Retail Roundtable: Can Brick-and-Mortar Thrive in an Omnichannel World?

These are dark days for many retailers, especially those brick-and-mortar stores that are losing store traffic and market share to aggressive ecommerce retailers.

By some accounts, as many as two-dozen major U.S.-based retailers are in danger of bankruptcy due to poor credit ratings. More than 3,500 stores – and counting – have closed thus far in 2017. And countless malls and shopping centers are facing vacancy rates that dwarf those of the Great Recession of 2008.

Is the ecommerce tsunami ushering in a sea change for traditional retailers? Or is the brick-and-mortar environment simply experiencing a natural evolution, which will sacrifice weaker players and leave stronger, innovative, omnichannel companies poised for long-term success?

We asked four Ketchum experts with extensive retail experience – Mara Richter, vice president, Brand Marketing; James Donnelly, senior vice president, Issues & Crisis Management; Rich Halberg, principal with Daggerwing Group; and Rand Carpenter, senior vice president, Account Director, Brand Marketing – to share their insights and perspectives on today’s retail landscape.

Many brick-and-mortar retailers are clearly struggling, with declining sales and profits leading to store closings or even bankruptcies. Are we seeing the beginning of the end for brick-stores with a physical presence?

Rand Carpenter: Not at all. People will always be drawn to brick-and-mortar for that in-store experience, especially in the hometown stores that are a big part of their communities.

But malls and department stores are going to drastically change. Many retailers may see their store footprint shrink in size, but those that offer desirable products, great customer service and a true omnichannel experience will thrive.

Mara Richter: Years ago, before ecommerce, it made sense to keep adding stores. Now, many retailers simply have too many. The sheer volume of real estate just isn’t sustainable when the number of online shoppers continues to grow. But you’ll always have people who prefer stores. Sometimes, you just want to go shopping.

It also depends on the industry. For example, brands that serve customers in a specialty category are serving people who have a strong desire to see and touch the materials before they buy it. But to keep them from seeing it in-store, and then buying it online from somebody else – a practice called showrooming – the company offers unique, convenient or exciting experiences that customers just can’t get online. That’s a good strategy for any brick-and-mortar retailer.

James Donnelly: It’s a transformative time. But I don’t see the demise of brick-and-mortar shopping. Some retailers will go out of business, and some will thrive, as in any transformation.

I think those that thrive will have to be more nimble than ever been before. You can’t plan your inventory 18 months in advance anymore. Companies that can adjust – almost in real-time – with quickly-changing trends will have the best chance to succeed.

What are the implications, for retailing in general, of large ecommerce companies acquiring brick-and- mortar companies, as we’ve seen recently in the news?

Rich Halberg: I think deals like these reflect an aggressive move toward omnichannel retailing. And consumer behavior seems to support that strategy. They want the convenience of online, but still crave – for certain types of products, like groceries – the tactile experience you can only get in-store. Retailers need to move toward the middle ground, with in-store and online experiences that may be different but are flawlessly executed. Given retail’s tight margins, and the intense competitive pressure, I would expect to see more mergers and acquisitions in this space.

Mara Richter: These deals are really interesting, because it gives the ecommerce leaders a whole new level of credibility. For instance, fresh foods are one area of online grocery shopping that some consumers have been leery about. But if online retailers are able to utilize local stores as distribution centers to ensure quality, it eliminates that barrier.

James Donnelly: The successful online retailers are all about convenience. If they can bring convenience to industries they haven’t quite mastered yet, the brick-and-mortar companies affected by that move will have to amp up their offerings, too. Smart brick-and-mortar retailers will also need to make sure that service and quality of merchandise are key differentiators.

Where should retail brands place their bets in terms of using communications to support their new or evolving business models?

Rich Halberg: First, you have to get alignment with your executives. What does success look like? What are the challenges you must solve? You’d be surprised how often there can be a disconnect on these issues, even in the executive suite. Next, you have to thoroughly understand how customers are interacting with your brand. Without customer journey mapping, you’re making decisions in the dark.

Then, you have to structure your marketing and communications operations to focus on the two stakeholder groups who are going to make or break your strategy – frontline employees and the customers themselves.

James Donnelly: I agree. Once senior leadership determines a clear vision, your most important audience is internal. From top to bottom, the cashiers to the regional managers, everyone has to be aligned on the vision and message of what transformation means and how it looks and feels.

Rand Carpenter: From my perspective, internal is the most important audience. But not enough companies tap into this loyal group of advocates. They can – and should – be huge ambassadors.

While some companies are nervous about employees speaking externally, they can really differentiate you. For longstanding companies, that employee legacy is something the newer, ecommerce-only companies can’t match. Tell their story!

What have you learned about retailing’s ongoing evolution from your work?

Mara Richter: Retailers and brands need to stop being reactive to everything competitors do. Certainly, things happening in your space often require a swift response. But not everything! If you have a strong plan and direction, you should strive to stay the course, make tweaks and innovations as needed, and deliver on your promises.

As Forbes recently reported, nine of the 10 largest retailers in the U.S. are primarily brick-and-mortar chain stores. So it can be done.

Rich Halberg: Many retailers are investing heavily in remodeling and making sure the store experience is pleasant and efficient. And that’s smart.

But if they aren’t addressing employee engagement simultaneously, they’re missing half of the equation. Stores create the setting, but employees make-or-break the experience. Employees are the essential element in delighting consumers, and making them customers for life.

Rand Carpenter: Retailers that are primarily brick-and-mortar companies definitely can’t neglect the online shopping experience. All channels must provide the experience their customers are expecting. Disappoint them once, and you may lose them for good.

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