February 20, 2014, 11:20 AM

The digital future of stores

E-retailing’s momentum has retail chains scrambling to engage shoppers with technology so stores don’t slip into obscurity.

Lead Photo

The digital investments being made by home improvement retail chain B&Q plc, a unit of the United Kingdom’s Kingfisher plc conglomerate, could point toward the future of retail, according to the cover story in the upcoming issue of Internet Retailer magazine.

With 350 U.K. bricks-and-mortar home improvement stores and more internationally, including 39 stores in China,  B&Q  is the third-largest home improvement store globally by sales after The Home Depot Inc. and Lowe’s Cos. Inc. It opened three B&Q Manifesto test stores—one is 33,000 square feet, one is 46,000 square feet and one is 95,000 square feet—to match its existing store formats.

But size is practically the only thing those stores have in common with the retailer’s existing stores, says Tom Scott, head of business solutions for B&Q. The stores are packed with technology that merge B&Q’s e-commerce site, DIY.com, with in-store functionality. Consumers can order online for in-store pickup, store clerks can use iPads to show and sell consumers products available online, and clerks can also use the iPads to customize their recommendations based on a customer’s prior purchase data, which they can call up using the shopper’s loyalty card data. “We’ll know everything else you’ve purchased, or if you have a delivery outstanding,” Scott says. There are also kiosks in the stores where consumers can e-mail themselves how-to guides for home improvement projects, and order products to be brought to them from the storeroom. “Our stockrooms [at the test stores] look a lot like an e-commerce fulfillment center,” Scott says.

The mix of technology and in-store services has been “almost universally positive,” Scott says. He says over the next three to four years he sees B&Q stores becoming smaller as a result, which Scott calls a “right-size store program.”

Consumers are spending less time shopping in stores and shifting more of their retail dollars to the web. The Bureau of Labor Statistics’ American Time Use Survey shows that between 2004 and 2012, the average amount of time consumers 15 and older spent shopping for consumers goods on weekends dropped 14.3%; on weekdays, it dropped 11.8%. Even during the hectic holiday season last November and December foot traffic in stores fell 14.6% compared to the previous year, according to ShopperTrak, which monitors traffic and sales at major malls and retail chains. Meanwhile, online sales are growing at a double-digit pace; they were up 16.9% year over year in 2013, according to the U.S. Commerce Department, whereas total retail sales, which include e-commerce, grew 4.2%.

Experts give a fighting chance to stores that evolve. Jay Holan, senior consultant for FitForCommerce, says stores will survive, but will have to change. For example, a store retailer will have to be able to access all its inventory companywide to provide the item an in-store shopper wants.

“To win, [retailers] have to deliver new omnichannel experiences that delight their customers,” writes Darrell Rigby, a partner in the retail practice at consultancy Bain & Co., in a 2014 outlook report. What’s far from clear is if the moves retailers are making now will “delight” customers and prevent more stores from closing. “I definitely think there is a future for stores, but I don’t think retailers have seen that future yet,” says Nikki Baird, managing partner at Retail Systems Research LLC, a research and consulting firm.

Many retail chain executives recognize they must act now to retain their customers, although often, in public, they put a positive spin on the challenges they face.

“We believe that over time there will be this fusion of the web and stores, and the technologies that enable that are things we want to start exploring now,” says Luis Fernandez, chief omnichannel officer at regional department store chain The Bon-Ton Stores Inc. “We want to learn and develop and hone our skill set and understand how to leverage them in a strategic way.”

Bon-Ton has 270 stores in 25 states doing business under several retail brand names including Bergner’s, Carson Pirie Scott & Co. and Younker’s. Fernandez says nearly all of them are now Wi-Fi-enabled so consumers can tap into the web while shopping in stores, and the chain over the last two years has worked to integrate its business systems to more tightly align web and store operations.

“Right now we are in the process of making the integration between web and retail inventory much tighter than it has been in the past, and much more real time,” Fernandez says. Those will include allowing online shoppers to see what products are available in nearby stores and to pick up web orders in stores.

As chief omnichannel officer since October, Fernandez is helping steer that transition, overseeing marketing, e-commerce and information technology for the retailer. The chief omnichannel officer title is a new one for Bon-Ton; Fernandez was hired as its chief marketing officer in 2012 with oversight of marketing and e-commerce. The new position added information technology to his responsibilities. “The job is really about linking the customer data and experiences between the web sites and the stores and making sure we have the right marketing and e-commerce experience to support and promote that,” he says.

Bon-Ton is testing the use of radio frequency tags in its shoe department in 30 of its largest stores. A consumer with a smartphone enabled with chips that support a wireless technology known as Near Field Communication (most newer Android smartphones have them) can tap his phone on a display shoe’s tag and immediately connect to the web—through the store Wi-Fi network if he chooses—for more information on that shoe, such as consumer reviews, and what sizes or additional colors are available in the store he is in, in nearby Bon-Ton stores and online. He can place an order online right away or e-mail himself the product information.

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