Why stores still matter but the definition doesn't
The word “store” has outlived its usefulness given the ongoing transformation of the retail industry where commerce is everywhere and shopping is continuous.
I was pondering the future of physical retail as the holiday season and 2019 arrives in the wake of store closures, the continued rise of e-commerce and the impact of digital innovation on stores. But what exactly is a store, and more importantly, what will it be in five years or more. Gaining clarity on this issue is a big deal because of the lead times required to develop retail projects that have to operate in a world where technology can quickly change how humans behave.
Let’s take a step back and examine the origins of the word store, which has a surprisingly large number of definitions. For much of history it was used as a verb and later became a noun when the forerunner of modern retail took shape centuries ago. The meaning of “store” was first recorded as, “a place where goods are kept for sale,” in 1721, according to Google. That definition has served the retail world well and remains core to how many companies operate today. However, it is one dimensional and dates to a pre-Industrial Revolution era. The retail industry’s structure has changed dramatically in the past 250 years and stores today serve a more expansive role compared to even 10 years ago. For example, stores are:
- A physical manifestation of a retailer’s brand. This may seem obvious, but stores have become a canvas on which a retailer conveys its brand attributes and value proposition through design elements, assortment, pricing and service levels.
- Nodes in increasingly intricate supply chains rather than a logistical end point. Stores are deeply intertwined in circular supply chains as their role has expanded to serve as fulfillment and reverse logistics centers.
- Laboratories to uncover consumer intent. Huge data streams generated by mobile device usage over store networks and video analyzed by artificial intelligence mean a retailer can know more about what a shopper will do before a shopper does.
- Entertainment and experience centers. Physical spaces function as more than destinations where shoppers tolerate the drudgery of replenishing consumables. The concept of store experience is one retailers of all types are attempting to bring to life in the context of their brand.
If this is what stores are today, what about tomorrow? What should we call these spaces knowing that they are going to function in vastly different ways than mere repositories of merchandise? They will probably still be called stores, just like we call our hand held supercomputers smartphones, but the notion of what constitutes a store becomes more virtual. It’s why the most valuable retail real estate in the world isn’t in Manhattan, Tokyo or Hong Kong, but rather a tiny icon on a smartphone. A retailer’s app serves as the entryway to a world of possibilities related to content, product discovery and personal assistance. A shopper swiping across their smartphone screen, pondering which apps to open, isn’t that much different than a person driving down the street deciding which stores to venture inside. The app is the store and the phone on which it resides is like a shopping center.
In such a world, the retail industry has to rethink its obsession with physical stores. Traditionally, a large number of store openings was seen as a good thing and closings were viewed as an indicator of weakness. Such broad generalizations aren’t as easy anymore because a legacy retailer proactively closing stores may being doing so for valid, forward-looking reasons to reposition its fleet while a retailer born online may open physical locations for entirely different reasons. Either way, new rules are in play regarding the size, density and function of stores, which could more aptly be described as customer engagement and fulfillment centers.
It’s a lot easier to just say, “store,” even if future generations wonder what that is. Think of it like this. A digital native told by a parent to hang up the phone likely never ended a call by placing a handset in the cradle of a base unit. And so it is with retail stores. Future generations are already interacting with stores in very different ways than their parents. The rise of voice commerce, increased mobile shopping, subscription boxes, meal kits, autonomous deliveries – pick an innovation – will change the role of physical spaces. We may still call them stores in the future even though the definition developed 400 years ago isn’t relevant.