The business model of the retail industry today is highly susceptible to change, especially following significant advancements in convenience within traditional retail, largely driven by the impact of the COVID-19 pandemic.
A study from August 2020 by Convenience Store News highlighted the vulnerability of traditional retail, with 52% of consumers willing to eliminate physical stores from their shopping routines. Unsurprisingly, the number of online stores surged, and 42% of shoppers indicated a preference for consolidating their shopping activities at a single point with multiple conveniences to minimize physical contact.
While physical stores can cater to essential shopping needs, they often fail to fully leverage their advantages with customers. This opens up significant opportunities for online stores, enabling customers to access a wide variety of goods directly from personal devices.
Another major drawback of physical stores is that shoppers increasingly seek contactless shopping solutions. The necessity of leaving home to purchase something has become less aligned with modern shopping behaviors. Consumers have embraced the power of digital tools to save time, pre-order items according to their preferences, and minimize physical interactions while shopping at retail stores. (1)(2)
The shift from “retail” to “consumer commerce”
The impact of COVID-19 on the retail industry has been unprecedented. While it is crucial for retailers to focus on operational and tactical considerations for reopening physical stores, this period also presents an opportunity to reassess business directions thoroughly by addressing key questions (3)(6):
- Customers-How have your customers evolved during and after the crisis? What are their expectations, needs, behaviors, and priorities in this new environment?
- Brand-What is your business purpose, and how can you best serve your customers? Do you need to evolve your value proposition to stay relevant? If so, how can this be realized?
- Products-What are the core, best-selling products and preferred categories that your customers are currently interested in? Is this the right time to explore new categories, services, or business models?
- Stores-What are the impacts on the store channel, its role, and corresponding activities? How can you ensure the safety of your customers and associates while redefining the store’s role in customers’ lives?
Retailers are eager to reverse the setbacks of 2020 and 2021, during which they endured significant impacts. However, they remain uncertain about what the future holds if they continue to operate under traditional business models. As these trends evolve, the connection between physical locations and the ability to sell products and deliver services is rapidly being reshaped.
These businesses may need to shift from “retail” to “consumer commerce,” a rapidly growing and evolving trend that enhances the efficiency of utilizing physical locations while offering products and services better tailored to the diverse needs of customers (5).
Global approaches to retail changes in recent years
Companies like Amazon have pushed traditional retailers to explore innovative ways to engage customers and make the shopping experience more convenient and enjoyable. One such approach is the store-in-store model. As the name suggests, this model allows a retailer to act as a host, enabling one or more brands to operate independently within its store. The partnership between the brand and the retailer is mutually beneficial, helping both parties boost revenue and expand their market presence.
Best Buy, Samsung and Sony
While other major retailers were feeling the pressure from the surge in online shopping during a few booming years, Best Buy continued to innovate with creative strategies to thrive in the era of online shopping and home delivery.
In 2013, Best Buy adopted the store-in-store model by launching a partnership with Samsung, called the “Samsung Experience.” This collaboration established 1,400 Samsung centers inside Best Buy stores. In fact, the partnership worked so well that Best Buy expanded the store-within-a-store model to include Sony the following year.
Continuing its streak of innovation, Best Buy even brought its competitor, Amazon, into its store-in-store business model. Determined to capitalize on the growing popularity of smart devices, the major electronics retailer integrated two in-store kiosks specifically dedicated to Amazon Echo and Google Home.
Instead of just promoting Google and Amazon smart devices, Best Buy utilized these in-store kiosks to demonstrate how customers could pair Echo and Google Home with other popular items sold at Best Buy, such as HD light bulbs and smart home appliances like thermostats and TVs.
Masan and the “Point of Life” Model (4)
In Vietnam, Masan has launched the “Point of Life” model, integrating services such as WinMart, Phúc Long, Phano Mart, Mobicast, and Techcombank to deliver a comprehensive range of services to customers.
While WinMart+ primarily caters to housewives, Techcombank, Phúc Long, Phano Mart, and Mobicast target all age groups and genders, especially young customers who are eager to experiment with new consumption trends. What sets Masan’s unified consumer retail platform apart is its ability to integrate not only physical (offline) points of sale but also online points of sale, creating a seamless omnichannel experience for customers.
References
(1) McKinsey. 2020 Reimagining stores for retail’s next normal
(2) McKinsey. 2020 Adapting to the next normal in retail: The customer experience imperative
(3) KPMG. 2021 Future of Retail Transitioning from ‘retail’ to ‘consumer commerce’
(4) Investment newspaper. Masan’s “Point of Life” strategy aims to serve 35 – 50 million customers
(5) Think with google. Marketing strategies app and mobile smartphone user mobile shopping preferences
(6) Erply. Store-within-a-Store: The Next Stage of In-Person Retail
