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Kurt Salmon: Stores Aren’t Dead, They’re Transitioning

Some say brick-and-mortar stores are headed to their end, while others remain steadfast in their belief that stores are staying put.

So which is it?

We know Black Friday didn’t bring the zing retailers had hoped for to kick off the holiday season, that 58 percent of retail executives don’t think brick-and-mortar only stores will make it in the future, and that Macy’s CEO Terry Lundgren thinks the whole talk of stores tanking is just exaggerated.

But according to Kurt Salmon consultancy retail and supply chain strategist Steve Osburn, stores are shifting their strategies, and they don’t in fact have one foot in the grave.

One thing more stores are tapping into is buy online, pick up in store offerings. This year, the number of retailers offering the service reached 50 percent, up from 38 percent last year.

The sizeable jump, Osburn said, can be at least in part attributed to improved inventory visibility, which has in the past been a barrier to entry for the dual-channel program that demands stores know where their stuff is.

“We’ve seen a lot of retailers implement ship from store, and once you have all things in place for that, buy online, pick up in store becomes a lot easier,” he said.

Despite the uptick in demand for e-commerce, consumers still like having the ability to visit stores for product pick-ups and returns. And for stores that want a fighting chance at playing in the e-tail market, the click and collect model can prove positive.

“If you’re trying to compete with Amazon, the easy way to do that is to use things that are already close to the customer,” Osburn said. “Amazon has the benefit of having DCs [distribution centers] all over the country. Most people live within an hour or so of an Amazon DC. Some of the big retailers may have four or five DCs across the country. So if I use my stores to get inventory to the customer, they are already a lot closer to the customer, and if I allow them to pick it up, that eliminates the transit time too.”

Stores that are winning at buy online, pick up in store have made it really simple and seamless for the consumer to get their purchases, some even offering a special parking spot for collecting customers to get in quickly, gather their goods and be on their way.

The buy online, pick up in store model is also benefitting retailers’ bottom line. Today’s consumers overwhelmingly expect free shipping for their purchases and more are starting to want returns to be at the retailer’s expense as well—which can be far less friendly to bottom lines.

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But more retailers, especially during peak holiday season, are concerned with maximizing market share than with what Osburn calls the cost to serve.

“When e-commerce is 5 percent of your business, the cost to serve the e-commerce customer is not such a big deal, but it becomes so if you’re not making a lot of money on those transactions,” Osburn said.

With the online channel obviously on the upturn, retailers will have to assess shipping strategies to both keep customers and make margins.

If the trend in retailers adopting buy online, pick up in store services continues as it has, and as Kurt Salmon analysts expect it to, 2016 could see 60 to 70 percent of retailers offering the option.

Either way, the customer is getting a more catered experience—something increasingly sought in today’s saturated market.

“The big thing is that retailers are making their inventory available to the customer,” Osburn said. “And it’s easier for them to pick and choose how they want to collect those goods.”

Stores will still have more than a fighting chance if they can meld the right mix of in-store and online elements to give the customer the experience they seek.

“Ultimately, the store is not dead, the retailers are just finding ways to use their real estate intelligently…retailers are finding ways to integrate the store into the online experience, so buy online pick up in store is one of the main indicators of that,” Osburn said. “If you’re combating stores like Amazon, you’ve got to find ways to do things they can’t do because most of what they do they’re very good at.”