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  • BDO AUSTRALIA - How hybrid retail is changing the customer experience

BDO AUSTRALIA - How hybrid retail is changing the customer experience

10 September 2015

Original content provided by BDO Australia

Nicola Purser, Partner, Tax, Research & Development, BDO Australia

Retailers are now adopting hybrid business models in order to maintain growth in a landscape with more consumer avenues than ever before.

Retail is a constantly changing landscape. Consumers are demanding new experiences and points of differentiation and retailers must keep pushing the boundaries to remain ahead of the competition.

Spending in the retail sector is also predicted to remain subdued, at least according to recent research from IBISWorld. These challenging market conditions call for organisations to continue shaping their offering in new ways to appeal to customers.

As well as new experiences, technology has also played a major role in the evolving retail landscape. As traditional bricks-and-mortar retailers find themselves competing with digital channels, many are adapting their businesses to match.

These hybrid retail models combine both digital and physical stores, while also developing the local retail experience to attract discerning customers.


What does hybrid retail shopping look like?

Hybrid shopping experiences require brands to seamlessly combine both their digital and physical presence. 

The exact balance here will depend on the organisation’s origins. If they are an existing retailer, they will have to combine their physical store with the same elements of a digital offering that a customer has come to experience. For e-commerce operators, they may instead be looking to open a flagship physical store that complements their core online offering.

This trend was underscored by a report from the UK's Retail Week into the fashion sector. According to the research, almost half of shoppers are now using three or more channels to make a purchase.

A hybrid retail model isn't solely driven by the development of a ‘brick and clicks’ business model, it is equally about the development of new retail experiences within a store.

This could involve the division of a larger flagship store into distinct areas or sub-brands that align with an organisation’s broader customer segmentation analysis. Many shoppers in Australia's largest cities will have already witnessed this shift, with flagship stores operating with multiple smaller experiences within them. Cotton On's flagship Surfer's Paradise store represents just one recent example of this model in action.

Beyond simply shopping, many organisations are also looking to provide experiences that a consumer might call for while they are shopping in a space. Developments like pop-up stores have already become mainstream, and larger retailers are now looking to capture this one-off experience within an existing store.

While these trends are reshaping the sector, they also call for a coherent strategy. Rather than a garbled, ad hoc approach, organisations need to adopt a comprehensive retail experience that is delivered to consumers at every touch point


How does this shift affect an organisation's strategy?

For senior managers, the need for a coherent retail strategy has become paramount. Building a retail experience that is both coherent across every aspect of an organisation, while also striving to stay ahead of new trends within the market.

There are a few strategic priorities that accompany this shift towards a hybrid retail structure. Firstly, it places a premium on new customer experiences, which often requires a shift from existing strategies. 

Secondly, the integration of digital has to be coherent if customers are going to be swayed by these offerings. As well as developing a strong customer-facing experience, much of the work will be carried out at the back-end.

A good example of this is click and collect, where online purchases are picked up from a shopper's closest store. While this seems simple from a customer's perspective, it requires a considerable investment in both stock and supply chain management, along with staff training, to ensure the service is deployed effectively.

Developing a coherent hybrid retail experience, that marries both online and physical retail spaces, requires a consistent business strategy from an organisation. Having an agile, flexible approach that can help organisations adapt to the constantly changing retail landscape is becoming essential for retailers to maintain growth.