Digital Natives Demand Smart Stores

Retailers look to a new generation of technology to stay a step ahead of e-commerce sites.

Younger people love in-store shopping, but they’ll look elsewhere if the experience isn’t tailored to their digital needs.

Whitman Davis spots yet another person at the bookstore surreptitiously checking her phone.

He knows she is comparing prices on, perhaps even ordering a copy of the book right there in the bookstore aisle. Davis is proud of himself for making it to the register with his purchase and supporting a local business.

Yet the 32-year-old admits his shopping is not usually so principled. “If I know I need something specific, I will choose the path of least resistance by purchasing online,” he said.

Davis found himself in Seattle’s Lamplight Books because he doesn’t always know what he wants. He prefers to wander through the aisles, observe what others pick up, and dust off a book to skim a few pages. He believes that “the experience of finding the book in a great shop adds to its value.”

While this may sound old fashioned, romantic even, Davis is far from unique. According to multinational accounting firm EY, 93 percent of purchases are still made in shops1. EY predicts online shopping will only account for 19 percent of transactions in three years.

This means brick-and-mortar is here to stay. But as brands close thousands of locations across the country, the retailers of the future are designing a new breed of store—one that caters to people accustomed to online shopping.

"Physical retail spaces need to focus on facilitating experiences that can't be replicated in an online setting."

—Shepherd Laughlin
Trend Forecaster,
J. Walter Thompson

Web Rules for the Real World
Adam Meiras, director of retail at consulting firm AlixPartners, points out that web companies moving into brick-and-mortar have the opportunity to start fresh.  

“They are purposefully creating their retail footprint to enhance their product catalogue, get their branding out there, educate their customers, and interact with them,” he said.

Some retailers are using virtual reality to make their stores more engaging. Tools like InContext Solutions’ ShopperMX let retailers visualize new layouts in VR. 

“Rethinking the design of retail in today’s world is very laborious. It takes a lot of people and time to build fixtures, bring products together, and set up a mock design of the store,” said Mark Hardy, CEO of InContext Solutions. 

“What we’ve done is cut the costs and time in that equation with VR,” Hardy said. “Allowing rapid prototyping means that retailers can drive the bottom line with faster, better decisions.” 

After making its name as an online retailer of just about everything, Amazon surprised the world and opened physical bookshops. The company cut the ribbon for its first location in Seattle in November 2015 and has launched six total.

Amazon Books aren’t ordinary stores. Unlike a regular bookstore, these include visual elements familiar to visitors of its website. Books are laid flat, rather than spine out, so that the cover catches your eye. Each work is accompanied by a personal review from the website, replacing the handwritten recommendations of store employees.

Then there’s the less obvious difference: Algorithms, not people, are the primary curators of its collection. Items are displayed on the shelf only if they exceed a four-star rating, and artificial intelligence scours website data to identify local consumption trends.  

Amazon’s decision makes perfect sense when you look at the group raised on smartphones and social media—those born after 1995, sometimes known as Generation Z. According to global consulting firm Accenture, a whopping 77 percent of these so-called “digital natives” prefer to shop in stores to preview products2.

"Retailers are constantly focused on experimenting with new innovations both online and in-store to remain relevant to evolving consumer demands."

—Matthew Shay
President and CEO,
National Retail Federation