The Great Convergence in Retail: Physical and Digital

By Doug Stephens

Most neurologists agree that technology is changing our brains. How we think, process data, and perceive the world around us is being steadily and permanently altered by systems, software and devices.  One only has to look around at an airport, coffee shop or other public place  to see the degree to which we have become inextricably connected to our devices.  They have, in essence become an extension of our own brains.  Wondering has been replaced by Googling and day dreaming has given way to dual-screening.

Moreover, our time spent online, which is increasing steadily, is having a profound affect on our expectations of offline, real-world experiences. Our fundamental perceptions around  convenience and selection have been completely redefined in a world where practically anything we desire to buy is a click or two away and can be delivered to our doorstep 24 hours later.

And yet it can also be argued that as we become increasingly digitally evolved, the value of real- world, physical experiences is actually increasing in equal measure.  For example, as digital music and streaming has grown, so too has the live concert industry. In the ten years between 1999 to 2009 concert ticket sales in the U.S. increased threefold from $1.5 billion to $4.6 billion, outstripping both inflation and population growth. By 2014, that number had ascended to $6.2 billion. So, while we’ve gravitated quickly to the ease, selection and affordability of online music, our appreciation of the art and experience of live performance has also grown.

The question on the minds of many retailers is how this same dichotomy applies to their own business.  How can the physical and digital aspects of retail not only coexist, but also complement one another to create a better overall shopping experience as we move into the future? The answer lies in “phygital” space, where brands and consumers interact in a blend of the physical and digital worlds. Here’s what it looks like.

Media Is The Store

Part of the answer for retailers lies in understanding that there’s an historic shift underway. Media, in all its forms, is now extremely effective at doing what stores used to do; that is to merchandise an assortment of items, provide product information and customer service and efficiently distribute purchases to customers in a fast and efficient way. Facebook, Instagram, Pinterest and other social sites are installing “buy buttons” on advertisements, all but eliminate any friction between wanting something and owning it. Every advertisement in Harpers Bazaar magazine is now shop-able. Smart TVs and video game consoles give users direct shopping access to products. Media is no longer a mere call to action to visit a store but rather a direct portal to the purchase itself. Consequently, global e-commerce is growing at an absolutely torrential rate, anywhere from 10 percent annually in developed economies to more than 30 percent in markets like China.

As this historic transition continues, we can also expect to see online commerce come to feel increasingly real. Technologies like virtual reality will allow us to literally step into and shop stores around the world from the comfort of our sofa.  Haptography – a technology that replicates the feel of surfaces using vibration – will make online commerce more tactile and sensorial. 3-D printing technology will evolve to allow for almost instant printing of customized items on demand.  Personal shopper services like Operator hint at our increased ability to connect with real people who can shop with and for us as needed. Far from the rather static, boring e-shopping experience of today, online commerce is set to become infinitely more immersive, sensorial and, ironically, human.

Does this negate the value of physical stores?  I don’t believe so.  In fact, I would argue that the opposite is true, as long as our concept of the value a store delivers evolves similarly.

The Store Is Media

This evolution begins with a simple realization.  The purpose of a store is no longer chiefly about the distribution of products.  It’s about the distribution of experiences.  In this sense, physical stores are evolving into media and, if done well, will be the most important and powerful form of media available to a brand.

Stores have the unique ability to tell a brand story in an immersive way, and form a personal and emotional connection with shoppers while physically engaging them with products and services.  If done well, the store experience should be absolutely remarkable. It should galvanize a relationship with each customer that is strong enough to forge a long-term and multi-channel buying relationship with the brand.

By corollary, as our online experiences become more physical in nature, our physical store experiences will become more digitally infused.  Much of the consumer data we’ve come to depend on while shopping online — such as reviews, social validation (Likes and Pins), product specifications and video — will make its way to the store.

Stores will morph from mere pick-up points to well curated galleries of products with plenty of room for shoppers to try, learn about and play with products. In fact, I can easily envision a future where particularly great retailers begin to monetize these experiences by charging their suppliers a “media” fee, akin to an advertising card-rate, simply to represent their products in-store.  In essence, the experience itself could become the most important product a retailer sells.

So, the future of retail isn’t binary at all.  It’s not a matter of digital versus physical but rather the convergence of digital and physical. It’s not a question of stores remaining relevant but rather reinventing their core purpose.  In the end, paper will coexist with pixels, systems will infuse surfaces, bricks will meet clicks and the lines between the physical and digital experiences will become all but imperceptible.

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About the author: Doug Stephens is one of the world’s foremost retail industry futurists. His intellectual work and thinking have influenced many of the world’s best-known retailers, agencies and brands including Walmart, Home Depot, Disney, BMW, Citibank, eBay, Intel and WestJet.  Doug is also listed as one of retail’s top global influencers by Vend.com.

Prior to founding Retail Prophet, Doug spent over 20 years in the retail industry, holding senior international roles including the leadership of one of New York City’s most historic retail chains.

Doug is the author of the groundbreaking book, The Retail Revival: Re-Imagining Business for the New Age of Consumerism. He is also the consumer technology contributor on the acclaimed international television series App Central, as well as the syndicated retail columnist for CBC Radio. Doug also co-hosts the popular web series, The Future In Store and sits on the advisory board of the Dx3 Digital Conference.

His unique perspectives on retailing, business and consumer behavior have been featured in many of the world’s leading publications and media outlets including The New York Times, The BBC, Bloomberg Business News, TechCrunch, The Financial Times, The Wall Street Journal and Fast Company.

Doug speaks regularly to major brands and organizations across North and South America, Europe, The Middle East and Australia.