I think that back in 2005, iTunes became the 7th or 8th largest music store in the United States. Think about that. They have no real estate, at least none dedicated specifically to iTunes, and carry no inventory. They don't have to pay for sales staff or worry about returns. And if you look at the typical Apple store, a great deal of its space is dedicated to social functions, not traditional retail functions. Now, if you're a large record store chain, this has got to be a huge challenge. You've got all of this real estate dedicated primarily of the inventory management of music and yet more and more people are buying their music online. And, of course, today, you're pretty challenged to find any big music stores still in business, although thanks to a resurgence in vinyl, there are still independent music stores to be found.
What's always interesting to me is that people in one industry can look at another industry and say "How can they not see that every thing's changed and they need to change" without looking internally at their own industry. For example, this was something I wrote in 2009:
More mall developers need to look at their business model in addition to the redesign on the physical space. Many work on a rent + a percentage of sales model, but will that still play in a world where people do more window shopping in the mall and more actual buying online? And, as we ask retail clients all the time, what happens to your retail space if you take away inventory management?
As the retail space has become more of a showroom and, thanks to Covid, people don’t mind shopping and having their purchases shipped, then what’s the impact on the real estate itself? We see it becoming a much more vibrant and alive social space. A place for people to gather and share their experiences through the brand, rather than sharing their experiences of the brand. Look at the Apple store. Lots of people talking to one another. The theatre where you can learn together as a community. Even the Genius Bar. It’s much more of a social space.
Do stores really need to exist as they've been for the past 40+ years? If, thanks to the internet and Covid, people are much more comfortable getting their purchases sent to them, rather then getting them right away, do we need that much space dedicated to merchandise? If we can do away with the inventory portion of most retail spaces today, what else would you do with the space? How could you make it a much more social environment, rather than being a retail environment? After all, this is exactly why places like Starbuck's or the Apple stores have boomed -- they created a social space in addition to a retail space.
For example, I don't understand why more retailers are not copying the Apple genius bar concept and not necessarily by having an actual distinct space. Sephora does a good job with their make-up areas, to help people understand what they can do with their looks. I wish grocery stores had one to help me eat better. Stores like REI certainly have a well educated staff throughout the store, but could they do more with trip/camping outfitting if I don't know where to start? I would love to see Home Depot and Lowes have them, but honestly, they would probably be busier than the Apple Genius Bar and I'd probably never be able to get an appointment!
With all of the talk about creating communities, I don't understand why retailers aren't using their physical space as a community-building tool. You already have their audience gathering there, but many times, you just treat your audience like an unwanted guest who's barely tolerated.
Can you afford to have hundreds of thousands (or millions) of square feet of retail space and all of the expenses that go with it, and just have it act like windows for people to do online shopping? And they may not even shop online at your store! Can you continue to support online social media efforts while creating physical spaces that are almost anti-social? Sure, open up your info so that I can get it on my cell phone. But shouldn't you also hire better people and do more to train them? And create better physical spaces?
I think that retailers with physical stores need to spend a little more time looking at what makes place special. Stop trying to compete with the online world by making your places more online-like and start competing by your rules. Use place to your advantage.
Retailers should think of stores as social media spaces. If your store is only a space to buy product then you aren't really offering anything special - you can do that lots of places.
The point is, that as consumers become continue to grow even more sophisticated in their expectations, retailers need to change their approach. I can shop online if all I need is shopping. I go to the store to receive service and I’m expecting more & more. Make my shopping experience my enjoyable. More helpful. More convenient. More of an experience. Give me more value then the other guy and I’ll keep coming back.