When Local Stores Are Digital Too

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Credit: Photo by iStock

Offline retail is finally about to change. But the shift is more subtle than many people think.

The internet has still barely touched how most things are bought. After two decades of the internet and the mobile revolution, 91% of U.S. retail spending still takes place in brick-and-mortar stores. Traditional retail sales continue to grow, exceeding $5 trillion this year. Amazon is growing faster, but is still a drop in the bucket.

You'd be forgiven for thinking that offline retail is about to keel over and die. Headline writers attract clicks by proclaiming the "retail apocalypse." There's plenty of material to fuel the narrative, from struggling mall operators to large bankruptcies like Toys R Us. Yet the numbers don't match this gloomy narrative. In 2017, the U.S. will have a net gain of approximately 3,000 new stores. (Apparel is having a tough time, but other sectors are growing strongly.) In total, offline retail sales will increase by about $70 billion, which is equivalent to half of Amazon's annual revenue. Brick-and-mortar will continue to dominate retail for a long time to come.

But something important has changed. Consumer attention has shifted online. Take a typical millennial trying to buy a brand or product: their natural first instinct is to take out their smartphone and search for it. What they experience next is deeply broken: dozens of e-commerce results, but almost no information about where the product is available locally. If a store 50 feet away has the product in stock, they might never know.

Supply and demand are not meeting, held apart by a barrier of legacy retail IT systems and missing data. Creating a unified search experience across the inventory data of one million local stores in the U.S. -- particularly smaller mom and pop stores -- has eluded even Google and Facebook. But this is finally beginning to change, powered by next-gen cloud POS companies like Clover and Square, and universal integration companies such as ours. What Yelp did for local services, highlighting what's available in your area, is now coming to local inventory and brand availability.

And with this change, offline shopping (and offline advertising) is going to feel a lot more like online. Tools that e-commerce retailers take for granted -- things like search and analytics -- are going to be available to average local stores. Online-to-offline attribution, even at the brand level or the SKU level, will start to become the norm.

The ability to get a real-time picture of offline retail is a momentous change. The first impacts will be simple and direct. For example, helping connect direct purchase intent to local availability. But as this ecosystem matures, the largest impact may ultimately be on brand advertising. It's especially potent when combined with the consumer shift towards YouTube and other digital video platforms. In very short order, we may see a transition from a world where brand advertising is largely about TV and very approximate measurement, to one that looks much more like digital.

Despite the hype, local stores are surprisingly healthy. They still represent the vast majority of retail, and they're about to get access to some of the tools that e-commerce companies take for granted. That means more consumer convenience and, potentially, a big change in the way offline advertising works -- a world where all advertising will feel like digital.

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