Changes in the retail world

Changes in the retail world

Analog and digital – customers want both

If you had asked a selection of small booksellers a few years ago about the prospects for their stores, you would have got the same panicky responses. “Online retailing is destroying our business.” “Amazon and other big online stores are killing us.” “Our city centers are deserted.”

Now, most experts believe the situation is much more complex, including that of bookstores. After years of apparently unstoppable growth, online retail gradually seems to be reaching saturation point. The latest statistics from the German Retail Federation (HDE) show that Internet stores are responsible for 9.2 percent of the country’s total retail sales of 485 billion euros. In the non-food segments, the proportion is slightly higher at 13.7 percent, but the big boom seems to have come to an end. In 2016, bricks-and-mortar retailing saw an increase in earnings of two percent over the previous year. This is not what a doomsday scenario looks like.

"The most successful retailers will be those that can best combine their online and offline sales platforms.”

Does this mean that the stores in our shopping malls no longer need to worry about Amazon and other online retailers? Will we be buying most things in town rather than on the Web in future? Yes and no. “Ultimately,” says HDE managing director Stefan Genth, “the most successful retailers will be those that can best combine their online and offline sales platforms.”

Most companies now understand that customers are not interested in the sales channel itself. “Customers want both,” says Michael Gerling, managing director of the EHI Retail Institute in Cologne. “They like strolling around the stores in town as well as buying something quickly on the Web.”

Amazon goes offline

Multichanneling is the name of this new survival strategy: selling via all channels, from the store around the corner to the World Wide Web. German booksellers such as Hugendubel and Thalia have been marketing their products on the Internet as well as in their stores for a long time. Moving in the other direction seems to be equally easy.

The best example of this is the recent acquisition by Amazon, the world’s largest online retailer, of the US organic supermarket chain Whole Foods with its 460 stores. At 13.7 billion dollars, this is by far the largest takeover in the history of the online giant. Amazon CEO Jeff Bezos has not yet revealed any details of the objectives behind the acquisition. Perhaps he needs the chain of organic stores for his online food business Amazon Fresh. It is also conceivable that he hopes customers’ trust in Whole Foods as far as sustainability is concerned will rub off on its new parent company. Whatever the reason, it is a good example of an exclusively online retailer leaving behind its roots and suddenly moving offline.

Hawesko, Germany’s largest premium wine and champagne merchant, based in Hamburg, is taking a similar approach. Some time ago, it opened a cool wine store and wine bar in the heart of Hamburg’s St. Pauli district. The product range is taken largely, but not exclusively, from the company’s online catalog. “We want to show that Hawesko is a cutting-edge retailer and popular with young wine drinkers,” explains Nikolas von Haugwitz, a member of the Hawesko management board. For him, this obviously includes not only a Web presence, but also bricks-and-mortar premises.

Both the online and offline worlds have their own specific advantages

Both the online and offline worlds have their own specific advantages. According to a consumer survey carried out by the German E-Commerce Trade Association in collaboration with credit assessment firm Creditreform Boniversum, online retailing does particularly well when bricks-and-mortar stores are closed. For example, in the textile segment, Web retailers earn almost 50 percent of their revenue on Saturdays and Sundays after their offline competitors have shut their doors.

By contrast, main street stores benefit from a quite different type of immediacy. ­Customers like to touch and feel many products before they buy, in particular, those made from natural materials such as wood, leather, or wool. Despite the progress made in the field of virtual reality, online retailers have not yet found a solution that can meet customers’ needs in this respect. A pair of new leather shoes can only be experienced in full at a real store.

The lesson to be learned from this is relatively simple: Companies that can offer their customers both things—shopping at all times of the day and night and the emotional experience—will be in a good position to maximize their future sales.

“We want to be the Spotify of the fashion world,”

Moritz Hau, Head of German operations Zalando

The Berlin-based e-commerce giant Zalando aims to go one step further. “We want to be the Spotify of the fashion world,” says head of German operations Moritz Hau. His plan is to develop an operating system for fashion retailing. For example, he believes that someone who wants to buy a red cashmere sweater in size 40 does not care which retailer or which online warehouse supplies the knitwear. The only important thing for the customer is to receive the sweater as quickly as possible without a time-consuming search in shopping malls or on the Web.

This is precisely where Zalando comes in. With its platform strategy, it will be the ideal partner for everything, from acquiring customers and retail marketing through to dispatching the goods, if necessary, by courier from the store directly to the customer’s front door and, of course, packaged in the familiar orange boxes. The basic idea behind this ambitious plan is to integrate the bricks-and-mortar retailers into the business model instead of competing with them.

Customers have never been as well-informed as they are today

In our modern economy, it is more important than ever for retailers to move away from the old approach to sales based on one specific channel. Customers have never been as well-informed as they are today. It has never been easier to gain and lose a buyer in just a few seconds.

The most successful sales strategy of the future will no longer be based on the opposition between online and offline. Instead, it will focus on what has always been the most important factor for both sides: commerce