Physical retail shops are not required for all categories of products, according to Walid Mansour, Managing Partner and CIO at Middle East Venture Partners.
“Category after category technology in digital has been able to prove that you don’t need physical retail to get whatever you are shopping for – starting from books, electronics and even fashion”, he said.
The Chalhoub Group, for instance, which has more than 750 retail outlets across the Middle East with a portfolio of 300 brands that include Sephora, Louis Vuitton, Tod’s, Michael Kors, L’Occitane, Lacoste, Tory Burch – will close 10 per cent of its stores over the coming months to move a lot of its investments to e-commerce.
Even globally, Inditex, which owns eight brands including Zara and Pull&Bear, will close up to 1,200 stores. The Spanish retail giant has unveiled a digital platform and expects online sales to account for over 25 percent of total sales by 2022.
“If you are good in your digital channeling with the discounts, promotions, loyalty programmes, payment schemes, recommendation search engines etc. they are all way better online than offline. I don’t think retail will die but I don’t suspect that the shops will not be smarter and adopt the key premises of e-commerce”, he said.
Speaking of retail verticals he thinks are better off online than offline, Mansour said, “While shopping for electronics, 70-80% of the times customers do price comparisons online to see if there’s a better deal out there. And this applies to fashion too. Your entry point to your shopping experience, even if you are in a store, is through your cellphone”.
“In order to get coverage, you don’t need so many retail shops around the city, if your digital offerings are good. What retailers should probably look into are warehousing, stocking or on-demand supply chain capabilities. So investment models will have to change – where you invest less money in stores and put that money in somewhere else”, he added.
Atul Bhatia, the head of growth and strategy at Splash agrees that not all retail categories need physical spaces, but fashion isn’t one of them.
“I don’t think it’d be possible to not have any retail space for fashion. This is a question between discretionary and non-discretionary categories. If you want to buy milk, eggs etc. you can just buy them online. But fashion is an experiential category where you want to try and touch the fabric”, said Bhatia.
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