The Return of the Big Box

The battle between online retailers and traditional brick-and-mortar stores is entering a new and exciting phase. Less than a decade ago, experts predicted the demise of the big-box store because e-commerce enabled people to shop for larger inventories from the comfort of their homes and get items delivered in a relatively short time. These experts claimed that traditional brick-and-mortar sales strategies were going to be the cause of their quick demise. And until recently, big-box retailers were indeed struggling to beat the large online retailers at their own game.

However, another dynamic came into play: The online-to-offline strategy, which was expected to rewrite the rules of web commerce radically, wasn't working so well. Fleets of unmanned delivery drones and fulfillment kiosks are yet to manifest and prove themselves. In the meantime, traditional brick-and-mortar stores found their stride, created excellent websites, and armed themselves with a host of IT tools, big data and analytics.

These traditional stores are changing time-tested strategies. Take, for example, the Adidas store in Lower Manhattan. It houses a high-tech digital wall showcasing every Adidas offering in existence. The multimedia display is akin to an endless aisle — i.e., a small store with a huge inventory. Consumers can scroll through the display and select sneakers, their colors and features, and plug all the information into the system. Once that's done, a store associate, the first human interaction in-store, appears with the exact pair of sneakers the shopper requested.

Everything is customized and ready to wear. Should the user wish to purchase the sneakers, it's instantaneous, without the wait time that one encounters in an online order. This example is one of many, and signifies an enormous change in brick-and-mortar store strategy. Expect big boxes like Wal-Mart and Best Buy — the latter recently announced it would be selling the new Apple Watch at its stores — to use their brick-and-mortar outlets as an advantage.

Big-Box Stores as Demand Fulfillment Centers
The phenomenon called "showrooming" was initially feared as a death knell for big-box retailers, but what we've learned since is that showrooming also implied that most consumers don't view a trip to a big-box retailer as a chore. Rather, it's a pleasurable experience because the displays are always changing and the retailer focuses on promotions and informs them about these on mobile devices while they're in-store. The process of demand fulfillment using IT software, big data and real-time predictive analytics showed that big-box retailers can ensure inventory that beats the prices of online retailers. Likewise, a customer takes pleasure in buying an item on the spot instead of having to drive to some fulfillment center or wait for a courier to bring it to their doorstep after having ordered online.

Big-box retailers have realized that their spacious stores are essentially fulfillment centers — but much better looking. Their well-trained sales associates are a tremendous advantage over someone simply scrolling down a web page and looking at products. Consumers can continue to drive to their favorite stores to kick the tires of new products, and they can also order the merchandise from the same retailer online should they wish to. Target’s newly introduced ship-from-store program at 136 stores in 38 markets has the ability to reach 91 percent of American households by ground transit within two days.

Omnichannel Retailing: Where Consumers Genuinely Enjoy a Trip to the Store
Traditional stores now have websites that are just as good, if not better, than pure-play online retailers. Furthermore, a recent study revealed that 90 percent of American shoppers access their smartphones while they're in a store. Shoppers are bringing the online experience into physical stores on their mobile devices. Therefore, retail chains now have a broader digital presence (online, mobile, kiosk, social media, etc.) than ever before. The digital consumer who prefers scrolling web pages in the privacy of her home can order products online, but she doesn't have to wait for the mail to arrive. If she orders from a big-box retailer’s website, she can drive to the nearest store and pick it up immediately.

Technologically savvy big-box retailers can successfully take on the internet giants with their ultramodern command of the supply chain and inventory process. Showrooms and impressive websites are the direct outcomes of the digitization of the supply chain. Inventory fulfillment and operations management have been utterly transformed by IT. Big-box retailers can tell in real time which customer has entered what store, and based on their previous purchasing patterns, can offer special promotions to her in-store. The business model that's now transforming the marketplace is based on an effective combination of digital and brick-and-mortar locations.

Consumers might not want to admit it, but hunting for deals and discovering sales online can be addictive. Brick-and-mortar retailers are also providing them with the fun shopping experience of hunting for deals in a physical store. They're engaging consumers in a one-on-one retail relationship by using the very best analytics and big data tools. The result is omnichannel retailing, and customers genuinely enjoying a trip to the store.

Online Retailers’ Response to Showrooming
Online retailers aren't standing idly by, however. For example, if a shopper decides to showroom and then go back home to order the item online, they might find 10 versions of the item they saw in-store. Simply put, online retailers are trying to negate the growing trend of big-box stores doubling as fulfillment centers. They're giving brick-and-mortar stores a shot across the bow, demonstrating that whatever a consumer might find in a physical store, they will find a far larger and more expansive inventory online. And because of this vast inventory, online stores can afford to cut prices. Brick-and-mortar stores might have won the initial battle, but the online giants aren't giving up.

Like every other web success story, this is far from being the last chapter. Expect innovative ideas, fierce strategies and a gala time for consumers.

Amitabh Mudaliar, AVP and senior client partner, retail, CPG and logistics unit, Americas, Infosys, a business technology consulting, IT solutions and IT services provider.