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The future of brick & mortar retail in the digital era

By Brian Gregg and Maher Masri

The rapid change in shopping behavior is creating massive strains on brick & mortar retailers, who need to not just adapt but get ahead.

Brian Gregg, a principal at McKinsey, and Maher Masri, an associate principal at McKinsey, led a dynamic conversation at the recent Shop.org annual summit.

What did you speak about?

Brian: We focused on the incredible changes we’re seeing in how consumers are shopping today, pulling in some recent data we’ve gotten from our iConsumer initiative (McKinsey’s program to monitor and analyze the behavior of digital shoppers). For example, two years ago, about 15 percent of shoppers checked prices on the mobile devices when they were in a store. Now that number is closer to 50 percent. And of those 50 percent who checked, 2/3 of them changed their buying decision because of it. This rapid change in behavior is creating massive strains on brick & mortar retailers, who need to adapt even as competition from pure online retailers continues to chip away at them.

What part of your conversation most interested people?

Maher: Retailers there were very focused on multichannel and omnichannel – the idea of interacting with their customers across a whole range of touch points. Mobile is an important part of that mix but people were still very surprised how common a habit it is now for people to check their smartphones when they’re in a store. Retailers are rightly concerned about the showrooming phenomenon, where shoppers check out products in a store like a showroom then buy it somewhere else for cheaper on their smartphones. This isn’t just a trend on the horizon; it’s already here.

Brian: The conversation these days tends to careen between the extremes of the "Store is Dead" and the "Store if King." But the truth is that mobile shopping revolution is here to stay, and retailers can either try to beat it or join it. While there are doubts and concerns, many agreed that it’s important to embrace the mobile shopper since the behavior isn't going away. Why shouldn’t your store be the first thing a customer sees when h/she checks their smartphone in your store? If stores can deliver on a great experience - and supplement it with a good mobile experience – then they have real value to customers.

What was on the top of people’s minds?

Maher: I don't think we’ll ever see stores go away but retailers understand that they need to be multichannel or they're not going to be around for long. All the channels matter – in store, online, mobile - but their power is in how they can work together. While many retailers understand this, it’s still a daunting task to deliver on it and it’s not clear where they need to start.

Brian: A big question on retailers' minds is how to incent their employees in a multichannel world. If someone walks into your store, loves the experience, then goes home and buys they product online, how to you give credit to the in-store sales person? And how do you structure the organization to capture the data so that you can allocate the credit in an equitable way that both rewards the right employees but also creates a superior customer experience? It’s really critical to get this right to succeed in multi-channel world.