CLICKS AND BRICKS IN A
SYMBIOSIS
–
A QUALITATIVE STUDY ABOUT THE VALUE
OF THE PHYSICAL STORE IN A DIGITAL ERA
Thesis number: 2020.5.01
Thesis for Two year Master, 30 ECTS Textile Management Linnéa Axelson
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Acknowledgements
My interest in fashion and curiosity about what the value of the physical store is in today’s digitalized society was the start to this master thesis. Given the chance to immerse myself in this subject together with knowledgeable people within the fashion industry has been incredibly interesting and valuable. I would therefore like to give all my thanks to everyone who contributed and participated in this thesis. Special thanks to all my respondents at MarQet, H&M, Gina Tricot, Ellos, Jollyroom and Nelly.com for contributing with valuable knowledge. Without your involvement and commitment, this master thesis would not have been possible, which I am very grateful for.
I also want to give big thanks to my supervisor Anita Radon for her valuable input and support as well as for the valuable feedback from my seminar group, which has driven me forward in the process of completing this thesis. Last but not least, a special thanks to my lovely family and friends for supporting me during my writing process. I hope that this master thesis gives you exciting material that contributes to new knowledge, as it has given me. Sincerest gratitude to everyone, thank you!
Enjoy!
Borås, 7 June 2020
___________________ Linnéa Axelson
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Abstract
___________________________________________________________________________
Title: Clicks and Bricks in a Symbiosis – A qualitative study about the value of the physical
store in a digital era
Publication year: 2020 Author: Linnéa Axelson Supervisor: Anita Radon
Program: M.Sc. Fashion Management and Marketing, Swedish School of Textiles, Borås
___________________________________________________________________________
Background and Problem Discussion
A paradigm shift in retail is evident due to the increase of customers purchasing products online, where digitalization has created a concern regarding the existence of the physical store in today’s digitalized society. On the other hand, e-commerce has been seen as an opportunity for retail stores to use as a strategy where physical and digital work together in a symbiosis for creating unified messages and experiences for the consumers across channels. However, this creates a challenge for finding the right combination, where physical stores require other demands today because of e-commerce.
Purpose and Research Questions
The purpose of this study is to investigate the value of the physical store in today’s digitalized society from a company perspective. In order to answer the purpose, the following research questions have been formulated focusing on the Swedish fashion industry:
• What role does the physical store have in today’s digitalized society?
• How do fashion brands value the physical store?
Research Methodology
In this study, a qualitative method was conducted with a hermeneutic approach, utilizing semi-structured interviews with key people at three traditional and three online-based fashion brands, which are MarQet, H&M, Gina Tricot, Ellos, Jollyroom and Nelly.com.
Conclusion
The physical store increases in value when working in a symbiosis with the online store. If the physical and digital commerce are coordinated and run parallel with each other, together they can produce greater value than individually. Traditional and online-based fashion companies find value in the physical store in attracting more customers, strengthening the brand, providing a holistic experience with personal service, events and added services. The store can provide that little extra to the customer also by integrating with the online store in order to move seamlessly across channels. The physical store is required in today’s digitalized society in a symbiosis with the online store to create value for both customers and brands. This study can in the long-term contribute to knowledge for fashion brands to understand and use the physical store in the best way possible to create customer value.
Keywords: Physical Store, Online Store, Omni-channel Strategy, Holistic Experience, Value
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Definitions
Retail:
An industry selling and providing goods that are used by the end-consumer (Cambridge Dictionary, 2020a).
Omni-channel:
When online and offline channels are seamlessly integrated and interchangeable during the search and purchase process (Cambridge Dictionary, 2020b).
Brick-and-mortar Store:
A traditional business that operates in a physical building (Cambridge Dictionary, 2020c).
Clicks and Mortar:
Businesses that involve selling goods and services using both traditional physical stores as well as the Internet (Cambridge Dictionary, 2020d).
Symbiosis:
A positive and lasting co-existence between organizations that depend on each other equally (Cambridge Dictionary, 2020e).
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Table of Contents
1 Introduction _________________________________________________________________________________ 1 1.1 Background and Problem Discussion ___________________________________________________ 1 1.2 Purpose and Research Questions ________________________________________________________ 5 1.3 Delimitations ____________________________________________________________________________ 6
2 Theoretical Framework ____________________________________________________________________ 7 2.1 Retail Management in Change __________________________________________________________ 7 2.1.1 The Swedish Fashion Retail Industry _______________________________________________ 7 2.1.2 The Digitalization of Retail _________________________________________________________ 9 2.2 The Physical Store _____________________________________________________________________ 10 2.2.1 The Traditional Service Landscape _______________________________________________ 10 2.2.2 New Forms of Physical Stores ____________________________________________________ 11 2.3 The Digital Store ______________________________________________________________________ 15 2.3.1 The Digital Shopping-window ____________________________________________________ 15 2.3.2 Clicks to Bricks ___________________________________________________________________ 16 2.4 Omni-channel Strategy ________________________________________________________________ 17 2.4.1 A Bridge between the Physical and the Digital __________________________________ 17 2.4.2 Hybrid Combination between Offline and Online Channels _____________________ 19 2.5 The In-store Experience _______________________________________________________________ 20 2.5.1 The Customer Experience ________________________________________________________ 20 2.5.2 A Holistic In-store Experience ____________________________________________________ 22 2.5.3 Value Creation ____________________________________________________________________ 24 3 Research Methodology ___________________________________________________________________ 27 3.1 Scientific Approach ___________________________________________________________________ 27 3.2 Chosen Methodology __________________________________________________________________ 28 3.2.1 Qualitative Method ________________________________________________________________ 28 3.2.2 Abductive Approach ______________________________________________________________ 28 3.3 Data Collection ________________________________________________________________________ 29 3.3.1 Sample and Selection of Companies _____________________________________________ 29 3.3.2 Semi-structured Interviews _______________________________________________________ 38 3.4 Data Analysis __________________________________________________________________________ 39 3.5 Quality of Research ____________________________________________________________________ 41 3.6 Ethical Considerations _________________________________________________________________ 43
4 Empirical Findings and Analysis ________________________________________________________ 44 4.1 The physical Store _____________________________________________________________________ 44 4.1.1 The Digital Driving Force for a Changing Retail __________________________________ 44 4.1.2 Try, Touch and Feel ________________________________________________________________ 50 4.2 Omni-channel Strategy ________________________________________________________________ 51 4.2.1 Digital and Physical in a Valuable Symbiosis _____________________________________ 51 4.3 Holistic In-store Experience ___________________________________________________________ 55 4.3.1 The Valuable Customer Experience ________________________________________________ 55 4.3.2 Seamless Experience _______________________________________________________________ 59 4.4 Summarizing the Value of the Physical Store ________________________________________ 61
5 Concluding Discussion ____________________________________________________________________ 62 5.1 Conclusion regarding the Physical Store’s Value _____________________________________ 62 5.2 Theoretical Contributions _____________________________________________________________ 65
IV
5.3 Managerial Implications _______________________________________________________________ 66 5.4 Research Limitations and Future Research Opportunities ____________________________ 67
References _____________________________________________________________________________________ 69 Table and Image List _________________________________________________________________________ 75 Appendixes ____________________________________________________________________________________ 77
Appendix A: Interview Guide for Traditional Physical Stores _____________________________ 77 Appendix B: Interview Guide for Online-based Physical Stores ___________________________ 78
List of Tables and Images
Table 1: Distribution of Respondents ___________________________________________ 30 Image 1: MarQet Concept Store _______________________________________________ 32 Image 2: MarQet Workspace Area _____________________________________________ 32 Image 3: Café Flik __________________________________________________________ 33 Image 4: Gina Tricot Concept Store ____________________________________________ 33 Image 5: Café it´s Pleat ______________________________________________________ 34 Image 6: Beauty Bar ________________________________________________________ 34 Image 7: Ellos Home ________________________________________________________ 35 Image 8: Ellos Home ________________________________________________________ 35 Image 9: Jollyroom Physical Store _____________________________________________ 36 Image 10: Jollyroom Showroom _______________________________________________ 36 Image 11: Nelly.com Showroom _______________________________________________ 37 Image 12: Nelly.com Showroom _______________________________________________ 37
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1 Introduction
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This chapter will introduce the background to the selected research area regarding the physical store’s value, where the purpose is to investigate what value the physical store has in today’s digitalized society from a company perspective. The chapter will also describe the study’s problem regarding the closing of physical stores as well as the research gap with support by two research questions followed by delimitations.
___________________________________________________________________________
1.1 Background and Problem Discussion
Shopping has gone from purchasing products in a traditional physical store to being able to purchase anything with a click from your computer and mobile device whenever and wherever (Herships & Garcia, 2019). We are living in a digital era, Davidson (2018) explains, where Engvall (2018) highlights that customers in today’s digitalized society keep track of other stores’ pricing and offers as the information is constantly accessible. Digitalization has therefore become a major impact on the physical stores and is likely to become increasingly more important for how, when and where the purchases takes place (Hagberg & Jonsson, 2016). However, physical stores have been forced to close down because of this paradigm shift within retail, where it is a new generation of consumer that primarily purchases items and services online rather than in a physical store (Samuelson, 2018). The numbers of physical stores are steadily declining in the suites of digitalization and the intensified pressure from commerce, where almost every tenth store has disappeared between 2011-2017 and e-commerce has at the same time grown by 20% each year between 2004 and 2017 (Davidson, 2018). As e-commerce companies grow, it is important to be able to compete for customers’ experience and attention through combining the opportunities for expansion and growth where the physical meets the digital (Hagberg & Jonsson, 2016).
Even though the retail industry has become more and more digitalized and e-commerce has increased significantly in recent years, 90% of retail sales are occurring in physical stores in 2019 and 60-70% of all trade will take place in the physical stores in 2030 (Johansson, 2019b). However, we are in a shop revolution where consumer demand is dominating, thus
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the physical stores need to reinvent in order to stand out on the market (Durén, 2020). It is therefore getting more common with omni-channels, which is according to Verhoef, Kannan and Inman (2015) a strategy where consumers can combine several channels within the purchasing process, and is according to Johansson (2018) about how a brand achieves an integrated and uniform customer experience regardless of the sales channel. The combination of digital and physical is getting more attention according to Johansson (2019b), where Poncin and Ben Mimoun (2014) at the same time argue that e-commerce companies are choosing to build physical stores, creating an exciting future for the clothing industry with the development of pop-up stores, digital in-store technologies and showrooms. New forms of distribution have therefore been created to strengthen the physical stores by implementing digital technologies as well as using the power of the Internet in their purchasing processes (Poncin & Ben Mimoun, 2014). Pop-up stores are according to Hagberg and Jonsson (2016) temporary physical stores that e-commerce companies develop to create interesting meeting places for customers in a physical environment, whilst showrooms according to Bell, Gallino and Moreno (2015) are retail locations where the full product line is available to try and touch but where purchasing is done only online. E-commerce has according to Gunnilstam (2019) increased by 40% with the opening of an associated physical stores, where more customers choose to pick-up their e-commerce orders at a nearby store instead of having it delivered to the door. Gunnilstam (2019) explains further that this increases sales in the physical stores and shows how crucial the omni-channel experience is for both customers and the firms. Therefore, a physical store needs that little extra in order to become attractive according to Engvall (2018), which can be opening up a café in the store along with a unique interior to attract more customers to the physical store. Wertz (2018) also explains that it can be about offering in-store exclusives, events or perks. Hence, customers are willing to pay more for experiences and personal service than for material goods, explains Johansson (2018).
“Digitalize the business. Offer experiences. Be transparent. Make sure you have an extremely fast-paced organization. Then you have a chance for survival”
(Engvall, 2018). Furthermore, the retail industry has changed because of e-commerce and this study will focus on the physical store’s value in today’s digitalized society. The physical stores require other demands, where traditional physical stores need to present unique memorable experiences that cannot be conveyed in the digital world, explains Samuelson (2018), since customers
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according to Floor (2009) require a memorable experience and not only an appealing product. Offline and online need to converge and physical stores need to according to Grewal, Roggeveen and Nordfält (2017) interact with the digital in order to enhance the in-store experience as well as create value. The challenge is to find the right combination between digital and physical, which this thesis will investigate regarding the physical store’s value. Hagberg and Jonsson (2016) researched for a period of two years regarding what digitalization means for the physical commerce and explain that digitalization of retail is about the exchange between customer and employees. The authors explain further that the key to the importance of digitalization for the physical store lies in that exchange. Hagberg and Jonsson (2016) also explain from their research that the physical store has become increasingly vital for attracting more customers since it is a place for experience and satisfaction. Customers’ experience is at the center of creating a valuable physical location, thus traditional fashion companies are according to Hagberg and Jonsson (2016) investing in more unique physical stores, and online-based fashion companies open physical stores because of this development. Hagberg, Sundstrom and Egels-Zandén (2016) also describe in their research, regarding the integration of digital technologies into retailing, that the Internet is used as a tool to strengthen the physical store. The authors also mention that digitalization is a way to include the customer in the value-creation process. Value creation is according to Grönroos (2015) a process in which the responsibility of both company and customer is crucial and takes place where brand and consumers interact. Fashion companies therefore need to understand what creates customer value and according to Grönroos (2015) provide relationships with mutual value creation to create a win-win interaction. Johansson (2018) has research about the future of the physical store, where the store has to provide a mixture of values and integrate with e-commerce in order to match price, size and stock information and easily return including pick-up e-commerce purchases in-store to create a holistic experience. Johansson (2018) also explains in his research that consumers would rather spend their assets on experiences, services and personal service than on physical products. The holistic experience is therefore the new product, where a seamless integration with the customer’s lifestyle needs to be created (Johansson, 2018). Bäckström and Johansson (2017) explain in their research regarding customers’ experience in-store, that consumers’ in-store experiences are created by the same aspects today as ten years ago such as layout, atmosphere and personnel. Mossberg (2015) explains that consumers are looking for experiences in the hope
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of increased value and satisfaction, where offline and online channels need to according to Floor (2009) have a consistent brand positioning and brand personality to provide the best customer experience across both channels. This is in line with what Hagberg and Jonsson (2016) explain, where they argue that emerging trading formats rather contain both digital and physical components to create customer value. Grewal, Roggeveen and Nordfält (2017) also explain in their study regarding the future of retailing, that the key is for online and offline worlds to go hand in hand, to understand the differences and similarities between them in order to know how digitalization as well as new technologies affect the physical commerce. Hänninen, Smedlund and Mitronen (2018) also discuss in their research regarding digitalization of retailing, that purely retail brick-and-mortar stores will maximize value, loyalty and extend companies reach over the customer base when covering additional physical and digital interactions. Physical stores compete today with e-retailers, who provide the customer with quick payment service, delivery and returns, explains Johansson (2019b). Therefore, there is prominent competition between the offline and online worlds, where Samuelson (2018) explains further that the brick-and-mortar stores and online stores need to work together in a symbiosis in order to provide value.
Retail has for a long period of time revolved around the personal meeting where the physical store has played a significant role in how businesses are run (Hagberg & Jonsson, 2016). However, the retail industry has according to Hagberg, Sundstrom and Egels-Zandén (2016) changed due to digitalization, where the reason behind the closing of many stores is according to Samuelson (2018) the emergence of new forms of shopping and according to Pantano and Gandini (2018) based on the massive usage of technologies and social media. Therefore, the interest and need to understand what digitalization means for physical commerce has increased dramatically, explain Hagberg and Jonsson (2016). Thus, it is more crucial than ever to understand the multidimensional characteristics of the store where retailers face challenges in how to address new and more sophisticated customer demands. Consumers require more advanced and multi-layered demands within the in-store environment and where digitalization has increased demands on experiences, product assortment and services (Bäckström & Johansson, 2017). This creates new challenges for the retail industry, where the e-commerce and digital communication have reshaped and challenged the physical commerce’s value (Schmidt & Ohlsson, 2016). However, previous research regarding the value of keeping the physical store as well as choosing to open a psychical store as a complement to the online store is limited, which therefore is the research gap I have
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discovered. This thesis will therefore investigate the value of the physical store both from a traditional and online-based fashion brand’s perspective, in order to fill the research gap.
1.2 Purpose and Research Questions
The purpose of this study is to investigate the value of the physical store in today’s digitalized society from a company perspective. Online-based fashion companies choose to open up physical stores at the same time as traditional fashion companies are keeping their stores as a complement to their online store. Thus, this study aims to achieve a deeper understanding of how these choices are made in order to investigate the value of the physical store. Previous research highlights that the physical store in today’s digitalized society require other demands because of e-commerce and where it is a challenge to find the right combination of digital and physical to provide value for the physical store. It is therefore interesting to investigate different fashion companies’ views regarding the value of the physical store in today’s digitalized society. In order to answer the purpose, the following research questions have been formulated focusing on the Swedish fashion industry:
• What role does the physical store have in today’s digitalized society?
• How do fashion brands value the physical store?
These research questions have been chosen to meet the purpose and aims to increase the understanding regarding the value of the physical store and what factors are behind why companies choose to keep and open physical stores in today’s digitalized society. To reach a broader perspective, I have chosen to interview both traditional fashion companies that have invested in their physical stores as well as online-based stores that have opened up physical stores. The aim is to fill the research gap based on the findings, theories and collected data from six fashion companies representing both online and offline. Fashion companies, e-commerce or traditional, are faced with the choice of meeting their customers through one or more channels today, which is interesting to investigate more about regarding the value of the physical store. This study highlights the value of the physical store from two perspectives focusing on online-based and traditional fashion brands, and can therefore in the long-term contribute to knowledge to those working in the fashion industry to understand the value of
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the physical store as well as use the physical store in the best possible way to create customer value.
1.3 Delimitations
This thesis is based from a company perspective, where the Swedish fashion industry is in focus. The study is delimitated to six different Swedish fashion companies, where three traditional and three online-based fashion companies are interviewed in order to receive a more holistic outlook of the study, which are MarQet, H&M, Gina Tricot, Ellos, Jollyroom and Nelly.com. These fashion companies have invested in their physical stores in various ways, which is interesting to investigate regarding the physical store’s value in today’s digitalized society.
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2 Theoretical Framework
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The following chapter aims to describe the theoretical background that forms the basis for achieving the purpose of the value of the physical store, followed by an overview of the knowledge and theories of the chosen subject. There will be a description of the change and digitalization of the Swedish retail industry, the traditional physical store, new forms of physical stores, the digital shopping-window, the trend clicks to bricks, omni-channel strategy followed by the customer experience, a holistic in-store experience and value creation.
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2.1 Retail Management in Change
2.1.1 The Swedish Fashion Retail Industry
Early trade was characterized by the temporary meeting in the countryside or at a marketplace, which was the start of the Swedish retail industry that we know today. Retail began to take shape in the late 1800s, where “business” went from being supplied at a marketplace, eventually moved inside market halls and then into larger department stores with a wide variation of supplies under the same roof. In the early 1900s, businesses mostly consisted of the personal meeting between customers and the store’s employees, but also by mail order where business was done via catalogues or by telephone. However, the biggest change came about when self-service was put on the map during the 1900s, when shopping carts and baskets were offered to customers. Packaged goods could be picked by the customers in-store and then paid for at the checkout with the assistance of the employees (Hagberg & Jonsson, 2016).
Furthermore, the growth of the Internet enabled according to Hagberg and Jonsson (2016) the initial start for distance selling with subsequent distribution to the consumer’s mailbox, door or postal office. This also enabled according to Hagberg, Sundstrom and Egels-Zandén (2016) global market coverage, increased accessibility and assortment, where local shops could transform into global markets, which increased business opportunities. The progress of e-commerce’s has contributed to that many stores have established e-commerce, offered more
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product alternatives, and where increased mobile usage has been a bridge between the home and the store (Hagberg & Jonsson, 2016). Avery et al. (2013) also explain that the use of mobile devices and the Internet has offered many opportunities for in-store shopping. However, the possibility to order products and clothes online is according to Hagberg, Sundstrom and Egels-Zandén (2016) considered as a threat to physical stores. Retail has taken a whole new turn due to the huge impact of e-commerce and the digitalization of retail, where we according to Samuelson (2018) have gained a whole new generation of consumers from primarily purchasing products, services and clothes online rather than in-store. However, digitalization and the Internet can also strengthen the physical stores by the implementation of digital technologies in the physical stores, which according to Poncin and Ben Mimoun (2014) improves the traditional points-of-sales to increase revenue including attracting more customers. Emerging trading formats rather contain according to Hagberg and Jonsson (2016) both digital and physical components, where the customer’s experience is at the center of creating value in the digital landscape. Hagberg and Jonsson (2016) explain further that the physical store as a trading place for experience and satisfaction can therefore become a factor that is increasingly important for attracting visitors to the stores.
”The store should be the place where brands get the opportunity to both engage and interact with the customer - often in a symbiosis between the physical and the digital”
(Customer Insider, 2019). The retail industry in Sweden has a central role in creating sustainable and attractive cities for residents, visitors and companies to visit. Because when people decide where they want to settle down, what the city can offer is many times more important than the job they can get. The commitment and debate about the future of the physical store across Sweden therefore speaks to the crucial role of retail in today’s society. Today’s retail companies operate in a global market, where the physical stores have become increasingly important for creating profit and value for businesses (Johansson, 2019b). Furthermore, digitalization has according to Schmidt and Ohlsson (2016) been a breakthrough where new opportunities to communicate with the customers through shopping experiences and offers have emerged. Physical commerce is according to Hagberg and Jonsson (2016) the first process of doing retail business, where digitalization has contributed to perceive e-commerce and retail as a combination instead of separately, which will be discussed further in the next chapter regarding the digitalization of retail.
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2.1.2 The Digitalization of Retail
It all began during the late 1990s, when the Internet started to emerge and new companies and retail chains started to focus on e-commerce. Digitalization is an on-going transformation of retailing with no clear beginning or end, which has been revolutionary for the retail industry. It has transformed physical products into digital services, where customers’ searching information online has lead to more purchases in the physical store (Hagberg, Sundstrom & Egels-Zandén, 2016). The change within retail due to technological change has simultaneously benefited retailers in reaching out to more customers as well as enabled consumers with faster service and better targeted offers (Grewal, Roggeveen & Nordfält, 2017). Digitalization entails a change for how people consume and thus also how the retail industry is organized and works to meet these changes (Hagberg & Jonsson, 2016). Digitalization has also according to Schmidt and Ohlsson (2016) driven up retailers growth rate as well as according to Hagberg, Sundstrom and Egels-Zandén (2016) been a contributing factor to get consumers involved in the value creation process, where the use of the Internet can create customer relationships, experiences and collaborations. Digitalization has facilitated new forms of value creation such as availability, accessibility and transparency as well as digitalized many products. More products and devices within retail that are stand-alone today will therefore be connected to a network and achieve new functionalities (Hagberg, Sundstrom & Egels-Zandén, 2016).
“Nowadays, digitalization is not just about a fast-growing commerce through computers and the Internet (e-commerce), or commerce through mobile applications (m-commerce),
but rather, about the meeting between the digital and the physical – about the hybrid of opportunities for emerging trade”
(Hagberg & Jonsson, 2016:15).
At the same time that e-commerce sites where launched, many e-commerce firms started according to Hagberg, Sundstrom and Egels-Zandén (2016) to establish fixed stores, also so-called multi-channel retailing, which gradually shifted to omni-channels, where Poncin and Ben Mimoun (2014) explain that the implementation of digital technologies in the physical store reduced the boundaries between classical in-store atmospherics and e-atmospherics. Today, the importance to provide customers with the possibility to move seamlessly between online and offline through one integrated purchasing process is more crucial than ever according to Hagberg, Sundstrom and Egels-Zandén (2016), which will be further described
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in chapter 2.4 (see 2.4 Omni-channel Strategy). Digitalization provides new opportunities for consumers, employees and businesses to connect with each other, where their boundaries get blurred. Digitalization also provides customers the opportunity to become co-creators and be a part of the value-creation process through self-service, social commerce and collaborative co-production (Hagberg, Sundstrom & Egels-Zandén, 2016). On the other hand, Bäckström and Johansson (2017) explain the importance of prioritizing more traditional values ahead of new technology solutions since experiences in-store are still largely created by the same aspects today as ten years ago, which will be described in the next chapter regarding the traditional physical store.
2.2 The Physical Store
2.2.1 The Traditional Service Landscape
The physical store is according to Soysal, Zentner and Zheng (2019) a landscape where retailers can provide a more integrated shopping experience where consumers can try, touch and feel products before purchase. The physical store is according to Pantano and Gandini (2018) a place to satisfy broader experiential needs, which ties the customer and products together. The customer’s evaluation of price, product and service quality then becomes the customer’s perceived value, explain Hagberg and Jonsson (2016). The physical store is also according to Hänninen, Smedlund and Mitronen (2018) a place where retailers can provide extra value, loyalty and reach out to more customers. However, many physical stores are predictable and dull, explains Floor (2009), where it is according to Poncin and Ben Mimoun (2014) crucial to focus on providing outstanding service and products that enrich the in-store shopping experience. Also, offering product assortment and facilities that enhance the customers experience positively, together with music, lighting and friendly employees, will lead to unplanned and planned purchases according to Poncin and Ben Mimoun (2014). Customers usually search for and require up-to-date information regarding offers and products digitally when they are in the physical store before making a purchase decision. This will then lead to that consumers visit the physical store more often and where a better in-store experience can be provided when using digital and word-of-mouth communication for price comparisons and information about the products (Verhoef, Kannan & Inman, 2015).
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The physical store’s shopping window is also a central tool amongst the exterior in order to attract customers into the store, which has a positive impact on sales and its’ positive image. It is therefore crucial to update and continuously place new products in the shopping window for increased traffic and sales in the store. To keep increased traffic, it is crucial to keep the store’s planning and design appealing including presenting attractive products along the walls as the customer makes their way through the store (Schmidt & Ohlsson, 2016). However, the physical retail store is according to Avery et al. (2013) living in a changing environment, where mobile devices and the Internet have made it possible for customers to purchase items wherever and whenever, where customers get in contact with new channels besides the physical store. This results in new reference frames for the consumers, explain Bäckström and Johansson (2017), where it according to Johansson (2019b) is crucial for physical stores to develop new concept stores with new market strategies, integrate with digital technology and develop smaller store areas in locations near by restaurants and entertainment, in order to attract more customers to the physical stores.
On the other hand, new shopping activities have emerged due to the use of the Internet, where customers make decisions and search for information in whole new ways. Prioritizing more traditional values before new technological solutions has been seen to more likely enhance the customer experience. Layout, personnel and opportunity to feel the products are more valuable and come to the customers’ mind as more natural when thinking about their in-store experiences than the importance of implementing technological solutions (Bäckström & Johansson, 2017). However, traditional retail has to stock products in each retail store, which results in high investment in inventory and facilities, explains Chopra (2016). Therefore, more and more retailers focus today on other store concepts in order to be more cost effective, improving their traditional points-of-sales by offering more than one channel to reach out to more customers, accelerating growth and sales (Poncin & Ben Mimoun, 2014), which will be described more in the next chapter.
2.2.2 New Forms of Physical Stores
The physical store has changed over the past decade where new shopping activities have emerged within the retail sector (Bäckström & Johansson, 2017). Everything is acting more collectively because of digitalization, where the boundaries between retailer and consumers are becoming more and more blurred. New forms of distribution have therefore emerged and
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made it possible to click-and-collect, where customers can pick up their products at a collection point by using their mobile device (Hagberg, Sundstrom & Egels-Zandén, 2016). Physical stores can also meet customers’ social needs by being served as pick-up points for online retailers, explain Grewal, Roggeveen and Nordfält (2017), which also according to Chopra (2016) reduces the delivery costs. Consumers have today the possibility of paying from their mobile devices, have access to product information and can compare prices whenever and wherever, which according to Hagberg, Sundstrom and Egels-Zandén (2016) shows of new forms of value-co-creation and has driven the emergence of new physical store concepts. Physical store concepts are according to Bäckström and Johansson (2017) getting more attention due to the growth of having multiple channels, where concepts stores are emerging in order to organize the physical stores in new ways. Retailers implement new store concepts and strategies, remodel their store offerings, increase integration between their physical stores with online to create a valuable in-store experience. Concept stores have also a significant impact on consumers’ in-store experiences and works as a competitive retailer advantage (Bäckström & Johansson, 2017). The emergence of new formats of physical concept stores indicates customers’ increased demand for memorable shopping experiences, explain Pantano and Gandini (2018), where concept stores such as pop-up stores, showrooms and digital in-store technologies will be described more in-depth down below:
• Pop-up Stores
Pop-up stores are temporary trading places with low investment costs and is a way for e-commerce companies to create interest and awareness by meeting their consumers in a physical environment. Pop-up stores that integrate digital elements in the store can offer an extended range, which is an effective way to increase value and traffic to the physical stores (Hagberg & Jonsson, 2016). The American beauty brand Glossier, which offers pop-up stores in several countries all around the world, is a brand that has seen great success for their marketing strategies and integration of digital in their physical stores. What makes them unique is their interior where they display their products on high tables in a room full of roses and mirrors and to match their interior, they also have dressed their ambassadors in pink overalls. Products are purchased in a quick and smooth way from iPads in the store, which makes the customers’ shopping experience more pleasant and convenient. Since pop-up stores only are available for a limited period of time, it results in that the customers look forward to the shopping experience even more (Engvall, 2018).
13 • Showrooms
Showrooms are offline locations where the full product line is available physically for customers to try and feel but where purchasing is only done online. Orders are placed on digital tablets or digital devices in-store, which allows consumers to ”sort” into their preferred channel on the basis of their information and needs to expand awareness and demand (Bell, Gallino & Moreno, 2015). Showrooming is becoming important due to omni-channel, explain Verhoef, Kannan and Inman (2015), where different channels become blurred. The borders between digital and physical channels begin to disappear, where customers get a seamless experience regardless of the chosen channel (Hagberg & Jonsson, 2016). Customers can search for information through digital tablets in the store and subsequently purchase the product online or search for offers in their mobile devise while being connected to the stores’ Wi-Fi network. This allows the firm to communicate with their customers through their mobile devices and at the same time to track their behaviour. Webrooming is the opposite from showrooming, where customers search for information online and purchase offline in the physical store (Verhoef, Kannan & Inman, 2015). One example of a fashion brand is The Lobby, which is a showroom that is located in Stockholm, where they have gathered different kinds of brands in an open space together with a café and a bar. The Lobby offers customers the ability to connect physical with the digital as well as test new solutions for future shopping (Engvall, 2018). Showrooms are also seen as an effective and profitable type of concept store since they do not carry inventory for sale, which reduces inventory, facility costs and the size of the store required (Chopra, 2016). Using stores such as showrooms, repair shops and cafés will according to Johansson (2018) possibly be the winning concept in the future.
• Digital In-store Technologies
Improving physical points of sales by integrating digital technologies in-store is something that has increased the past decade, which makes the traditional physical store seen as more attractive and aesthetically pleasing, which also can add value to physical products as well as in-store experiences (Poncin & Ben Mimoun, 2014). Physical stores can for example offer a digital receipt to the customers by leaving their email address and contact details, which will remind the customer to visit the store again. Also, by leaving their email or contact details to enter the Wi-Fi allows users to be exposed to local marketing (Samuelson, 2018). A trend that retail companies are
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contributing for customers is the ability to see which clothes are in stock from the online site as well as to see the available size or colour in the nearby store (Englund, 2019b). There are also efforts to enable usage of the smartphones as a scanner in the physical store, digital coupons, self-service or digital receipts, which shows that customers and digital information need to be combined with one another to create value in-store (Hagberg, Sundstrom & Egels-Zandén, 2016).
Shopping has been revolutionized by the introduction of smartphones, where retailers can connect with their customers on a whole new level, where one example of this is the retailer Amazon Go that uses deep learning technologies, sensor fusion and computer vision that allows customers to scan with their smartphone when they enter the store, pick up the products and leave the store without going through a check out. Right after the customers leave the store they are charged and sent an automatic receipt to their smartphone. This type of technology automatically keeps track of the chosen products in a virtual cart and knows exactly when an item is picked or returned to the shelves. The only things customers need are an account on Amazon and a smartphone (Grewal, Roggeveen & Nordfält, 2017). Integrating digital technologies in physical stores may result in a transformation of new types of products, services and activities, where it is possible with electronic payments, point-of-sale data and barcodes, which can actively involve the customers through their mobile device. Products also contain today digital aspects such as QR-codes and EAN-codes, which show on that digital and physical distributions are combined (Hagberg, Sundstrom & Egels-Zandén, 2016). Digital in-store technologies such as digital screens, virtual reality and augmented reality, allow customers to try on clothes digitally and are according to Schmidt and Ohlsson (2016) an opportunity to enhance the customer experience in both e-commerce and physical commerce and have according to Poncin and Ben Mimoun (2014) positive effects in terms of satisfaction, emotions and behavioural intentions as well as provide a higher shopping value. Creating a unique connection between digital and physical is something that Samuelson (2018) explains more companies have started with, where technology and mobile targeting according to Grewal, Roggeveen and Nordfält (2017) may improve customer experiences and value, which is described more in the next chapter.
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2.3 The Digital Store
2.3.1 The Digital Shopping-window
Digitalization has enabled consumers to access information whenever and wherever as well as to share and take part of relevant information with others (Grewal, Roggeveen & Nordfält, 2017). Retailers can with the use of e-commerce participate in dynamic conversations with consumers, through social media influence consumers’ values and purposes to feel a deeper emotional connection as well as improve their shopping experience. Visual cues contained within digital displays, which are signals to act, or dynamic messages such as videos can at the same time improve customer experience in physical stores. It can also reduce consumers’ price sensitivity and retailers can create a stronger emotional connection with their customers (Grewal, Roggeveen & Nordfält, 2017). The digitalization with mobile development and online shopping has also increased retail sales as a result of this, where a need for understanding the consumer’s buying process is more vital than ever in order to adapt message and assortment (Schmidt & Ohlsson, 2016). The communication between consumers through social media has also increased consumers’ access to compare information regarding prices, environmental impacts, ethical considerations, offers and assortments amongst different retailers including providing customers with the possibility to take part of recommendations on social media (Hagberg, Sundstrom & Egels-Zandén, 2016).
Furthermore, when the customer purchases a product or service online, the retailer is provided with a multitude of disparate information and data about the consumer such as gender, age, quantity purchased and price paid for example. This data in turn can benefit customer engagement and provide retailers with effective insights about consumer behaviour to design more appealing offers, encourage consumers to make purchase-decisions that benefit their products. Retailers can also with the use of the Internet gather massive amounts of consumer data in order to understand their behaviour, generate consumer loyalty, engagement, optimize process followed by maximize sales (Grewal, Roggeveen & Nordfält, 2017). However, this personal information, regarding age, gender etc. when subscribing to the retailers’ website or when purchasing an item, can both enhance and diminish consumer engagement with the firm. Consumers may worry about their privacy when recognizing how much information and data retailers have about them. Retailers therefore need to according to Grewal, Roggeveen and Nordfält (2017) be careful in utilizing the knowledge about customers in a way that balances out this personalization-privacy paradox. Furthermore, thanks to e-commerce and
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the digitalization, digital devices have been incorporated into the purchasing process, where the direct communication between consumers and retailers is becoming more digitalized. New forms of distribution channels have also emerged from using the potential of the Internet, which has made it possible to enhance new forms of value-co-creation (Hagberg, Sundstrom & Egels-Zandén, 2016). Traditional physical stores can according to Pantano and Gandini (2018) integrate digital tools within the store as well as combine the networked shopping experience to create a new sense of shopping, where Soysal, Zentner and Zheng (2019) explain that overall revenues increase and induce switching from online to offline when opening a physical store, which the next chapter will describe more.
2.3.2 Clicks to Bricks
A trend in today’s digitalized society is clicks to bricks, explain Herships and Garcia (2019), where purely e-commerce companies open up physical stores in order to meet and get to know their customers better as well as giving their customers an idea of the material and appearance of goods, explains Johansson (2019b). Customers can buy anything with a click whenever and wherever, but although this is an effective way to purchase items, the physical store has shown its’ benefits for customers and the firms (Avery et al., 2013). Online stores have therefore realized that the physical stores are not going out of fashion. Just as physical stores try to optimize their online presence, online players optimize their presence in the physical world in order to improve service and accessibility (Schmidt & Ohlsson, 2016). The e-retailers have also a head start when opening up physical stores because of their collection of customer data. The competition between the different e-retailers are high online, therefore opening up a physical store will become a way to quickly sell the goods that e-commerce customers have sent back (Englund, 2019a). Online stores can for example use brick-and-mortar stores for returns, where the products that are being returned can get back onto store shelves more quickly and customers can at the same time buy something else than to return the item when they are in the store (Herships & Garcia, 2019). This is much more effective for physical stores than the online store, where the product returns decrease whilst the return rate and cost is higher for online stores as returns have to be shipped back to a centralized distribution center (Chopra, 2016). Something that benefits both the online and physical store is local pickups, where customers have the possibility to purchase a product online and pick up the product in the nearest physical store free of charge. This provides an opportunity to sell to the customers because it gets them in the store, explains Wertz (2018), as well as reduces
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according to Chopra (2016) transportation costs since orders can be shipped to the store along with other products. Tracking the dynamics when opening up physical stores also helps to implement the desired effects for the brand and its’ customers followed by the ability to pick up or return items in the physical store that customers have ordered online (Avery et al., 2013).
“E-commerce can strengthen physical commerce by inspiring the consumer to come to the store! The web-store shows what is available there and we say “come to the store and we can help you more”
(Johansson, 2019b). Furthermore, when combining offline and online channels, it improves sales in all channels and encourages consumers to shop across channels. However, retailers need to have a great understanding regarding the patterns of omni-channel interaction, otherwise it will not reinforce the cooperation between the digital and physical channels (Avery et al., 2013). Retailers use the physical store as a place to meet their customers in person and satisfy their broader experiential needs, explain Pantano and Gandini (2018) in order to gain loyalty, value and reach out to more consumers through both the digital and physical channel, explains Grönroos (2015). Value creation takes place in the common sphere where there is interaction between customer and company whether through the digital or physical channel (Grönroos, 2015). Omni-channel retailing has emerged as a result of digitalization and where retailers create a coherent customer experience regardless of the retail channel used (Hänninen, Smedlund & Mitronen, 2018), which will be further explained in the next chapter.
2.4 Omni-channel Strategy
2.4.1 A Bridge between the Physical and the Digital
Customers have never had so much power as they do now due to digitalization, explains Engvall (2018), where customers can be involved in new forms of value co-creation through their mobile phones, explain Hagberg, Sundstrom and Egels-Zandén (2016). Consumers are in today’s modern omni-channel environment bombed with information regarding services and products, where retailers need to embrace a variety of digital technologies in order to engage their customers in the best possible way (Grewal, Roggeveen & Nordfält, 2017). Omni-channel is a strategy that allows offline and online to complement each other’s
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strengths, effectively has the potential to serve all customer segments and serve both convenience seeking and price sensitive customers in emerging markets (Chopra, 2016). Omni-channel is according to Johansson (2018) about how a brand achieves a uniform and integrated customer experience regardless of the sales channel. Omni-channel, such as online sites, social media, mobile sites and physical stores, therefore need to according to Cochoy, Hagberg, McIntyre and Sörum (2017) be seen as one in order to provide a seamless customer experience and according to Bäckström and Johansson (2017) to create a bridge between the digital and the physical. Furthermore, companies that already have a successful and updated website but have problems with the physical store can use an omni-channel strategy, explains Samuelson (2018), in order to interact with the online store in order to be used simultaneously, according to Verhoef, Kannan and Inman (2015). This creates a win-win strategy where digital technologies are becoming a part of in-store shopping, which affects the level of customer satisfaction and value (Hagberg, Sundstrom & Egels-Zandén, 2016). Digital technologies can therefore be vital within the in-store environment, where the smartphone influences how consumers interact with salespeople and the environment within the physical store (Bäckström & Johansson, 2017). Self-check-out technology is something that can enhance profitability and benefit businesses including consumers, where customers gain control by scanning the products and paying on their own without interacting with a cashier. This results in shorter waiting times, improves customer experience and the employees gets less stressed when customers have the overall control of the purchase process (Grewal, Roggeveen & Nordfält, 2017).
In-store technologies such as digital screens or online store portals can also help balance the battle between wanting to provide great service as well as the need for enabling quick store visits in order to satisfy the consumers and enhance the customers’ experience (Bäckström & Johansson, 2017). Digital technologies may also provide customers with information to make better decisions regarding which services or products to consume and retailers may provide targeted information and offer more value to create deeper customer engagement and connection with the right consumers (Grewal, Roggeveen & Nordfält, 2017). However, the more technology that is around the consumer in-store such as self-service or machines, the greater the need for human interaction and personal service. Staff knowledge and social interactions are therefore a high demand for achieving customer satisfaction and value (Gummesson, 2008). On the other hand, Gummesson (2008) explains further that digitalization is a driving force for more human contact and new forms of concept stores and
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is according to Poncin and Ben Mimoun (2014) a crucial element for constructing an appealing atmosphere in the physical store. The ability to access information across multiple devices as well as shop across channels adds value in developed markets, explains Chopra (2016). Digitalization within the retail industry has for example enabled customers to participate in designing products, offering more effective ways to deliver and purchase products as well as offering self-service in-store (Hagberg & Jonsson, 2016). Creating a symbiosis between online and offline is therefore vital to create a positive shopping experience for customers (Engvall, 2018), which next chapter will describe more.
2.4.2 Hybrid Combination between Offline and Online Channels
The boundaries between online and physical channels is getting more blurred due to digitalization, explain Hagberg and Jonsson (2016), where Engvall (2018) also explains that it is becoming more vital than ever to combine digital and physical channels in order to provide customers with a consistent experience of a brand. It is according to Bielecka (2019) all about the physical store merging with the online store, where the physical store according to Engvall (2018) serves predictable and frequent needs whilst the online store provides variety and serves sporadic needs. The online and offline channels therefore need to support each other by coordinating the message and communication about the products in the store and digitally, explains Samuelson (2018) as well as according to Hagberg and Jonsson (2016) offer in-store returns for free when purchasing online. Online and offline efforts, price, offerings, appearance, treatment and marketing also needs to be in sync, explains Wertz (2018) and Samuelson (2018) in order to create a long-lasting, loyal and valuable relationship between the customers and the brand. However, a lack of congruence between the online store and physical store may generate negative experiences, explain Bäckström and Johansson (2017).
“Omni-channel is self-evident – not a goal. To connect the customer experience online together with the physical stores is the key to facing an increasingly complex competition”
(Schmidt & Ohlsson, 2016:8).
It is crucial for the physical and the digital store to cooperate in order to provide a more pleasant shopping experience for the customers (Grewal, Roggeveen & Nordfält, 2017). Information offers and services must be the same regardless of the channel in order to meet the customer’s wishes to create customer value (Hagberg & Jonsson, 2016). This hybrid
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combination of online and offline is according to Chopra (2016) a benefit and serves customer needs more effectively than using a single channel as well as has cost effective benefits both for the physical and online store. Hagberg and Jonsson (2016) also explain that if the physical and digital commerce are coordinated and run parallel to each other, together they can produce greater effects and value than they would have done individually. While physical stores are becoming increasingly digital, digitalization is making physical stores increasingly “physical” in that sense that they enhance the benefits of physical commerce (Hagberg & Jonsson, 2016). Today´s physical stores are therefore more multidimensional because of the convenience to shop across channels, where retailers focus more today on layouts in the physical stores, since customers gain a quick overview of the selection in the store right as they are entering the store. Consumers require more advanced and multi-layered demands within the in-store environment and are more demanding and knowledgeable due to digitalization (Bäckström & Johansson, 2017). The most popular products should therefore be sold in the physical stores and more niched products online, which will attract more customers to visit the physical location (Chopra, 2016). The personal service and meeting are vital factors in how satisfied a customer becomes, explains Gummesson (2008), where Gunnilstam (2019) at the same time explains that customers also value the omni-channel experience more and more. Furthermore, retailers can create long lasting relationships with their customers by offering outstanding personal service and face-to-face contact that is not possible online as well as have in-store experiences, events and perks that is special just in the traditional retail landscape (Wertz, 2019), which next chapter will bring up.
2.5 The In-store Experience
2.5.1 The Customer Experience
Customers’ consumption patterns have changed over the last few decades, which have resulted in new demands from customers where customers seek new ways to be entertained and to receive an extraordinary experience (Mossberg, 2015). Customers enter physical stores today with a whole different mindset compared to ten years ago since it is a new type of consumer that is more updated, knowledgeable, competent and demanding due to digitalization. This has also put more demand on the retailers to provide a more unique experience than is possible online, where the challenge for retailers is not only to attract customers to the physical store, but most of all keeping them in the store by meeting their
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needs and values at their level of expectations (Bäckström & Johansson, 2017). The experience is the new product, explains Johansson (2018). Experiences together with a pleasant and attractive environment in the physical store, will result in that customers purchase more and the staff will be more satisfied with their work (Mossberg, 2015). Consumers are according to Johansson (2018) increasingly expected to pay more for services, experiences and personal service compared to what they spend on physical products. Hence, the way forward for retail is according to Durén (2020) to focus on the customer experience and it is according to Johansson (2019b) the retailers’ task to ensure that the customers are fulfilled and satisfied when purchasing or looking around in a store. An experience occurs in relation to the surroundings where customers for example interact with staff in a clothing store and are affected by what happens in the experience landscape (Mossberg, 2015). On the other hand, it is crucial for retailers to know where, when and how to display the offers for them to stand out since consumers are bombed with offers and products from different retailers both online and in physical stores (Grewal, Roggeveen & Nordfält, 2017). Visual merchandising can therefore give life to a retail company through effective and appealing product presentations, displays and how the store looks and feels. The products in-store need to be brought to the customer’s attention by being presented as dominant, appealing and clear. The presentation is also crucial, where the products need to be displayed in a way that relates them to the shopper’s needs, preferences and aspirations (Floor, 2009).
Visual merchandising is one of the most effective and powerful communication tools where the brand loyalty will also become stronger if the store’s appearance communicates the brand’s personality and positioning as well as inspiring customers to visit the physical stores (Floor, 2009). Physical stores can for example focus on giving the consumers a view of the whole garment rather than hanging clothes on hangers as well as combining the garment with accessories or a bag beside. It is therefore a more effective way for consumers to put together a whole outfit by themselves and may result in that the customer purchases more items. Customers can spend less time searching for products and orient themselves more easily when stores have more logical store layouts (Bäckström & Johansson, 2017). The in-store design may also change in accordance to the shifting trends, explain Bäckström and Johansson (2017) since customers according to Floor (2009) expect stores to quickly react to trends, which can influence the customer’s buying behaviour, stimulate desire and persuasion to buy a product in-store. In order to enhance customers’ experience in the physical store it is also needed to combine valuable elements such as service, knowledge, inspiration, easy approach
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and accessible store offerings. Retailers need to create a valuable customer experience together with matching the staffs’ competence to the consumer’s increased levels of knowledge in order to stand out on the market (Bäckström & Johansson, 2017). They need to design products that offer value to the customer, because what customers choose to consume is at the heart of all retailing (Grewal, Roggeveen & Nordfält, 2017). The interactions amongst the consumers can also have an effect on the shopping experience, which is influenced by the social environment, where the interactions with customers online are an effective form of word-of-mouth communication. Customers can take part of reviews or chat rooms that help build loyalty and a more enriched customer experience (Verhoef et al., 2009). It is all about the experience, where the physical store has become more and more like a meeting place where customers can interact with other customers and where brands get the opportunity to engage and interact with the customers, often in a symbiosis between the physical and digital (Customer Insider, 2019). Schmidt and Ohlsson (2016) also argue that it is vital to combine consumer’s online experiences with physical stores in order to be competitive on the market. The key is to combine multiple in-store aspects such as the traditional values; display of products, layout, atmosphere, design, selection, price, personnel and new values like technological solutions creating a positive in-store experience with a holistic approach (Bäckström & Johansson, 2017), which will be brought up in the next chapter regarding the holistic in-store experience.
2.5.2 A Holistic In-store Experience
The consumer’s purchasing experience is at the center of attention, and creating a positive and holistic in-store experience is one of the central objectives in today’s retailing environments. A holistic experience is created due to the integration between the physical store, e-commerce, social media and mobile devices, explains Johansson (2018). Holistic means according to Hagberg and Jonsson (2016) the total purchasing experience such as search, purchase, consumption and after-sale phases, and according to Bäckström and Johansson (2017) customers social, emotional and physical responses to the retailer. A customers purchasing experience is according to Verhoef et al. (2009) holistic in that sense that the experience is not only affected by the elements that the retailer can control such as pricing, assortment, store design and retail atmosphere, but also elements that the customers are in control of, such as purpose of shopping and influence of others. The in-store experience is therefore according to Pantano and Gandini (2018) co-created by consumers’ interactions
