Experience Driven Retail Strategy - a shield against online shopping?
With the increasing popularity of online shopping, retail brands operating through a store are under a quest for survival. Considering e-commerce is going to dominate the industry for a while, how have retail stores planned to combat the challenge and thrive in the market?
When talking about shopping hubs around the world, Dubai’s name tops the list. From the most expensive to the most affordable, Dubai’s market has something for everyone. Even in terms of the economy as such, the retail sector contributes to 27% of the total GDP (approximately AED 103.6 billion).
“Unlike its counterparts in the West, retail plays a more integral part in a consumer’s life in the UAE/GCC region,” says Evarist Rego, Marketing Manager - Ajmal Perfumes. “Especially for the local Arabs, retail is a ‘recreational’ activity; to spend time with their families by visiting malls. And with this country pulling close to approximately 26 million tourists a year, retail is one of the corner-stones of UAE’s existence.” Be it because of the weather conditions or the infrastructure, the culture of visiting shopping malls as a family activity is more prevalent in this part of the world. Despite this, the reality of shopping has undergone a massive makeover during the last few years.
Almost a decade ago, stores used to be crowded with people purchasing and bargaining on prices. Now, however, some prefer to shop online on platforms like souq.com, Noon, Namshi and more. Such platforms allow customers to choose from a variety of products from various brands, compare prices and specifications, and make an informed decision. Thanks to these benefits, there has been a significant increase in online shopping leaving retail stores unpopulated. In such a scenario, are retail stores able to cope up with the competition posed by online platforms?
“The retail industry is constantly evolving and retailers need to make sure they keep up,” says Chris Naylor, General Manager at Leem, an Arab couture brand. For instance, retail brands are focusing more on providing a shopping experience to their customers by adding different elements to bring them to the store. Sacoor Brothers’, the Portuguese clothing brand’s store at the Dubai Mall is a perfect example. The store walls are surrounded by LED video screens going all around showcasing their latest collections. They also have a digital booth inside that displays the brand’s live Instagram feed. Their in-house tailors working on alterations can be seen from outside the glass walls giving a true feel of the brand. From being a pure tailoring brand, the store today is much more than that. But why is there a need for such ‘experiences’?
“Millennials are the key reason for the retail industry going experiential, says Evarist. “Having born in a hyper-socialized, Instagram fanatical digitized world, the millennials prefer everything that’s experience-driven. This is the generation that’s responsible for the changeover of ‘From Status Symbol to Status Update’”. Since most millennials are dominating the consumer market today, retails brands are now focusing on an ‘experience-driven’ strategy. “Alibaba’s offline supermarket retail brand, Hema with digitized aisles, farm-to-store food tracking devices, service robots, etc is a classic example of how brands will be catering to these millennials,” he adds.
There, however, are brands who had predicted this shift before and planned their cards in time. Merlin Digital is one such brand which believed in being different. “A google search will show that we were selling build to order assembled PCs along with Dell in 1999,” says Rohit Bachani, Director and Co-Founder of Merlin Digital. “We were the first brands in the Middle East to offer their own specialized brand ambassadors at one the worlds biggest duty frees back in 2006 with a live demo stand. And in one the biggest malls we had a live station demonstration showcasing wireless music back in 2001. So the emphasis has always been on experience driven and live demonstrations for us.” But for a brand like Merlin, experience emphasis is more important because in buying electronics, the look of the product is not enough for a guaranteed sale. Similarly, for a perfumery brand like Ajmal, customers would like to smell and indulge in the fragrance first before purchasing. But in the fashion industry, where people are increasingly choosing to buy online, the dynamics are different.
A number of fashion labels, who couldn’t afford to offer unique experiences, have either completely gone virtual or are choosing to sell over different platforms including Instagram and Facebook. This, in a sense, has also pushed new brands to plan their launches keeping an omnichannel strategy, where a store has a physical and an online presence simultaneously, in mind before starting.
Leem, for instance, was designed with an omnichannel integration on charts to match the latest shopping trends. “We started off with brick and mortar entities to ensure we understand our clients, their shopping habits, their tastes, and preferences,” says Chris. “We are planning on launching our e-commerce site and application in the next few months with movement towards full omnichannel integration between stores and e-commerce sites.”
With going omnichannel too, there is another challenge being posed by the expat population in the UAE. As Evarist says: “Since the primary reason of most expats to come to the UAE, besides having a better living and working standards, is to save money, the latter might become the key reason for the online industry to prosper in the longer run – as we’ve seen the two key reasons for the online industry to grow in the West are lower prices – to be read as discounts and convenience.”
So now retail brands are left with two options. Either adding different experiences to attract customer footfall which may be an additional cost, or to go online and sell at cheaper prices. If the latter is preferred by most, in the long run, it would mean that retailers will have to compromise on quality or reduce their profit margins in order to survive in the market. But despite all these trends and predictions, retailers are quite optimistic that physical stores would never disappear completely and will still have their value.
Rohit feels that for technology products with simple models, online sales will work but a traditional retailer will still be needed for extended warranties, special accessories which are hard to find online and authentic products.
A combination of the two seems to be the future of retail. According to Chris and Evarist, customers will choose to visit the store in person to enjoy the overall purchasing experience and will buy online, called the ‘Brick and Click’ model. Rohit, however, is optimistic about the fact that in due course, traditional retailers will have the ball in their court. “I personally feel in a market like the UAE with the beautiful malls and infrastructure, it is still an experience to go out and buy a product and it will come full circle with the charm of online retail going down a bit and consumers would come back for the old fashioned experience.”