interest?
• Why not provide changing room tickets so customers don't have to stand around with their items at busy times?
• Provide non-product specific reasons for consumers to enter and walk around. Collaborate with social networking enablers like coffee shops or bars, and design the space around this, rather than shoe-horning a coffee point into some corner of a shop as we see with Costa.
• For multi-brand retailers, make shopping easier by mixing brands together by product category rather than cordoning off areas by brand as is the current norm.
• Place directly related product families together e.g. A Canon camera plus its case, plus leads, lenses, memory card and batteries displayed as a group next to each other, or via a touch screen or at least a printed card next to each major product item displaying accessories available in-store and where to find them.

Self Service Information

• Provide self service capability through touch screens, kiosks, or even actual PCs if you want to make the experience familiar for the customer
• Provide customisation capability for customers select size, colour etc, with order and payment capability for immediate collection or delivery, or even simply to find which store has the required version and the option to place it on hold
• Provide review capability for consumers to browse store and/or product ratings and reviews
• Provide browsing capability for customers to interactively scan through products available, related to an interactive map to find the item in-store
• Allow customers to use these screens to select and request items to try, with in-store sales assistants tasked to put the selection together at changing rooms or tryout points
• Allow customers to create visualisations of outfits, with workflow that suggests other options, and then be able to select to get the whole ensemble provided by a sales assistant for them to try on directly at the changing rooms
• If you are really brave and/or price competitive, why not be open and allow direct in-store price comparison against competitors. Frankly this could even be a business idea in itself to set up stop off points on the high street where shoppers can pop in and run quick price comparisons or read product reviews of things they're about to buy in a nearby shop. Maybe this could be combined with a bar or sandwich space, with this service as a free value-add and supported with revenue through the advertising opportunities it would create.

Simpler Purchasing Options

• Provide self checkout terminals
• Allow customers to create ‘one-click' style accounts in-store using self-type pin or password verification synchronised with online services and vice-versa, i.e. recognise one-click accounts created online.
• Incentivise buyers to go online and register one-click accounts and credit cards, like Amazon have online. Maybe provide offers or free credits that are only validated once this is complete, but which are redeemable across any channel
• Use these accounts to create and maintain purchase histories that can be accessed in-store and leveraged to create value for the consumer.

Relevance

• Ensure one consistent view of each registered customer with seamless multi-channel integration across both billing accounts and product history
• Use buyer history to recommend other items worth looking at, or suggest items other people bought – maybe even provide these as a printout when handing over purchased items?
• Recommend complementary products when making a sale – again this could automatically be printed out on item scan and handed to the buyer
• As with the previous point, consider suggesting related accessories for products being purchased. Complementary and accessory products could alternatively be highlighted at point of display through item grouping, touch screens, flip-cards etc.

Value-Adds

• Allow online vouchers to be used in-store and vice-versa. Avoid promotions that result in one channel cannibalising sales from another, for e.g. single channel discounts
• Ensure that online and offline prices are consistent for the same type of purchase, for e.g. if ordering for home delivery in store, the consumer should be able to pay online prices. This could be made viable by ensuring that the item will be delivered from a warehouse with cheaper overheads allocated to it.
• Allow customers to specify delivery, and ideally time-slots, while paying for items in-store
  Provide try and return policies with free return postage or easy access PUDOs (pick up and drop off points)

Leverage Email and the Web

• Capture email address at point of purchase and use it to auto-create user accounts on the store website. Email log-in details straight to the user, along with purchase, receipt and product guarantee details. Auto link product details in the email to review capability.
• Design the website to support the in-store experience, rather to compete as a separate and unique online entity
• Collaborate/tie-up with online social networking sites and bring elements of these in-store – e.g. say Zara advertising on MySpace online, while creating a range of MySpace branded clothing for sale in-store
• Create and develop free but branded popular culture spaces to embed brand and create new target audiences – e.g. Gap creating a free and open clothing review and discussion site that is only minimally branded to Gap, but effectively creates a new audience.

Summary

To summarise then, I see the High Street 2.0 comprising information and experience rich stores, where consumers can enjoy the benefits of both web and in-store shopping; developed by retailers with a channel-unified approach to pricing, marketing and consumer relationship management, and supported by seamlessly integrated information about target audiences across both online and offline channels.

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