The Death Of The Store? How Digital Technology Can Breathe New Life Into Physical Retail

0aaScott Clarke Cognizant

While retail stores are closing at an alarming rate, the demise of physical retail is exaggerated. In fact, America’s top retail chains reported a net increase of 4,000 new store openings in 2017 and are projecting a further net increase of more than 5,500 new stores in 2018. Over the past two years, retail growth in the U.S. exceeded that of GDP by nearly a full percentage point and is expected to continue to outperform GDP for at least the next two to three years.

U.S. retail is a $4.8 trillion market with specialty, discount and grocery stores leading current growth. However, general merchandise stores, especially department stores, are struggling to compete with players like Amazon and Walmart that offer a wide range of products, lower prices and the convenience of easy, online transactions. Fortunately, while a significant segment of consumers prefer shopping online, a comparable segment enjoy the in-store shopping experience. This presents an opportunity for retailers to create unique, personalized experiences that inspire buyers at the point of discovery and decision as well as the end transaction.

The 4 Key Themes That Drive A Valuable Shopping Experience

Millennial and Gen Z consumers value experience over material possessions and increasingly visit physical retail stores to get the authentic experiences they desire. This is leading retailers to reshape the in-store experience and create a unique value proposition based on four key themes that today’s consumers value: convenience, community, curation and immersion. Retailers can create convenience by removing the inherent pain points and friction from the shopping experience. This is essential to competing with pure play e-Tailers, because regardless of how engaging an in-store experience might be, the effect is lost if the consumer is then forced to wait in a long line to check out or to pick-up pre-ordered items.


Creating a community where physical stores are transformed into destinations can provide a unique experience and build brand loyalty. For example, lululemon stores that have a yoga studio or Williams Sonoma’s in-store cooking classes put retail at the heart of a community gathering by offering the physical equivalent of a social network.

In today’s digital world, consumers are bombarded with numerous product categories, brands and features, leaving many frustrated and overwhelmed. Curation allows retailers to differentiate themselves by helping consumers navigate through an overwhelming amount of choice and more quickly and efficiently arrive at purchase outcomes that are personalized to their specific needs, preferences or lifestyles. By playing the role of curator, retailers can help to build trust and relevancy in an environment of increasing complexity and uncertainty. For example, a retail pharmacy might develop a health and wellness plan that includes nutrition tips, vitamin recommendations and skin care products designed specifically for an individual consumer. By understanding how these consumers live their lives and make decisions, retailers can become trusted advisors and the conduit through which consumers navigate solution options.

Digital technologies offer numerous options to help retailers engage customers throughout the shopping journey — from magic mirrors that allow shoppers to virtually try on clothing to augmented and virtual reality that enable customers to interact with products. However, retailers need to decide what business they want to be in and which combination of experiences across the four categories discussed above will create a unique position in the market.

Consumer Loyalty Requires Engagement At All Touch Points

The more channels and touch points a consumer interacts with throughout the shopping lifecycle, the greater the loyalty to the brand. Consumers who interact with a brand through two or three channels are 30% to 40%more profitable, and 50% more loyal, than those who interact through one channel. But to fully capitalize on cross-channel interactions, retailers need to understand the rational and emotional value drivers at each point of interaction, so they can determine which channels will work best together across the decision making process.

Digital is bringing together industries and technologies to solve problems and create experiences. In fashion retail, for example, the convergence of 3D body scanning and automated bespoke tailoring will likely disrupt the industry over the next five or six years. The ability to create custom clothing based on an individual consumer’s body measurements and accelerate delivery through automation could transform fashion retail. It would eliminate the need to stock multiple sizes or maintain a large store footprint and ultimately create inventory-free stores.

Despite the proliferation of online shopping, physical stores will remain the hub of retailing for the foreseeable future. Online sales in the U.S. across all retail categories are not anticipated to exceed 20% by 2025, which leaves plenty of opportunity for physical stores to thrive. But physical retailers must determine what the offline experience will look like and how they can create memorable experiences that will attract and retain consumers. To do this, they need to humanize the retail experience by offering experiences that change lives, inspire, excite and solve problems. In addition, retailers need to fully leverage sales associates to create value and automate tasks that do not add direct consumer value.

Selecting The Right Tech That Fits Best

Perhaps most critical, retailers need to determine which technologies to use and build a dynamic platform that connects different devices into a single ecosystem, and can adapt as new technologies become available. Technology and data will enable associates to make real-time, in-store decisions that enhance customer experience. Making analytics and artificial intelligence core competencies will enable retailers to create and sustain a unique value proposition.

Finally, retailers need to integrate in-store technology with backend, inventory management, merchandising, customer relationship management and loyalty systems to create a 360-degree view of the customer experience. This will elevate physical stores to the level of maturity that online stores are already beginning to achieve and help keep them competitive. Retailers must creatively use a combination of physical and digital assets to deliver differentiated, personalized consumer experiences at scale.

Retail’s transformation will look very different in five years as digital technologies continue to proliferate and consumer preferences and shopping habits change as a result. Retailers that offer the right combination of experiences, create inviting store environments and put the customer at the center can establish a unique market position in today’s hypercompetitive, ever-changing, human-centric digital economy where there is no room for mediocrity.


Scott Clarke is Chief Digital Officer and Global Consulting Leader for Cognizant’s Retail, Consumer Goods, Travel and Hospitality Industries. Clarke brings more than 25 years of international, cross-industry experience leading organizations in growth and innovation by helping them understand the ramifications of commoditizing global markets as well as the convergence of digital technologies and social change, and how this affects relationships with their customers and creates opportunity for competitive advantage. Prior to joining Cognizant, Clarke led global consulting practices at Capgemini, IBM and PricewaterhouseCoopers.

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