That was one conclusion from Matt Fassler, analyst at Goldman Sachs Research, at a company podcast on “The Store of the Future.”
Fassler identifies two retail models, one for distribution and the other for showrooming.
He spoke about warehouse clubs such as Costco and Sam’s Club that were built first for logistics, with a showroom element that is “happenstance.” That’s in contrast to a high-end store on Fifth Avenue that’s focused on showing the merchandise, with distribution secondary. For companies that want to showcase goods, “then most certainly it’s worth it having real estate where you have lots of people walking around, they pass by it naturally, it’s a very central location,” he said.
Fassler concluded that companies that will succeed are going to tilt toward one model or the other. “We think the models that will struggle are models that try to have big logistics operations in mainstream retail locales. We think that’s going to be a very hard model to monetize in the current environment,” he said.
Fassler said companies will have a very hard time to match what Amazon is doing logistically, in part because of the scale it has and due to the value proposition based on the prices it can charge. But the analyst also noted an inherent problem that brick-and-mortar retailers have, which is the tension between the growth that can be generated online and the business that continues to operate offline and how it’s a “tough dance” to keep the economics of the two intact.
The analyst also said that retailers operating physical stores have a disadvantage because most of the time they don’t really know who their customers are. He said technology can help change that through sensors that can help track who is doing what, using artificial intelligence to interpret those observations and make recommendations to the retailer. He believes there are opportunities for investment that can pay off for the retailers. For beauty or high-end fashion specialty stores, Fassler suggested improving service to shoppers through their purchase profiles, as well as RFID technology that can match buying preferences so an item would light up as the shopper gets near it.
One example is Farfetch, which is rolling out a store in New York that will feature RFID technology. A different example, this time involving a cashless experience, is Amazon Go in Seattle that’s being tested by company employees. The technology allows them to walk through and pick merchandise off shelves as sensors keep track of what they are buying when they walk out the door without having to stop to scan the items.