How physical stores are fighting back

The retail sector is the largest private sector employer in the country, providing more than 300,000 jobs directly and many thousands more indirectly through the supply chain.

Pick a place, any place, and according to Ibec, retail is likely either the largest or second largest employer in it, typically accounting for up to 15 per cent of employment.

It’s why the sector’s health is so important. Right now it faces a number of challenges, including significantly changed consumer behaviour post-Covid.

A survey from professional services firm KPMG finds customers are moving away from city centre shopping, with just 16 per cent preferring to shop there, compared to 40 per cent in large shopping centres and 28 per cent in local main streets.

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“The fact that fewer consumers are shopping in city centres is concerning and suggests that the long-term impact of the pandemic and the emergence of hybrid working environments has caused some to avoid the city centre in favour of their local main streets or shopping centres,” says Keith Watt, head of retail and manufacturing at KPMG.

“We have seen that some big brands have left the high-street to become ‘online only’ within Ireland and this further adds to this challenge. While online shopping continues to grow, particularly among the younger demographics, consumers still believe the experience of shopping in-person is better and cannot be matched online.”

The sector, like many, is also struggling with staff shortages.

What many thought were temporary conditions at the height of the pandemic now appear to be structural, as labour shortages and accompanying wage inflation continue to challenge the sector.

“Employees are one of retail’s most important assets but are often considered first as a cost centre, even in the current environment,” says Watt.

A shortage of them is already having an impact on the consumer experience in-store.

“Staff shortages remain pain points for many consumers, with, in a recent survey, over a third noting that when they shop in-person, there are not enough staff available to assist them. With customers still believing the experience of shopping in-person cannot be matched online, the unique value of the in-store employee and the power they have to influence customer buying behaviours is more important than ever,” he adds.

Persistent supply chain issues are a bugbear for retailers and customers alike.

We’re increasingly seeing a mixture of retailers mixing in services with their more traditional products. This could be through virtual reality experiences, in-person events, mixing hospitality with retail

—  Keith Watt, KPMG

“Stock shortages remain a challenge for retailers, with large numbers of customers saying they are often unable to find products in-store due to stock shortages. Retailers are faced with increased supply chain costs, costs of goods, energy, and labour, and now must consider building in more sustainable practices right through their supply chain,” says Watt.

But the transition to more sustainable practices is costly. “These pressures mean retailers will need to constantly evolve, adopting new business models and strategies and investing in new technologies that will allow them to deliver on their promises while seeking to protect their margin,” he points out.

In today’s omnichannel world, all sales channels must be embraced, but in physical retail, the customer experience must be a laser sharp priority.

“With the power to buy whatever you want at your fingertips, it’s more important than ever for retailers to offer customers an experience that’s worth leaving the house for,” explains Watt. “We’ve seen some examples of retailers excelling in this area, offering unique in-person experiences, but many have been struggling to get the essentials right in a tough economic environment.”

The answer is a mixture of “the basics done well”, he says. Knowledgeable staff, good customer service and the latest products in stock are all essential. After that it’s about “having that something extra, that elusive factor that gets people excited to come to your store”, says Watt.

“We’re increasingly seeing a mixture of retailers mixing in services with their more traditional products. This could be through virtual reality experiences, in-person events, mixing hospitality with retail.”

Technology can help. “More and more, people will be looking for an easier life using technology when purchasing goods and services, whether that’s a personal experience using digital or physical appointments in store, or remotely using a website to order faster click and collect, or same-day delivery to home,” says Patrick O’Reilly, interim head of retail sales at Three Ireland.

“People will use technology more to take the stress out of shopping, so retailers will need to have an ever-changing omnichannel approach to all aspects of their experiences for customers.”

While younger generations have embraced the world of online shopping, older generations remain more traditional, but the lines are blurring.

Take aftersales services. “Customers don’t necessarily want to return to store. If their needs can be met digitally, this makes life easier,” he says.

Equally, “consultations with staff around issues such as plan changes, upgrade queries, or researching for a future purchase will continue to blur as we see more customers embrace digital ways of meeting their own needs for that easier life,” he adds.

Customers starting journeys in one channel, such as digital, and finishing in another channel, such as in store – and vice versa – will continue to grow.

Technology can also help retailers to cope with challenges such as staff shortages and sluggish supply chains.

“The use of self-service technology and artificial intelligence in stores can reduce the need for a full consultative staff interaction, allowing customers to come to stores and complete their purchase or query using technology in store,” he says.

Three Ireland’s interactive Discovery Tables are a good example. Customers in store use them to browse the latest products, load content and see instant comparisons. Purchases in store can be completed on their phone, or they can signal a staff member for help.

“In-person events or in-store promotions that are exclusively physical will continue to create a call to action for people to visit stores. Creating that exclusivity factor around stores that cannot be replicated in a digital world will see the world of physical stores remain relevant and compelling,” says O’Reilly.