Dark Physical Stores

Darkness Ahead for Physical Stores?

Experts debate the future of retailing in a digital world

June 28, 2017, 10:06 am By Jim Dudlicek, EnsembleIQ
Yale professor Ravi Dhar; Steve Henig, of Wakefern; Joanne Harris, of P&G; and Shopkick co-founder Cyriac Roeding discuss omnichannel at Nielsen CoNEXTions

Is the physical store as good as dead?

Opinions on both sides of that debate fueled discussions at this week’s Nielsen CoNEXTions conference in Los Angeles, where the growth of omnichannel retailing and the Amazon-Whole Foods Market deal framed sessions focusing on how retailers should be leveraging shopper insights to stay relevant amid constant disruption in the marketplace.

The dimmest outlook for brick-and-mortar retailers came during a Tuesday panel discussion, “What’s Next for Omnichannel.”

“The future of physical retailers looks really dark. The future of retail looks really bright,” asserted Cyriac Roeding, co-founder of digital shopping app Shopkick, based in Redwood City, Calif. Consumers want shopping to be a “vacation” rather than work, and most physical stores will be unable to provide that experience, Roeding contended.

Others offered less dire predictions. Steve Henig, VP of digital for Keasbey, N.J.-based Wakefern Food Corp., said that Amazon’s pending acquisition of Whole Foods should “act as an impetus to take digital more seriously. The window is closing for us to keep up with it.” Grocery retailers should “consider your digital assets as another tool to engage your shoppers,” Henig asserted.

Roeding said that investors are underestimating Walmart as well as Amazon. “People don’t understand Amazon – it’s not a retailer, it’s a service provider,” he said. “Amazon bought Whole Foods because they needed a customer for its own services in grocery.”

Henig did agree that some center store categories are likely to vanish from traditional stores as consumers opt to shop these categories online; he predicted that within a decade, the health and beauty care category would be exclusively online.

Meanwhile, German hard-discounter Lidl has firmly planted its flag in the southeastern United States, with sights on eclipsing its longtime overseas rival Aldi, which has built a commanding presence in the States over the past 40 years. Panelist Joanne Harris, VP of North American sales for Cincinnati-based Procter & Gamble, predicted that Lidl will reach the same level in 10 years year that Aldi took 25 to reach.

But fresh categories stand to give traditional retailers an edge.

“Retailers need a point of difference and are increasingly turning to the perimeter for it,” Matt Lally, Chicago-based Nielsen’s manager for fresh growth and strategy, said in an interview with Progressive Grocer. “As we continue to watch the disruptors, fresh will be playing a bigger role. We don’t expect brick-and-mortar stores to be eliminated. They’ll use fresh to bring shoppers into the stores.”

Marc Lore, president and CEO of Walmart Ecommerce, and founder and CEO of the Bentonville, Ark.-based mega-retailer’s recently acquired Jet.com, said that “winning at retail is about merchandising and logistics, and understanding where it’s going next.”

In a Q&A session with Nielsen President and COO Steve Hasker, Lore said that the latest step change in retailing wasn’t home delivery, it was digitizing the catalog of products long available to consumers in more primitive formats. Now fertile with rich content and speedy online ordering ability, digital “allowed a step change in merchandising that caused home delivery to explode,” according to Lore.

Grocery is a key category, Lore said, and “we’re going to see incredible acceleration in that category online” over the next five years. “It’s going to be a mega-trend.”

Deanie Elsner, president of U.S. snacks at Battle Creek, Mich.-based Kellogg Co. noted that “brands are getting squeezed” amid the changes among consumers (haves and have-nots, Millennials, and a multicultural and aging population) and customers (ecomm, discounters, big box versus small box, and private label).

Amazon and other e-tailers are intimidating, Elsner said, because “they know more about our customers than we do.”

Nielsen was showcasing many of its data solutions at the conference, including the rollout of its Connected System, positioned a way for retailers and their trading partners to more easily digest and effectively convert consumer data into sales-driving solutions.

Michael Terpkosh, VP of store services for Minneapolis-based Supervalu Inc., said that the system has allowed the company to be more “nimble” and has facilitated greater collaboration with its vendor partners.

The system provides more granular info, noted Chris Morley, Nielsen’s president for fast-moving cosnumer goods (FMCG) and retail. “We were blown away by the amount of integration and collaboration within the system,” Morley said in an interview with PG.

The collaboration of data sources, he said, “could be the difference between success and failure in the future.”

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