3 ways suppliers can drive store-based value in the digital era

Online shopping will grow three times faster than store-based retail between 2020 and 2025 and that has consequences for the future store. How should suppliers respond? 

By Florence Wright and David Gordon

While sales have been shifting online over the past few years, there is no question that the COVID-19 pandemic has emphatically ushered in a new era of retail. Edge by Ascential Retail Insight analysis forecasts show that ecommerce will reach a 34.8% share of chain retail sales by 2023 (up from 30% in 2021), at least two years ahead of projections made before the emergence of the pandemic as shopper habits changed during the crisis of 2020. 

That means, share of global chain retail sales through store-based retail will therefore fall by a corresponding value. Forward-thinking retailers are moving quickly to meet increased online demand, but at the same time, rethinking their role and purpose of their store networks as the new economic reality now potentially undermines traditional store-based profitability. 

In June, we published the third iteration of our Store of the Future report, which is one of our flagship thought leadership reports, one part of our Winning Strategies - the others being Ecommerce and Digital Ecosystem Management, Shopper Engagement and Retention and Next Generation Supply chain. 

Perhaps unsurprisingly given the extraordinary year we have gone through, our 2021 Store of the Future report finds that the past 12 months has seen the biggest transformation of store-based retail since the emergence of chain retail 50 years ago - and we can expect further changes shaped by the increasing sophistication and adoption of technologies that enable stores in the future to operate as part of a broader, interconnected ecosystem where online and offline distinctions are irrelevant. 
 

Edge by Ascential Retail Insight supplier capability framework 
Source: Store of the Future report, June 2021

 

So, in a world where pure-play operators like Amazon and China’s enormous ecommerce ecosystem Alibaba are trailblazing new trends in store-based retail, what do suppliers need to do to optimise the value of the physical store?

Here are 3 of those priorities: 

Support Last Mile Solutions

Retailers are re-positioning their stores as a strategic resource to support online fulfillment, transforming them into local and rapid delivery centers, online collection and returns hubs and ecommerce warehouses to reduce the costly ‘last mile’. Suppliers must build an agile supply chain to support the variety of different fulfillment options and can also take opportunities to drive purchasing as customer traffic switches towards store pickup.

 

Case Study

Cure Hydration, a startup fruit-flavoured drink powder company, launched a free sampling programme with curbside orders at Walmart during the pandemic to aid discovery as consumer traffic moved to the carpark. The firm said the samples lifted sales, while costing less than store demonstrations, and was more easily scalable across 1,000 stores.


 

 

Create seamless omnichannel experiences

Retailers are focusing their efforts on ‘O2O’ (Online-to-Offline) integration. Stores are integrating more digital touchpoints, such as mobile apps, to connect the shopper journey across multiple channels. This will generate opportunities for brands to connect physical and online media, content, advertising and promotions, in turn fostering greater levels of personalisation across the shopper journey. Suppliers must ensure content, packaging and pricing are aligned offline, online and through mobile to promote a positive experience across channels. 
 

Case Study

Craft beer brand Brewdog was running an offer via its direct-to-consumer site, giving customers who purchased products on its site a voucher to spend in-store only at Tesco. With shoppers encouraged to use their loyalty card in Tesco, this initiative has potential to generate relevant shopper data and insights across both channels.



Differentiate through products and assortment

An increasing requirement for differentiated and margin enhancing assortments to attract shoppers in-store means suppliers should innovate in response to get ahead of the curve. To identify where store-based retail channels are focusing curation efforts at present, we analysed retailer publications and press releases related to range launches and expansions in Q1 2021 across select store-based grocery channels. Almost half of the initiatives were focused on fresh and meal solutions, with a growing emphasis on cause-based (health, sustainability) curation. Across sectors, we see demand rising for exclusive and premium products. 

 

Case Study

Tesco has a product incubator programme and it has recently been focusing on supporting plant-based or veg-focused brands including Tenzing - a natural, all plant-based energy drink - the world’s first carbon-negative energy drink. In the year-long programme, Tenzing will benefit from the guidance and support of Tesco’s product team, who will give them access to customer insight to develop their brands as well as offer merchandising advice. 

 

These are just some of the actions suppliers should be considering to successfully execute against the defining characteristics of the store of the future. Ultimately, suppliers should be building capabilities in a range of areas, from supply chain to product innovation, merchandising and data analytics to succeed in a tech-centric retail landscape where online and offline elements are blurred. 

Hear more about the key characteristics of the future store and how the changes will affect suppliers in our recent virtual panel event, chaired by consumer journalist and former retail editor at The Daily Telegraph, Harry Wallop. You can access a recording by filling out the form below.   

Our Store of the Future Report June 2021 is available to all Edge Retail Insight subscribers. Contact info@ascentialedge.com to find out more about the platform and how it can support your business make difficult decisions in uncertain times. 
 

David Gordon is Director, Omnichannel Insights, Edge Retail Insight and Florence Wright is a Senior Analyst at Edge Retail Insight .
 

Facebook
LinkedIn
Facebook Share
LinkedIn Share

Information Request

Configurable, actionable insight at your fingertips