Bricks and mortar to overtake e-tailers: report

New technologies will help retailers create richer experiences bringing customers back to stores, according to the latest IBM 5X5 predictions.

Amazon is far from a death knell to traditional bricks and mortar stores, according to IBM research, despite declining revenue and closings at many big box stores.

In fact, according to the annual 5X5 (five predictions for the next five years) study by the software giant, traditional retailers will likely see a turnaround, following years of decline due to e-tailers, says Sima Nadler, retailer research lead worldwide, IBM, and author of the report. Between the establishing smartphone market and growth of online giants, such as Amazon, e-retail has ballooned to a $262 billion (and growing) industry worldwide while traditional retailers have suffered year-after-year declines at checkout, according to comScore numbers.

The key, she says, will be retailers who’ve got both an online and offline presence seamlessly integrated (such as ordering online and picking up in store or vice versa), and are quick to embrace new technology that brings data analytics into the aisles.

“When you go into a store, there is very little information they have about you, as an individual,” she says. “They don’t know you’re there, how long you’re there, which products you are interested in or not, [etc]. The brick and mortar retailers, to a large extent, are blind. But that’s changing.”

She points to mobile phones, as well as new wearable technologies heating up the marketplace, and things like Apple’s iBeacon, which will allow brands to better track consumers in stores. Once married with things like augmented reality and location-based tech as well as real-life staff ready to respond to shoppers’ needs, it will create a much richer and more personal experience than e-tailers could ever hope to produce in the digital-only space, bringing shoppers back to the aisles.

She recognizes that brands hoping to survive will have to move quickly in order to adapt to the change.

This may be difficult for many box stores, who are feeling the steady decline from online sales. Best Buy, for example, saw a revenue decrease of 2.6% in 2013, while disappointing holiday sales caused the electronic store’s shares to plummet. Sears has been shuttering storefronts across Canada in a bid to stem revenue loss, while Indigo posted a second year of revenue decline with a $41.5 million loss in 2013. (Indigo has recently made plays to deepen in-store experience, including exclusive partnerships, the launch of a new loyalty program and a new mobile app. Results from those pushes have yet to be measured.)

Tony Chapman, president of Capital C, thinks a turnaround for bricks and mortar locations is wishful thinking.

“I look at the [retail landscape] right now and I think the train has left the station,” he says.  “And it’s called Amazon and it’s going to continue to be a category killer.”

He says retailers bleeding from the effects of showrooming, increasingly losing sales from in-store browsers and shopping online for a better price, won’t be able to move quickly enough to create richer experiences. What’s more, it’ll all come back to price for many consumers – it won’t matter how rich an in-store experience is when people can price-compare at the tip of their fingertips, Chapman says. Bricks and mortar will have an incredibly hard time – considering the overhead required to run a physical location – competing on price alone.

“IBM thinks that technology can give [them] back the advantage,” he says. “But I think it’s hopeful thinking.”