How does bricks and mortar retail survive in a digital world?

In Wednesday’s budget, Chancellor of the Exchequer Philip Hammond acknowledged one of the most pressing issues facing British retailers:

“Business rates raise £25 billion per year…so we cannot abolish them.

“But, it is certainly true…that we have to find a better way of taxing the digital part of the economy – the part that does not use bricks and mortar.”

The Digital Revolution has turned global retail on its head, with the UK now the world’s most developed ecommerce market.

And the ecommerce giants aren’t going away. On the contrary, as their product offerings expand, along with their engaged, loyal user base and logistical reach, the allure of etailers is only growing, with the high street firmly in their crosshairs.

But with many retailers heavily invested in real estate, with hundreds or thousands of expensive physical locations, they need their square footage to work harder for them in order to survive.

Because, in a world where “going shopping” increasingly means reaching for an internet-enabled device that instantly connects you to an infinite catalogue of products that can be purchased, delivered, tried on and then either kept or returned from the comfort of your home, physical stores need to offer something more to customers.

As we’re seeing from the most innovative consumer brands, dedicating physical space to non-sales activities can create moments that no digital experience can match.

The Nike ID Bar allows customers to create their own trainers, and has been expanded to the Converse brand

Brands like Disney, Lego and M&M have always adopted experience-led shop floors, giving customers a playful, try-before-you-buy environment.

Leveraging social media platforms like Instagram and Snapchat has opened a new, powerful content-creation opportunity. Now, even if they don’t spend a penny in store, socially active visitors can post images of themselves with branded backdrops and props that offer a priceless brand endorsement.

Sport and leisure stores have also experimented with experiential installations. Aspiring athletes can’t learn much from trying elite sports equipment and apparel on in a changing room cubicle, so Nike Town’s astroturf testing pitch allows footballers to pick a pair of boots and take some shots at goal before committing.

Nike’s also innovated in personalisation. The Nike ID Bar lets you pick your trainer of choice, individually design every aspect and “print” your own, totally unique pair of shoes, all through a touch screen. On the back of the IDLab’s success, they’ve rolled the idea out to their Converse Blank Canvas lab.

Whole Foods have reinvented the grocery store with a truly innovative concept store. Their 50,000 square foot space in Austin, Texas offers immersive experiences including Candy Island, where customers can dip fresh strawberries in a chocolate fountain, and Whole Body, where shoppers can choose from a range of massage therapies. They even have a Salad and Chardonnay Bar, where you can construct your own salad from more than 150 organic options and then eat and drink in a landscaped salad garden.

The brick and mortar companies most at risk from the Digital Revolution are those whose core products have become totally digitally available. Music, book and video game retailers have been overwhelmed by online entertainment marketplaces like the Apple Store, Google Play, Amazon, Spotify and Netflix. The pace of change has already claimed high street mainstays like Our Price, HMV and Borders.

GAME has launched seven BELONG eSport gaming arenas to entice video game fans to compete against each other

With consumers now able to immediately access tens of millions of books, albums, films and video games, in high definition, in seconds, with no limit on choice, directly on to a state-of-the-art device, it’s hard to see how physical entertainment stores can compete.

GAME, the UK’s leading video gaming retailer, has made an innovative big bet on the global phenomenon that is eSports. Now a US$500m annual business, with 250m active participants, arena-filling competitions and even Premier League eSports players, the potential is enormous.

Launching seven BELONG eSports gaming arenas, they host regular competitions and rent out the spaces to shoppers, parties and private tournaments. Fundamentally, they are inviting gamers – a highly active and engaged cohort – to make a home in GAME.

They have realised that, in a world built on virtual communities, there’s still demand for a physical space for those communities to meet.

Technology has made every single part of our world reflect, react and innovate. If the high street locations that built these companies’ successes are to survive and continue to compete with the younger, leaner new kids (not) on the block, they need to inject innovation to their property portfolios.

Tax relief and policy implementation will only offer short term relief. Retail will continue to evolve, and as the above examples show, creativity within physical space can still drive brand love, loyalty and, sales.

And with an almost unlimited range of options for consumers, only the innovators will survive. | @SteRosenthal | @TheMBSGroup