Hybrid brick and mortar: The digital solution
By Abbas Leghari, Head of Business Development/Sales Management Office, and Sehar Azhar, Assistant Manager Global Marketing, NETSOL Technologies Inc.
Digital has changed the lives of people drastically from buying groceries to monitoring kids while at work, none of which was imaginable a long time ago. There is no production, moving, exchanging or collection done without the involvement of some part of digital technology.1 The change to digital was being accepted and normalised in its own swift way, when the Covid-19 pandemic hit. Businesses were forced to make the jump to digital or face the consequence of going obsolete. Businesses wanting to survive the pandemic, accepted the change without thinking about the bounce back. But acceleration in acceptance of digital transformation took away the real question, will digital be the new normal?
Many retail stores closed down as people were forced into a lockdown. The acceptance of digital created a new environment for all. Classrooms, workplaces, meeting spaces, social gatherings, all became digital. But what everyone forgot, while trying to survive, was to foresee a future post lockdown. The importance of human interaction was only felt when everyone was video chatting with families and co-workers while staying in quarantine for over a year.
Gradually adopting to this change, impacted the way people wanted to experience things. As businesses gradually come out of the pandemic restrictions, smart retailers have the chance to get back on track and win back their customers from the full digital competitors (eCommerce).
Many traditional retail stores closed down because of the pandemic impact and most of them will not be reopening again to the way they were before. But was this anticipated as a long-term decision? Some people perceived it as the death for traditional retail and, in order to stay solvent, brands were expected to go all digital.
Bigger brands started acquiring the most innovative transitions of smaller brands in order to stay ahead and advanced. However, with all the digital transitions happening, what very few anticipated was the come back from the pandemic.
Fully vaccinated people, tired of sitting behind their screens and longing for a physical shopping experience, want to get out and spend their savings on all kinds of things. As mentioned in The Economist2, history tells us how consumers have previously reacted post pandemic and the spending increased whether it was an impulse buy or an exotic experience they had longed for.
What this pandemic has helped the most with is it improved the digital adaptability yet reminded all the strategists the importance of human interaction, thus encouraging hybrid brick and mortar. It has taught many a lesson that there is not only black or white but grey as well.
As the Greek philosopher Aristotle said, “man is by nature a social animal.” People are social animals at heart. Human beings cannot live alone. The opportunity of visiting a store and physically being able to purchase something with a single click is an attraction people have desired or adopted. Physical retailers have the time to shine as a post pandemic world gives them an advantage.
Table 1: Digital channels in the automotive-purchase experience are becoming more important
Source: McKinsey Automotive Retail Consumer Survey (China, Germany, United States)
However, an isolated traditional retail rebound is not the answer. Though people want to go out and socialise, the ease that digital has brought into the lives of people will remain a privilege forever. Having a combination of both physical and digital is the future. A hybrid model is what the future demands. Having a blend of both physical and digital strategy can provide customers with both ease and satisfaction. But will the hybrid model survive or will people eventually move to a completely digital ecosystem?
Physical and digital strategy – A hybrid model. Being smart about blending a physical and digital strategy can bring about the social experience that customers are looking for. Technologies like autonomous micro markets offer an easy, checkout-free shopping experience. The idea of limited human interaction, no waiting in long queues or public tills, gives customers the opportunity to shop from the comfort of their mobile phones. However, it also offers the satisfaction and a physical in-shop experience. This is a great chance for the traditional retailers to utilise the store space and provide in-person unique experiences. For example, Nike has a floor completely made into a small basketball court, soccer pitch and treadmill to let customers test their products before purchasing, which also gives live feedback to the retailer.
The best way to enable the hybrid experience and successfully implement it is to think of the experience for the customer first and then technology. The unique, branded physical experience needs to be well thought out by retailers in order to satisfy the customers who have patiently waited behind screens to go out and shop in-stores.
Integrated omni-channel experience is best catered to when the entire ecosystem is measured. From production to logistics, in-store experience, purchase and everyday use, it can create opportunities for invention that could transform business operations and improve customer experience.
Research done by The Shekel Group3, executed in the US, shows that 87% of consumers want an in-store shopping experience that does not require them to touch anything and have robust self-checkout. The brick-and-mortar retail experience is not going anywhere, however, it is inducing innovation for improving customer experience and efficiency in order for it to stay for a longer time.
Traditional retailers do not necessarily have to beat the online sales in order to increase their own. They need to find a way to make it worthwhile for the consumer to visit the store.4 There are plenty of ideas that traditional retailers can implement to bring a hybrid model into existence.
A traditional car purchasing experience looks pretty much the same for everybody.5 A customer is brought into the showroom, met by the sales assistant to hear their sales pitch, look for the desired vehicle, try and find the exact match and then have 20 minutes to test out the car before they make the decision. However, with a virtual showroom, the entire idea changes. Brands can show consumers their portfolios including newer and older models, help them with preliminary research, let people setup time for showroom visits, sign up for promotions or upcoming launches and introduce gamification. Ability to explore and test drive their desired vehicle with the family, without stepping out of their houses can be offered through an augmented digital experience. However, the target should not be focused only on user experience but to streamline the entire supply chain and find efficiency in all forms, time, resources, and cost.
The automotive dealership sustainability. Car sales continued to decrease by 37% in the US since the start of 2020, with the blame for the drop in sales put on the closure of dealerships. However, the truth is that in many regions, car dealerships are far behind digital transformation.
While electric vehicles and autonomous cars development is accelerating, the opportunities for hybrid sales have increased exponentially. Customers are envisioning a future of online car buying where everything is available to them on tap. However, these customers also want to test drive the car and have a real-time experience before agreeing on the purchase.
Table 2: The role and business model of the dealership needs to change
Source: McKinsey Automotive Retail Consumer Survey (China, Germany, United States)
Companies like Cazoo and Cinch have been offering all digital solutions for purchasing cars even before the pandemic and because of the availability of such platforms, an increasing number of consumers started buying online. According to a survey6 done by Vauxhall Motors, around 10% of shoppers preferred to buy their car online and enjoyed the click-and-collect or delivery services. However, many consumers still prefer in-person dealerships and wish to speak with an expert before making such a major purchase. Today, the forecourt visit is the final step in the car buying process, hence making it the most important one. In a survey7 conducted by Car Dealer, out of 2,000 drivers, 80% agreed that the dealers provided them with expert knowledge and understood what they wanted, which convinced about 70% to make a purchase at the dealership.
As mentioned in a research by McKinsey, for staying digitised and ahead of the disruptions happening in the automotive sector, OEMs and retail partners are required to do more than just moving operations online. Many automotive giants are bringing out new retail models to cater to the needs of the consumers.
Today, the customer is more intelligent and is using smarter technologies. They conduct online research, explore financing options, and choose the subscription/rental/instalment models that suit them. Nonetheless, no matter how much information and research are collected on the customer’s buying journey, the consumer is his own decision maker for the kind of buying process they want, as said by Allyson Witherspoon, US Chief Marketer for Nissan.8 The behaviour of consumers has changed tremendously in a lasting way.9
It is important to understand that buying is not the only reason customers visit dealerships, there are additional services too which consumers look for at a dealership such as research, maintenance, service, vehicle return and evaluation, among other things. While staying in a lockdown has made people safer, cars need regular upkeep and most cars’ maintenance has been delayed because of lockdowns closing down dealerships.10 Digital needs to cover all aspects of the supply chain to be a complete success or else it will be half cooked.
What is next for car dealerships? In a world that we are now getting used to and are looking forward to for car buying, the most sustainable model is hybrid retailing. The opportunities for both physical and digital retail are booming. The catch now is for dealers to find a way on how they can complement both ways. Close Brothers Motor Finance11 states that the most successful dealership is the one that has truly adopted the hybrid model.
With the extremely strict lockdown restrictions in the last year, dealers have been very innovative about digital forecourts. Now that the restrictions are lifting and the in-person dealership experiences are returning, the progress of digital will play a very vital role in supporting and improving the entire car buying journey as well as efficiently improving the supply chain.
As consumers rely on research before visiting the dealership, digital dealerships should ensure that they provide tools to facilitate that and position themselves. This should be backed by technologies such as AI/ML to learn and improve based on consumer profile, footprint, etc., and help in ensuring consumers achieve the end objective easily.
Similarly, it also provides opportunity for upselling and cross selling. It reduces the time a consumer has to spend online or in-person at a dealership. This is just an example of many initiatives that a dealership of the future needs to take.
The buying journey of a consumer will keep on changing and so will their needs. Dealers need to make sure that the needs of the consumers shape their forecourt, so the customers are facilitated with hybrid retailing. As we look at the future, more smart and robust retailing models and an efficient supply chain will prove to be extremely valuable. Reassessing brand strategies, investment plans and performance metrics for most businesses is what hybrid retailing is and physical stores are the main part of the hybridisation process.12
Abbas Leghari, Head of Business Development/Sales Management Office
Sehar Azhar, Assistant Manager Global Marketing
NETSOL Technologies Inc.
Main Ghazi Road
Tel: +92 42 111 44 88 00