"Bricks & mortar" retailers will always be here - but need to up their game, says expert.

New Zealand "bricks and mortar" shops will always be part of the country's retail mix, according to a leading expert – but many retailers need to evolve to survive the challenge of online shopping, digital disruption and changing consumer trends.

Tristan Will, head of the retail sector for accounting and business advisory firm BDO, says physical retailers have a great opportunity to prosper but only if they do the research, put in the thinking and come up with new ways to improve the customer experience.

"Online versus bricks and mortar isn't a situation where one wins and one loses," he says.
"There will always be both – but retailers need to differentiate themselves, whether online or in store, to satisfy changing consumer demands."

Customers increasingly want more of an "experience" when shopping; Will cites the growing influence of millennials – a generation for whom work is often a means to an end that has more to do with leisure than career. They often enjoy shopping as a pastime and are heavily influenced by the internet.

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It's not just millennials. Most consumers are increasingly demanding a more immersive experience and Will says many physical retailers are creating "destinations" where events and experiences increase customer "dwell time", encouraging spend on services and experiences if they are less likely to spend on products.

A theoretical example, says Will, is a retailer selling gym gear – but branching out into fitness classes and wellbeing services, as well as involving a shoe retailer so that complementary services and products are more interesting and pleasing to the customer.

Stores which manage to combine the digital retail world with the physical comfort and experience of being in a desirable location often stand out, like some Nike stores – where people can easily buy shoes online. But in-store advances like their inter-active table increase the experience. Customers place a shoe on the table – and can immediately access digital examples of different colours of that shoe, price and size availability, plus information on the athletes who wear it.

In New Zealand, Will says Pak'n Save's "Shop'n Go" technology is one example of a local retailer enhancing the experience – with technology allowing a customer to scan goods as they go, arriving at the checkout only to pay, thus reducing queues and waiting time.

Amazon Go, currently being trialled in the US, is planning 3000 convenience stores but are operating only eight at present. The key offering is that there is no checkout, no waiting time; customers activate an app on their smartphone while the store uses cameras and sensors to track everything the customer does. They can then choose a product and leave – with the money deducted from an account via the app…no till, no queue.

Some estimates forecast revenue of USA$4.5 billion if all 3000 stores come to pass, with returns 50 per cent more than traditional convenience stores because of the speed and convenience.

Will says most New Zealand retailers do not need to be so "futuristic" in their thinking, though he knows of one similar project here seeking to use cameras and sales data to forecast customer peak times, in-demand goods and other patterns which help the store involved to (a) sell more, (b) make the shopping experience more efficient and enjoyable and (c) allow them to staff the premises according to the most likely flow of customers.

"Many New Zealand retailers can improve by just adjusting their interaction with their customers," says Will. "Virtually all the retailers I know in New Zealand got into the business because they loved interacting with other people – but that can get buried in the hurly-burly of everyday business.

"Retailers mustn't stand still – they have to be pro-active, do the research, understand what is happening overseas, understand what is going to impact their business, positively or negatively, and plan how they are going to combat or embrace it."

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One example, he says, of a company that forgot its interaction with customers was Dick Smith: "In the 90s and early 2000s, Dick Smith really interacted with people; they were renowned for staff who would really help you as to whether you needed that one or that one…

"But when they re-invented themselves as an online company, that helpful and enjoyable experience changed. All you got then was a Dick Smith employee looking something up on the internet – which you could have done before you got to the store."

New Zealand's retail industry generated $92bn last year and is forecast to reach $120 billion annually by 2030. Online spending is now estimated at $4.5bn annually (up 10 per cent in 2018 over 2017) with 43 per cent of that heading to overseas retailers (a drop of 1 per cent) and 57 per cent to New Zealand retailers. The trend in recent months has been for local online spend growing faster than spend with overseas retailers.

So, Will says, there is an opportunity for New Zealand retailers to grow and improve their lot: "But they have to have a strategy built on the back of analysis tools; they have to know what state their business is in; if they are going to develop digital channels, they have to do it right – a bad experience for customers can have a big impact on brand awareness and loyalty.

"Retail technology is exciting – but it can be a threat if you are unaware and don't have a plan. To thrive, brick and mortar retailers may need a strategy taking in omni-channels, creating a destination that has complementary goods, services or experiences."
BDO has just compiled a Thrive Guide for retail businesses.
For more information, go to www.bdo.nz/retail