Beyond the Store: Drop-shops and Pop-up Stores

There is ongoing change in the retail landscape. Both offline and online retailers now migrate towards hybrid solutions. Just as brick and mortar retailers have shifted towards online retailing, so did online pure-plays started engaging customers offline.

Retailers now need to combine the in-store pick-up options (which most online pure plays don’t have), an offline presence for information and branding purposes, as well as a way of pushing best-sellers into the market. At the lowest cost possible.

Bellow you’ll find two of the most promising directions, especially for online-first retailers:

The Drop-Shop

Not to be confused with the term “drop shipping”, the drop shop is an offline facility that handles first and foremost package pick-up from customers. Such a need arises when customers do not want to subjected to shipping schedule but rather decide when and where to pick up ordered products. When dealing with such customer requests, offline-first retailers have the upper hand, as the existing store network provides support for customer pick-up options.

Slowly moving into the brick and mortar territory, online retailers discover innovative ways to handle customer offline interaction. One such example is the Amazon Locker. Its function is to allow customers to order  products online and then pick-up the package from a near-by Locker.

Amazon Locker

Amazon Locker

As seen above, most Amazon Lockers are not exactly located in the most glamorous locations (here pictured near the lady’s room) but it does the job.

Customers could select the closest Amazon Locker, had their orders delivered there and then receive an email announcing the order is now available. To pick up orders, clients can either enter the pickup code in the central-unit computer or scan the mailed barcode.

So far Amazon tried its luck with the likes of Staples (second largest online retailer in the US),  Radioshack and 7-Eleven. The promise to these companies was that Amazon has many customers and those that will want to pick up their packages from the Amazon Locker will probably buy something else from the store. The practice was not exactly successful as both Staples and Radioshack eventually dropped the project.

However, Amazon and the likes will probably not stop here, to increase sales they need to provide the customer with an way to experience product, as well as return and buy other products from their B&M operations. So far they didn’t need to, as others catered to the showrooming need. Soon enough, however, retailers able to price match will either become serious competitors and improve their online operations and then online retailers will have to battle on unknown land.

The drop shop will be a type of small to medium shop, probably affiliated with larger retail operations, providing customers for:

  • package pick-up
  • merchandise experience and testing
  • returns and customer service

The pop-up store

The concept behind the pop-up store is a temporary location that exists for a short term, to provide marketing exposure or sell limited inventory items. It is not something that online retailers brought to the market but there are a lot using it right now.

Fleur de Mal online retailer uses Pop-Up Shops to engage customers in real life.

Fleur de Mal online retailer uses Pop-Up Shops to engage customers in real life.

Online stores that don’t operate B&M operations found the pop-up store an useful way to attract attention. It’s also a great way to provide sales outlets to customers during high sales periods, such as the holidays.

New brands, focused on retail online increasingly find that using pop-up stores is a great way to attract new customers. These customer acquisition tactic allows potential buyers to experience the brand, as well as its products.

For online retailer Fleur de Mal, setting up pop-up shops has been a great way to appeal to their fashion savvy target customers. Company representatives use pop-up shops to showcase their organic fiber fashion items to potential consumers throughout the US.

BAUBLEBAR, a fresh and innovative ecommerce startup focused on jewelry has seen brand recognition increase as soon as they started opening pop-up shops. Katherin Hill, director of offline at BAUBLEBAR outlined the main incentive to open a pop-up shop: We see about half of the people who walk in to our pop-up shops have never heard of our brand before” [Source].

There are, however, several obstacles that need to be overcome, such as offline channel connectivity to the central server, as well as store design. The biggest challenge is to find the right spot to place the pop-up shops. As most online pure plays have a hard time navigating and understanding the complex offline retail rent environment, a new startup decided to step in and help small and medium retailers find the right store spot.

Storefront is a company connecting landlords to retailers. It works as a marketplace between the two types of users. As pop-up shop demand has been on the rise, the company launched a Pop-Up Shop blog and an eBook detailing the inner workings of setting up a pop-up shop.

Both the drop shop and the pop-up shop are hybrid solutions that point to the fact that online retailers feel the need to set foot in offline retail. The pressure to reach omnichannel retailing efficiency is, thus, equally felt by offline, as well as online pure plays.

This post is an excerpt from “Understanding Omnichannel Retail – A Detailed Report”.

 

 

 

Showrooming Markets

Showrooming is a trend more and more retailers recognize. Most online retailers piggyback on consumers trying on merchandise in physical stores, only to search for the best price and then purchase the product online.

Although hard to fight, the trend might be actually beneficial for larger retailers that need to attract customers to their online stores and can afford price matching.

On one hand we have large retailers fighting to keep customers purchasing. Walmart for example, rolled out Savings Catcher in 2014 and now its pushing it across US. The tool allows users to compare prices on Walmart.com to those of its comepetitors. Any difference found is stored as store credit for the customer.

The likes of Amazon are trying to allow showroomers even more space to find the best prices online. Its recently launched Fire Phone has a built in mechanism that allows users to scan products (not just barcodes) and find the best deals online.

Showrooming around the world

Showrooming around the world

In this battle the ones that suffer most are the small retailers or retailers unadapted to omnichannel operations. This companies cannot afford customers trying on merchandise only to buy it some place else, while still keeping the shop open. It’s not just a passing thing either. 33% of customers worldwide report being showroomers, with 21% using their mobile phones to do it ( Source ).

Even more, markets that are earlier adopters of this trend seem to be even more into it. 71% of shoppers in developed Asia, 60% in North America and 54% of European consumers report showrooming practices.

As probably small to medium retailers won’t just roll over and disappear a new type of partner will probably appear in the near future

Showrooming markets as outsourced product display

Traditionally, retailers evolved to outsource everything that didn’t make sense handling within the company. Things as manufacturing or logistics are now commonly outsourced to reliable partners, companies that handle more than one retailers.

It’s not just manufacturing or logistics. If you think about it, most retailers outsource vital areas of their operations. Financial reporting, IT services and sometimes even human resources are outsourced to partners providing reliable service and economies of scale. Globalization has helped push this trend as companies can find cheaper, reliable work offshore.

But so far stores were pretty much left untouched. Retailers still feel the need to control and manage stores as they see fit, even if sometimes it is not the most economically reliable thing to do. As showrooming decreases the need and efficiency for the self-managed store, as online retail becomes increasingly popular and outsourcing gains traction in the future product display in store will also be outsourced.

[Article extracted from "Understanding Omnichannel Retail". Download the report here.]

Millennials as well as older demographics still favor B&M stores. They also like to see and touch the products they are buying. But they don’t always buy from the shop displaying the product. There is a solution that will probably become commonplace in the future, especially for small and medium retailers.

As retailers need to optimize their pricing in order to compete to only pure plays and online retailers need to establish a physical presence, a new type of company will emerge. The showrooming market.

The showrooming market is a place that aims to provide customers with extended information on the product, as well as the full product experience. The concept is already available online, with markets such as Ebay providing product display space for smaller retailers, as well as online pure plays willing to try an additional sales channel.

The primary function for the showrooming market is product display, rather than sale. Its revenue sources would be retailers paying and competing for shelf space, but generally paying less than they would displaying the products  on their on. Retailers, on the other hand, would benefit from an affordable B&M space, as well as a logistic point in product delivery, outsourced to companies that can do it better, due to economies of scale and process optimization.

Omnichannel Payments – Battle Between Giants

What comes to mind when you think digital payments? That would probably be PayPal. We all know Ebay subsidiary PayPal leads the game in digital Payments but now the game is set to change.

Paypal bets big on POS integration

Paypal bets big on POS integration

Although it does have the first mover advantage and has been going strong into omnichannel retail, PayPal is threatened by the largest tech companies in the world:

  1. First of all, company president David Marcus has resigned (or has been fired as rumor has it) to join Facebook. His mission – building a new type of … messaging tool. And by that I mean Facebook Payments.
  2. Google is pushing hard on its Google Wallet, a mobile bridge between online and offline sales. It is a fully NFC compatible payment system, which now accepts all major credit and debit cards, loyalty cards and discount cards. It also allows customers to save offers and buy using touch-to-pay systems.
  3. Everyone raved about the Amazon phone but the actual big news is … Amazon Payments. With over 200 million credit cards stored and the ability to pay with one click (for a very long time Amazon held the patent on that), Amazon is probably the biggest competitor to Ebay’s PayPal.
  4. Apple also has a huge database of credit cards stored on its server. It also has a massive database of customer options, customer history and a fully featured Keychain app built into Safari, ready to help customers do a quick checkout. Its wide device adoption allows it to become one of the most important players in the omnichannel payments area.
  5. Let’s not forget Ali Baba Group, the organization that controls over 84% of the fastest growing and biggest ecommerce market: China. AliPay is the group’s payment system, fully featured with the Yue Bao savings account. And now the company is set to have its IPO in the US.

Now this is the real Game of Thrones in the omnichannel world. Five tech monarchies are reaching for our wallets.