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The On-Demand Economy And Retail: Is The Tipping Point Upon Us?

  • Written by  Stephanie Kidder, Storefront

0aaaStephanie Kidder StorefrontI read a poignant column the other day from a favorite journalist of mine, Kara Swisher, Editor of Recode and a contributor to The New York Times. It was titled: “Owning a Car Will Soon Be as Quaint as Owning a Horse.” In it, she mused that thanks to trends like car sharing apps, ride-hailing services, on-demand scooters and autonomous vehicles (AVs), the days of people actually owning their cars might be numbered. To be clear, Swisher emphasized that her use, indeed affection, of cars was not going away, “But the concept of actually purchasing, maintaining, insuring and garaging an automobile in the next few decades? Finished.”

I wondered if she could have just as easily been talking about retail, specifically the idea of big, permanent brick-and-mortar giving way to more flexible options. We’ve all heard the rhetoric of the retail apocalypse and predictions that online commerce will wipe out retail as we know it. It’s not happening. I prefer to see it as an Uber-like renaissance that our industry is going through. Just as Swisher enjoys the experience of cars, people still like to shop in person, and deal with real humans. This is universally true, even across younger demographics: in a 2018 survey of 6,000 consumers worldwide, Accenture found that 82% of Millennials prefer shopping in brick-and-mortar stores over online.

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The value of the experience and the engagement for brands is increasing as a differentiator, even though a transaction can be completed virtually. However, how the experience is presented is changing.

With each article I read about the closing of a JCPenney or Sears or Toys ‘R’ Us, I take heart in the news of digital natives like Warby Parker, UNTUCKit or Casper opening physical stores at a breakneck pace. I spoke with a manager at an UNTUCKit store not long ago and he reflected on how the customers that come into the physical store may never have found them online, and even if they did, they might not be as likely to buy for the first time through the web site. Some things just need a physical experience — like trying on a new style of shirt, or a pair of new eyeglasses, or testing a mattress.

More encouraging is the growth of the temporary storefront phenomenon, with brands and retailers of all sizes embracing the flexibility and innovation that pop-ups allow. Some estimates have pegged pop-ups as a $50 billion market. I’m not sure how big it is, but from our viewpoint, we see more demand for flexible space all the time. To me, pop-ups symbolize a transformation occurring in retail that parallels similar shifts in other industries. People needed taxis before Uber and liked renting vacation homes before Airbnb, but those marketplaces brought a new level of democratization to both consumers and suppliers.

Likewise, temporary retail space is now becoming more accessible to anyone who needs the benefit of an experiential presence without a long-term commitment to a building, neighborhood or geographic market. In today’s on-demand society, brands, designers, artists and makers can execute quick-strike campaigns and events, creating a buzz and nurturing relationships not possible online, nor feasible in the traditional long-term lease model. They can experiment — in a low risk, low investment way — with new ideas, target specific types of customers and optimize for different seasons and events.

The definition of success in this new world of retail changes, too. Sales-per-square-foot metrics give way to measurements of social media engagement, web site traffic and even qualitative in-person reactions. The storefront becomes as much a marketing tactic as a sales channel. Technology can be utilized to further engage and evaluate, offering new types of experiences and conveniences, like virtual reality, data-driven concierge services and bespoke designs.

This shift shouldn’t set off a panic across the commercial real estate business either, any more than the big automakers are worried about the proliferation of ride-sharing services and AVs. The launch of New York’s Hudson Yards underscores the reality that retail in its physical incarnation is far from dead. Savvy property owners and managers see the opportunity in short-term occupancy and are adjusting their strategies to position themselves for it.

Someone once said that the railroads should have realized they were in the transportation business and they would have all bought airplanes. No matter what they sell, retailers today need to know they are in the customer experience and satisfaction business. That still requires some level of human interaction that thrills and delights customers. It just doesn’t mean you have to own, or even rent long term, a physical space.


 

Stephanie Kidder is an experienced marketing professional who oversees Storefront’s global corporate and product marketing programs. She has more than 20 years experience bringing growth to international tech companies. Prior to joining Storefront, Kidder was CMO at Jabmo, a pioneering account-based marketing (ABM) provider, and held senior marketing and e-Commerce roles at Avid Technology. Kidder has a degree in finance from Michigan State University and studied languages in France and Germany.

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