Are You Ready for Hybrid Retail?
The pandemic has certainly accelerated ecommerce, so much so that some people even questioned the survival of the high street. Many businesses were forced to close their bricks-and-mortar stores, while shopping both online and on social media has registered a significant growth during this period.
All these changes led to hybrid retail, combining online, social and offline shopping. Our content editor, Lina Vaz, talked with Jonathan de Mello, founder and chief executive of JDM Retail, who explains how much the retail industry has changed in recent years, and the best way of thriving in such a dynamic environment.
These are just the main points from the interview, part of our Retail Masters video series, which is all about learning from retail insiders. De Mello has been working in the retail industry for over 25 years, providing tailored solutions to clients in the retail, retail banking, retail property and public sector.
De Mello says retail has become omnichannel over the years. It was catalysed by the advent of the internet a couple of decades ago, and since then people moved to online shopping, which is now pervasive. De Mello stresses Amazon is now dominant in this sector, not only in the UK, but globally as well. Other retailers had to evolve with times:
“During Covid, people had no choice but to go online to shop, and retailers have heavily invested in distribution channels. They are now tech savvy and have modernised, but it's been a long journey for some of them.”
He adds that retail is now very much about multiple channels, as opposed to one channel. Some retailers are still stuck behind the times to a certain extent, and those are the ones that struggled or even failed, such as Arcadia and some department stores.
On the other hand, pop-up stores are becoming prevalent. A lot of high streets in the UK have a surplus of space because of the demise of the department stores and many other retailers during Covid. “We have seen vacancy rates at beyond 20% in some high streets, so there has been an increase demand for pop-up space as a result.”
De Mello explains this as a way to have some agility, as retailers don’t want to commit to a location without testing it first, and a pop-up store allows them to do that, they can assess the concept and consumer demand, while also minimising their costs.
It's important to note that physical stores tend to increase online sales. “From the work we’ve done for multiple retail brands across the years, we’ve found that where you have a physical space, it does generate additional online sales, it’s what we call the halo effect.”
The halo effect can bring millions of pounds of additional revenue to online channels, but De Mello stresses that a pop-up doesn’t deliver the same level of halo as a proper fully appointed physical store, as its main purpose is to showcase the brand.
Another important change is the shrinkage of the department store market, particularly in the UK. “The department store concept is a little bit outmoded. You don’t need as much floor space as you did in the past to showcase your products, because you can do so online. That’s why these stores have downsized and turned retail space into office space or even residential.”
Nonetheless, one cannot underestimate the power of a physical store, not only due to its impact on online sales, but also because it’s a powerful way of fostering brand engagement and offering great service. “Samsung is an example of this. They opened a physical store in King’s Cross, but it doesn’t make any money, for them it’s a big marketing vehicle, people go there to experience products.”
The interview also touches on the metaverse, and if it’s worth investing in it at this moment in time, and sustainability. De Mello says that buying from a physical store is actually more environmentally friendly than online, due to the high level of traveling and packaging involved. Last, but certainly not least, he gives some advice about what retailers should prioritise in the near future.
Jonathan de Mello, Founder and CEO of JDM Retail