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Author’s preamble: all that follows is linked to the current Europe situation.
A few years ago, we feared the total disappearance of the stores in favour of online retail. We were partially correct. While the physical store didn’t disappear, we did witness an exponential growth of online sales.
When the world was hit by the COVID-19 pandemic, the retail world turned upside down. As the world returned to normal, we predicted retail models that were successful in 2018-19.
However, in the past few months, there has been a drop in online purchases, particularly in the United States and Europe. 2022 witnessed a 20 per cent drop in online sales – something none of us expected to see.
There are three factors that have contributed to this trend. Firstly, people have become more mindful that purchasing something from the other side of the world means an increased carbon footprint. Instead of buying international brands, people have opted to go local. Homegrown brands, too, are more mindful that people are willing to pay extra for high-quality sustainable products. It then becomes a win-win for all.
Secondly, online portals are now charging customers who want to return their products. In Europe and the United States, the cost of returning a parcel is anything between $15 and $18.
Finally, store experiences have become a critical part of the physical store. Thanks to these experiences, customers now browse online and visit the physical store to make the purchase post experience.
How can retailers capitalise?
Naturally, the retailers who will stay ahead of the curve are the ones that will capitalise on this situation. Here are some suggestions that retailers could employ to do the same. Firstly, retailers need to realise that shoppers do not want to look at screens all the time. Digital tools are required to target two specific things
Secondly, artificial intelligence must be used smartly. Retailers should use AI to manage customer data, and not as a tool to influence shopper behaviour. AI should also be used to manage inventory in the warehouse and store shelves.
Finally, retailers need to rethink the store experience by moving out of ‘products and stores’ to ‘customer focus’. By doing this, retailers achieve the following
To conclude: Do you know why a shopper will go on to visit the physical stores? To find all that he can’t find online. In conclusion, the retail industry has undergone significant changes in the last few years, with a shift towards online sales, followed by a drop in recent months. This trend can be attributed to consumers' growing concern for sustainability, the added cost of returning products online, and the importance of in-store experiences. Retailers who want to stay ahead of the curve must embrace technology, such as AI, to manage customer data, inventory, and improve the store experience. The focus should be on the customer, with a defined target audience, a personalised selling journey, and a motivated and trained team. By doing so, retailers can continue to grow and succeed in this ever-changing industry.
The author is Director, Global Retail Alliance France. You can follow him here
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