The rise of stores without stocks

When is a retail store not a retail store? Perhaps when it has no stock to sell to customers? The rise of ‘showrooming’ – the practice of visiting a brick-and-mortar shop in order to examine a product before buying it online, often at a lower price – means that the once-strange concept of stores without sales inventory is becoming increasingly common in certain countries.

Certainly they have stock. But it’s limited and not actually for sale. Customers can touch, feel, try on, push the buttons and experience the product. But no matter how good their credit rating or how stuffed their wallet, they can’t leave with the item of their desire. Because these stores are merely showrooms that enable customers to make an informed purchase decision and then buy online.

There is no stock room at the back of the store, no shelf-packers working after hours to restock the shelves. No tills. No cashiers. No barcodes to scan. No reshipping of items between stores when one runs out of stock or is overstocked. Plus, having no stock means less floor space is required.

Apart from being a showroom, these stores may also accept product returns from online sales, or provide a pick-up point for customers who don’t want their purchases delivered to their doorstep.

“In short, retailers are discovering the cost savings that can be had storing items in a single central location, rather than in multiple locations,” says Materialogic, a US-based logistics solutions company. “Given that an increasing number of customers are comfortable with online ordering and delivery [processes], thanks to a few decades of online sales, retailers are finding that inventory-less showrooms are the more cost-effective way to go.”

The company points out, though, that this business model is not entirely new and predates the digital era by many years. Furniture stores and those selling large white goods such as refrigerators, for example, have long had salespeople who demonstrate the product and its virtues, while arranging for future delivery via a distribution centre.

Shopify, the Canadian e-commerce company, notes in an article: “Your [stock-less] brick-and-mortar shop would solely consist of the space you need to immerse your customers in your brand so they could experience your products. Therefore, every [rand] you spend on rent and utilities would be invested in your customers – which would return to you. When you and your employees don’t need to worry about running to the backroom to restock products on the [shop] floor, it’s easier to focus better on customers and offer a unique in-store experience.”

Even highly successful online retailers have realised that the future is in ‘blended retail’ – also sometimes called omnichannel or multichannel retail – and have opened physical stores in shopping malls and high streets to accommodate showrooming consumers.

Among the retailers, which have embraced the concept is Bonobos, the New York-based men’s clothing brand. It began as an online store, but in 2012 started opening stock-free outlets. It now has 60-plus stores. Recently the brand startet trialling a revised concept whereby potential customers can go online and order up to 12 items to be sent to a store of their choice where it will be tried on. If they like them, they can leave the store with the items in hand. If not, the store returns the items to the distribution centre. The trial has gone well, with Bonobos reporting that customers who use the new service have a higher average order value and conversion rate.

In a 2016 article examining the store-with-no-stock concept, Inc. magazine observed that “what Bonobos has done is found a different retail formula, one which obviates the rapid turning-over of inventory as part of the brick-and-mortar equation”.

Another retailer going a similar route is Nordstrom, a fashion department store operating in the US and Canada. It began opening its Nordstrom Local stock-less stores in Los Angeles in 2018 and is now expanding the concept to New York.

Forbes magazine describes the new stores as “being about the size of a Starbucks” and notes that “you can get fitted, get styling guidance, get alterations from on-site tailors, do pickups and returns, or get help ordering online. Anything you order from a Nordstrom department store can be brought to you at the Local store in a few hours. Nordstrom Local customers spend more and return goods faster, giving the retailer a better chance of reselling returned products. That’s important news for anyone who operates retail stores.”

Indeed, the Nordstrom Local store in West Hollywood is as much a hang-out destination as a shop. It boasts a nail salon and a bar stocked with beer and wine.

“The expansion for Nordstrom comes at a time when retailers across the US are grappling with how to compete in the age of Amazon and as more shoppers are ringing up purchases online,” says broadcaster CNBC. “Nordstrom in particular has many locations at shopping malls, which are seen as less appealing to some consumers today.”

Made.com, a London-based furniture and homeware retailer, has gone a similar route. Originally an online-only operation, it now has multiple showrooms in the UK and Europe.

Chief creative officer Jo Jackson comments: “For us being a digitally native brand, online will always come first, but we know a human connection with the brand can be a valuable midpoint in our customer journey. We are doing something different with our physical spaces. They are not shops, they are brand experiences. From being able to touch and feel fabrics, discovering new trends, getting personal style advice, attending a workshop with one of our independent designers, or even playing with new tech we are testing out in the space, these are all steps to build a deeper and more personalised relationship with our customer.”

But in a world of instant-gratification consumerism, isn’t there a risk in forcing customers to ‘touch-now-but-buy-later’? Logistics solutions company Materialogic agrees that there is, but points out that experienced online shoppers are familiar with this concept and retailers make significant savings, which can ultimately be passed on to consumers.

“Technology experts are placing their bets that this will be the future of store sales,” the company says. “For example, IBM’s recent Retail 2025 report predicts that more than half of all retail sales will be direct-to-consumer, with a sizeable chunk of these sales being from showroom-like stores.”

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