the new retail ecosystem From disrupted to disruptor - startup

1. The new retail
ecosystem:
From disrupted
to disruptor
Six strategies for retailers

2. | 2 |
Disruptors have succeeded in training vast swaths of consumers
to view them as a reflexive default setting. Be it Amazon, Netflix,
or Uber, they’ve done so by finding the ideal combination of
convenience, price, speed, and variety that best appeals to
consumers. With tiered options that allow room for tradeoffs and
flexibility. And continually expanding service offerings well beyond
their original value propositions.
Rather than responding to consumer preferences, they actually
shape consumer behavior.
The results speak for themselves: Uber chalked up its first billion
global rides in a six-year time span; its second billion rides took
a scant six months.1
Netflix streams 125 million hours of
content worldwide each day, some of it original.2
And 90% of
US respondents to our Total Retail survey told us they are
Amazon shoppers.3
The magnitude of this disruption is unprecedented; retail is
among a wide array of industry sectors fighting the onslaught. In
fact, the retail store of the past may well be dead, as evidenced
by the ongoing trend of thousands of store closures over the last
decades — capped by several new rapid-fire rounds of closure
announcements in early 2017 after a lackluster in-store holiday
shopping season for some eclipsed by record-breaking online sales.4
Expect more of these announcements as the pace of digital change
continues to accelerate, necessitating reinvention with an urgency

3. | 3 |
that upends decades of complacence. In fact, more than 10% of
retail space — nearly 1 billion square feet — might well need to be
shuttered, repurposed, or renegotiated for lower rent.5
While the store of the past may be dead, retailers are already
adapting to a new retail ecosystem. In this retail ecosystem of the
future — a combination of physical, digital, and complementary
service offerings — stores tailored by location and demographics
become part of the consumer’s broader shopping experience.
The physical store is a key component of the new retail ecosystem.
It has to provide a reason for the consumer to leave the comfort of
home to shop — an experience within its four walls that not only
competes with the convenience and ease of online shopping but also
offers other options consumers might choose to spend their time on,
such as movies, sporting events, or dining out.
From sporting goods retailers encouraging customers to shoot
hoops — or join running clubs to foster a sense of community —
to department stores with fully stocked bars for those who’d rather
grab a drink while a friend or significant other is shopping, retailers
have no choice but to step up their game — to provide experiences
that engage shoppers and entice them to linger.
In our analysis, we examine six closely intertwined strategies
retailers are using to stave off disruption and better attract and
retain today’s mercurial shoppers. The underlying theme of these
bold strategies: To create an immersive, seamless, brand-defining
experience for consumers across all channels, one that will keep
them coming back.
Pricing
Fulfillment
Platform
Loyalty
Assortment
Innovation

4. | 4 |
Pricing
Dynamic pricing allows
real-time adjustments
While Amazon’s origin story — like
those of many disruptors — is closely
tied to low price, it has moved beyond
that early model, instead competing now
on speed, variety, and convenience. In
fact, shoppers told us their motivation for
shopping online isn’t always dictated by
price; almost 45% selected convenience
as the main reason for shopping online.
Across all channels, however, our survey
of 1,010 US consumers found that low
price continues to dominate shopping
decisions for some two thirds of shoppers.

5. | 5 |
For omnichannel retailers such as Walmart — now the second largest
online retailer by traffic after Amazon — this dichotomy provides the
perfect opportunity to fine-tune pricing. With its $3 billion Jet.com
acquisition, Walmart can take advantage of its new acquisition’s
sophisticated software for dynamic pricing options, which allow real-
time adjustments based on a variety of factors including customer
loyalty, shipping costs, and inventory updates.
In fact, dynamic pricing was a key component of promotional
offerings during the 2016 holiday season, with several retailers
adjusting in-store prices to better compete with online offerings.6
For Walmart, Jet’s volume discounts complement its own growing
online offerings — 15 million items with 1 million more being added
each month, up from 7 million earlier in 2016, with several new
warehouses dedicated to online order fulfillment and a two-day free
shipping option.7, 8
Amazon is the indisputable leader in volume (6.1 billion items
shipped globally) and assortment (350 million plus items).
However, the universality of Walmart’s physical stores — 90% of
Americans live within 20 minutes of a Walmart location — offers
clear advantages both for in store pickup and shipping from the
store (for more, see page 13).9
64%
43%
39%
Low price wins across all channels...
...but convenience rules online
Good prices
Items in stock
Trusted brand
More convenient
Better prices
Better product selection
45%
26%
23%
Q: Thinking of your favorite retailer, why do you shop there?
Base: 1,010 US consumers (2016), 1,000 (2015). Note: Respondents asked to select UP TO
FIVE options.
Q: What has been your main motivation for buying online?
Base: 1,010. Note: Respondents were asked to select the statement that best reflects the
majority of their purchases.
Source: PwC, 2017 Total Retail Survey, February 2017

6. | 6 |
Meanwhile, retailers are finding innovative ways to modify their business models to deal with
showrooming — the practice of browsing and testing products in store, then buying them online for
less. Some are offering competitive prices in store while others are ramping up the ongoing practice of
having vendors create customized Universal Product Codes that prevent comparison shopping.
Others — especially retailers of “differentiated” items such as furniture or branded fashion apparel —
are embracing showrooming by paring down inventory for smaller physical footprints and encouraging
consumers to browse and test, then order in store for home delivery at competitive prices.

7. | 7 |
Loyalty
Keep ’em coming back
Brand loyalty, while hard-won, is
not easy to shake. More than 70% of
our survey respondents are staunch
brand-loyal shoppers; less than a
third are willing to try new offerings.
While shopping online, more than
two-thirds use only credible web sites
and companies they trust with their
financial information.

8. | 8 |
That’s good news for retailers who have cultivated close ties with
shoppers over many years with individualized coupons, marketing,
and pricing. It also reinforces the power of one-to-one connections
with customers via personalization, which new entrants online
cultivate rigorously.
Amazon continues to build out an ecosystem of physical and
digital products — powered by Prime — that makes it a reflexive
default setting for online shoppers: 90% of consumers told us
they are Amazon shoppers, accustomed to frictionless, one-click
checkout. So much so that almost 40% of them shop less often at
retail stores and 25% shop less often at other retailers online.
Amazon’s Prime members meanwhile spend more than double
what nonmembers do. Industry analysts estimate that almost half
of all US households are Prime members.10
PwC analysis indicates
that Prime members account for more than two-third of sales.
Retailers like Best Buy are bolstering customer loyalty with a
combination of robust digital offerings and white-glove delivery
and set-up for electronics and appliances. Among the retailer’s
multi-pronged approach to building customer relationships,
Best Buy offers premier-customer-only shopping days, advanced
ordering on limited allocation products, an exclusive concierge
service beyond general customer service, and discounts via
private-label and loyalty cards.
The retailer recently added an in-home service for select customers
in which trained technicians can provide advice on setting up
home-technology projects such as a multi-zone home theater with
90% of consumers
are Amazon shoppers, accustomed
to frictionless, one-click checkout.
So much so that almost 40%
of them shop less often at
retail stores and
25% shop less often at
other retailers online.

9. | 9 |
Staunchly
brand-loyal
Eager to try
new items
29%
71%
Brand loyalty runs deep surround sound. Similar to the retailer’s well-known Geek Squad for
tech installation and repair, this service is open to new customers
for a price while loyal customers gain preferred access.11
The loyalty program at Starbucks, closely tied to its mobile
app, offers free food and drink to loyal customers — as well as
recommendations based on past orders. In turn these customers
spend more money more often, tracked by average transaction and
order size. They can also customize mobile orders in advance, then
pick them up at a nearby location without waiting in line.12
Starbucks also make it easy for customers to linger, with expanded
menu offerings, easily accessible WiFi, and an ambience that
invokes a friendly neighbor’s inviting digs. Thus, the term “third
place,” where consumers spend time with colleagues and friends
away from work or home.13
Hallmark, the greeting card retailer, has created a sense of community
for customers that translates into a remarkable level of loyalty.
Neighborhood Hallmark stores organize local chapters of the Hallmark
Keepsake Ornament Club (KOC), with more than 400 chapters
nationwide to nurture a sense of community among their customers.
Not unlike a civic group, chapter members socialize both via
social media and in person to connect with other collectors and
trade ornaments. Sometimes they meet the artists who design
the ornaments. These local chapters of KOC offer a case in point
for customer engagement in reinforcing brand loyalty.14
They
also confirm what our survey respondents told us: That positive
interactions on social media make them more loyal to the brand.
Q: Which of the following statements most accurately describes how you like to shop?
Base: 1010. Note: Respondents asked to select ONE only.
Source: PwC, 2017 Total Retail Survey, February 2017

10. | 10 |
Fulfillment
Hurry, hurry, hurry!
Cost-prohibitive last-mile delivery
issues continue to challenge retailers
who are experimenting with a
combination of options in response
to customer preferences for speedy
delivery. Trained to expect two-day
or next-day delivery, customers have
decided they quite like that option for
home delivery or in-store pickup.

11. | 11 |
While home delivery is by far the most popular option with some
70% of shoppers — urban, suburban, or rural — they are also
open to ordering online and picking up in store, often browsing
and buying more items once they arrive. In fact, almost 50% have
tried that option occasionally.
Alternatively, shoppers told us they are open to using curbside
pickup (33%) as well as pickup at a third-party location (28%).15
Collectively referred to as click-and-collect, these models are
expected to grow as retailers and consumers trade off speed, cost,
and convenience to achieve the most value at the lowest cost.
More generally, retailers are experimenting with a combination
of supply-chain and distribution approaches to best accommodate
customer needs — from insourcing to crowdsourcing to large and
small external shippers — recognizing that what works best in a
particular location might not translate well elsewhere.
Seamless transparency across traditional and digital offerings is
essential for low-cost overnight nationwide delivery to reach its full
potential. As are transparent inventory systems across the board
to ensure the most judicious shipping decisions that consider all
relevant variables.
Sales staff might well be required to fulfill online orders in addition
to their traditional roles. The physical proximity to customers offers
retail stores an advantage over online competitors, especially if they
partner with logistics companies who can pick up orders the night
before for regional next-day delivery.16
Same-day delivery, for example — fairly commonplace in large
urban centers — is not always feasible across less densely populated
regions, despite the increasing prevalence of regional and local
distribution hubs. PwC analysis has found that consumers who opt
for curbside pickup instead could shave a few days off delivery and
I want it . . . now!
Whether shipped from store or in-store pickup, speed is of the essence.
46%
Same day/
next day
24%
Same day/
next day
Ship
from
store
In-store
pickup
Q: How fast would you expect a delivery if requesting a ‘ship from store’ option (item is sent to customers location) or a ‘ship to store’ option (customer picks up item from store)?
Base: 1,006; 999. Note: Respondents asked to select ONE in each row.
Source: PwC, 2017 Total Retail Survey, February 2017

12. | 12 |
save shipping fees — especially since such orders are ready for pickup in 24 hours almost 90% of the time.
Similarly, in-store pickup items ordered online are sometimes ready within a speedy two-hour window.
Our analysis found that some 45% of retailers offered in-store pickup during the 2016 holiday season.
In the wake of the spate of store closings in early 2017, retailers are grappling with new questions about
how many physical stores are appropriate. Especially in light of the massive amount of retail real estate
in the US, which leads the world at 24 square feet per capita, compared to 16 square feet per capita in
Canada, 5 in the UK, and 4 in France.17
They’re also analyzing where their stores should be located for ideal customer proximity. Stores that
serve as fulfillment centers allow retailers to compete with low-cost ecommerce fulfillment centers.
But should all stores serve as fulfillment centers? Or only a few? And which few? Since no particular
economies of scale come into play, would it be best for stores with lower sales volumes to serve as
regional fulfillment centers?
At Best Buy, half of all online orders are picked up at — or shipped from — a store. Since 70% of
consumers live within 15 minutes of a store, most online purchases arrive within two days, similar to
Amazon Prime’s speed but without the annual fee. By using its stores as distribution centers, Best Buy
was able to compete with Amazon on speed while offering a lower price for delivery.18

13. | 13 |
Hidden in plain sight: Store as distribution center
Amazon’s sustained long-term growth
over the course of more than two
decades is driving its current proliferation
of e-commerce fulfillment centers (eFCs)
nationwide. This network allows Amazon
to capture both scale and proximity to
the consumer.
The typical Amazon eFC is now one
million square feet or more; it processes
at least 75 million units annually. The
resulting economies of scale offer
the lowest pick and pack costs in the
industry while proximity reduces shipping
distance and cost, according to PwC
analysis. Proximity also allows Amazon
to offer faster delivery, with overnight
soon to be the de facto standard.
Traditional retailers’ comparatively
nascent e-commerce businesses are
much smaller. Walmart’s, for example,
the second largest online retailer by
traffic, represents less than 20% of
Amazon’s. Consequently, retailers
struggle to compete on both cost and
speed of delivery.
According to PwC analysis commissioned
by Google, for a typical, sizable, big box
retailer, the lowest-cost e-commerce
fulfillment network would require between
one and three fairly large, geographically
dispersed fulfillment centers, the efficiency
of their operations more than offsetting
higher shipping costs. However, this
minimal network can reach only some
85% of the population in two days and
barely 20% overnight (without costly air
freight). Amazon’s faster, more responsive
network meanwhile still maintains a cost
advantage—combined across picking,
packing, and shipping—of between
$2 and $2.50 per unit shipped.
As customer expectations for delivery
speed continue to rise—to overnight
or better—competing retailers could
build out their eFC networks to reach
more consumers faster. However, they
would be sacrificing all-important eFC
economies of scale, which means overall
costs rise despite lower shipping costs,
further undermining their ability
to compete.
The most promising solution is hidden
in plain sight—existing stores. Already
located in close proximity to customers,
shipping from the store can speed
delivery and reduce shipping costs.
While a physical store might not come
close to an eFC for efficiency in picking
and packing, the existing fixed-cost
base contributes to lower overall costs,
well below the cost of building a new
ecommerce fulfillment center. In fact,
on a marginal-cost basis, shipping from
the store could be comparable with
Amazon’s overall cost.
Undoubtedly, a ship-from-store option
cannot offer the seemingly endless
assortment of items many e-commerce
sites. For retailers who want to compete
on breadth of assortment, long tail
items—the vast majority of which sell
in much smaller quantities—can be
held at a dedicated eFC and offered at
incremental additional cost, although
with slower fulfillment of approximately
three to five days. Shipping from the
store, however, will cover the vast
majority of volume.
In fact, retailers are well advised to
consider boosting their capabilities to
ship from their stores, not just for surge
capacity but as a primary means of
e-commerce fulfillment since it offers
the perfect balance of lower cost and
delivery speed.
The added bonus—once robust
technological and logistical components
of a mature ship-from-store capability
are in place—retailers can easily add
in-store or curbside pickup based on
consumer demand.

14. | 14 |
Reach = 85% of
population in 2 days
$3.50
$1.10
$5.10
per additional item added
$2.20 $2.90
Ship from store
~$3.70Marginal costs
$5.80
$1.70
Store as secret fulfillment weapon
Shipping cost per unit (club store example)
Amazon leads in shipping costs and delivery speed.
However, existing stores with wider reach
allow traditional retailers to ship from
store for speedy delivery at lower cost.†
For traditional retailers, the cost of additional new eFCs quickly adds up.
60+ e-commerce fulfillment centers (eFCs)
Mode of
distribution
Mode of distribution
2 days or less
~99%
1 day or less
~95%
Amazon
~85% <20%
Retailer direct
*includes inventory financing, capital, direct and indirect labor, and indirect-non labor
Source: PwC analysis
Population
reached
Population reached
2 eFCs
$2.20
$6.00
Reach = 95% of
population in 2 days
~95% ~50%
5 eFCs
$6.60
$3.50
Reach = 95% of
population in 1 day
100% ~95%
19 eFCs
~100% ~99%
2 days or less 1 day or less
480 stores nationwide
TransportHandling*
$2.40
$4.10
$3.80
$3.10
Source: PwC analysis, commissioned by Google
†
slightly more than Amazon’s cost of $3.50

15. | 15 |
Assortment
The right mix of offerings
The ideal mix of physical and digital
product availability is essential, as
so many former pure plays have
recognized. The abundance of an
online universe of products ultimately
cannot match the very real need
to interact with them, especially
for “differentiated” items such as
furniture or branded fashion apparel.

16. | 16 |
Showrooms may offer an ideal balance of cost and experience
for differentiated products — an opportunity for consumers
to experience the merchandise, then place an order for home
delivery. The retailer benefits from stocking less inventory at the
store, thus condensing the physical footprint. Showrooms also
eliminate the need for parallel logistics systems, one for stores
and one for home deliveries. These inventory management
efficiencies can dramatically reduce stranded inventory that
necessitates deep discounts.
Bonobos, a former online pure play focused on men’s clothing,
has about 30 “guideshops” with knowledgeable sales staff who
can help walk-in shoppers sort styles and sizes, offer advice, and
recommend accessories. Thanks to its alternative format,
Bonobos can keep costs down with a small retail footprint.
Since the smaller stores are less expensive to operate, Bonobos
can invest in a more personalized experience, offering all the
advantages of a high-end, high-touch retail store.
Once shoppers have made their choices, they can order products
for shipment to their homes; items are not available for purchase
at the store itself. Customer data is available for shoppers to
access online at home for future orders, thus building loyalty and
avoiding returns.
The process of discovery in a physical store — “Oh, look, here’s the
perfect gift for hard-to-buy-for Uncle Bob!” — remains unmatched
online. As does an environment in which shoppers are encouraged
to interact and enjoy the products just as they would at home.
Rather than merely looking at sporting equipment, for example,

17. | 17 |
shoppers want to test it out — running on a treadmill at the
Nike store, for example. Or curling up on a couch to find out for
themselves how comfortable it is, as furniture retailer RH invites
shoppers to do with a glass of wine from the bar.
Nordstrom already partners with several specialty apparel lines
for its store-within-the-store offerings. More recently, the retailer
has developed a luxury-boutique concept in its stores titled Space.
At 500 square feet, it is intimate and set apart within the store
by design. Space features up-and-coming high-end designers’
seasonal collections of apparel, shoes, handbags, and accessories.
Like its Pop-In stores, highlighting a buzzy not-really-department-
store vibe by featuring rotating designers, Space creates a beyond-
the-department-store sensibility within the four walls of the
department store.19
Big box stores might consider an outdoor sculpture garden or
dog park next door to appeal to shoppers as part of an overall
experience. Or, as Walmart does, consolidate one-stop shopping
with a hair salon, pharmacy, medical clinic, bank, optometrist,
and restaurant — thus evoking a sense of community as did main
streets of yesteryear, but all under one roof.
Office products retailer Staples meanwhile has partnered
with Workbar, a company that offers flexible workspaces for
professionals who don’t work in a traditional office setting but
need a space away from home. Located within Staples, Workbar
offers private offices, open seating, lounges, meeting rooms,
conference technology, interactive whiteboards, and a kitchen area
— on pay-per-visit or membership plans.20, 21
Importance 76%
Satisfaction 56%
64%
52%
Shoppers prefer knowledgeable sales
associates over ambience at stores
Knowledgeable
sales associate
Ability to
check stock
41%
39%
Inviting
ambience
Q: Please rate how important the following attributes are in relation to your in-store
shopping experience.
Base: 1,010. Note: Respondents were asked to select ONE option only.
Q: Please rate how satisfied you are in relation to your in-store shopping experience
for the following attributes
Base: 1,010. Note: Respondents were asked to select ONE option only.
Source: PwC, 2017 Total Retail Survey, February 2017

18. | 18 |
As for product assortment online, Amazon’s agreements with
third-party sellers — including warehousing their products for a
fee if they choose via a program titled Fulfilled by Amazon (FBA) —
allowed those sellers to sell more than two billion items worldwide
in 2016. Meanwhile, FBA items experienced global growth of 50%
during the 2016 holiday.22
Some retailers are using both their physical and digital channels to
promote exclusive products and their own private-label offerings.
For example, a particular designer brand might be available
either only online or only in store, and sometimes only by special
invitation in store. That sense of being part of a select customer
group further cements customer loyalty over the long term.
Ultimately, retailers need to entice customers to interact with them
— whether online or in store — and keep coming back. At physical
stores, they can do so by providing a convenient, frictionless in-
store experience, not unlike what Amazon offers online. With the
added advantage of knowledgeable sales staff who can explain
product offerings, the number-one preference of 76% of in-store
shoppers, even ahead of ambience.
In fact, a skilled sales associate can transform the oft-dreaded
returns process into a pleasant customer-service encounter by
offering alternative options. Rather than being a minder of
merchandise, the sales associate serves as a brand ambassador
with deep product knowledge to engage shoppers, a feature
unavailable online and especially relevant for products such as
appliances and furniture.

19. | 19 |
Platform
Effortless digital interaction
A secure, always-accessible, easy-to-
use technology platform is the price
of entry in a world of consumers now
accustomed to the almost effortless
digital interaction they encounter
with Amazon — be it mobile, voice-
activated with a device such as Echo,
or one-touch with a Dash button.

20. | 20 |
Retailers have been shoring up their tech platforms for a few
years now. And not a minute too soon: online Cyber Monday
sales hit $3.45 billion in 2016, a 12% increase over 2015.23
For a technology platform to succeed, it has to be part of
an overarching digital strategy that encompasses the entire
organization — rather than an ad hoc point-in-time initiative —
which often results in internal realignment evidenced by shifting
spending patterns, new digital roles, and previously undefined
working relationships.24
At Target for example, after the retailer observed that 98% of
its shoppers were using digital platforms, with 75% on mobile,
it reorganized its business to address consumers across all
channels. Target already knew that customers who shop across
three or more channels are three times more valuable than those
who shop via one or two channels.
Beginning with its patio division, Target built a digital-first
team of its digital, mobile, and store-merchandising employees
organized around a single profit and loss statement. The digital
team analyzed Google’s Store Visits data to deconstruct searches
in the patio category. Based on the data, the team rearranged
the physical store to fit the expectations and desires of online
shoppers. In the test rollout, the new store layout improved
customer satisfaction and increased gross margins.25
Shoppers embrace mobile payment
29%
46%
2015 2016
Consumers are increasingly
more willing to use
mobile payment.
Q: How do you use social media as part of your shopping experience?
Base: 1,010. Note: Respondents were asked to select ALL that apply.
Source: PwC, 2017 Total Retail Survey, February 2017

21. | 21 |
A robust tech platform enhances customer engagement: 50% of our survey respondents said they
browse retailer websites as their main search option for items to buy. The tech platform also serves to
make inventory visible across the board at all retail and distribution centers. That way, products can
be shipped to customers from the location closest to them, drastically reducing prohibitive last-mile
shipping costs.
In the physical store, the in-store payment platform can pose a challenge to frictionless checkout,
especially for retailers still transitioning to chip technology — known as EMV — intended to reduce
fraud. To circumvent the more arduous chip-technology process, some consumers use fingerprint-
enabled mobile payment instead, a process that parallels one-click technology online for ease of use.
In fact, far more respondents to our survey were open to using mobile payment via smartphone this
year (46%) than they were last year (29%). Meanwhile, actual mobile payment use more than doubled
between 2015 and 2017.26
A tech industry group estimates it has the potential to surpass cash and credit
card transactions by 2030.27

22. | 22 |
Innovation
Accelerated pace of
digital change
Continual experimentation and
ongoing course correction is at the
core of disruptors’ success — even
when they are ahead of the game.
Amazon recently unveiled sensor-
powered physical stores, coming on
the heels of its digital devices. The
digital devices proved to be runaway
hits during the 2016 holiday season.
Not least because Amazon promoted
the devices assiduously via television
(76%+ year-on-year) and digital
(224%+ year-on-year) advertising.28

23. | 23 |
As the proliferation of new entrants with their innovative
approaches continues to accelerate, traditional retailers have
less and less time within the window of opportunity to take the
necessary risks. Smaller, quicker tests are now commonplace
rather than full-on rollouts. From self-checkout devices that
help circumvent long check-out lines to touchscreen fitting-
room mirrors that offer immediate help from sales associates,
retailers are experimenting with a raft of options to make
the shopping experience simple, convenient, personal,
and engaging. Some retailers are partnering with tech
accelerators to expedite digital offerings. Several are turning
to crowdsourcing for new product development and selection.
Traditional retailers like Macy’s are conducting test-and-
learn experiments of their own. Backstage discount stores at
Macy’s first opened as standalones but now sometimes reside
within an actual department store, part of the retailer’s overall
reinvention with additional focus on discount and digital
offerings.29
Similarly, the retailer’s Bluemercury specialty
cosmetics stores also combine freestanding and in-store
options; some include a fully functioning spa.30
Retailers experiment with
innovative technology
for a simple, convenient,
personal, engaging
shopping experience.

24. | 24 |
Luxury retailer Saks Fifth Avenue meanwhile has pared down and modified the layout at one of its
newer New York City stores. With a smaller footprint, the store combines the best physical and digital
elements for a superior shopping experience. Lower display racks with items grouped by brand better
reflect what a shopper would see online. After shoppers leave the store, Saks’ sales staff connect with
them online to respond to questions and recommend items.
Fitting rooms with plush carpet and communal seating encourage shoppers to browse and stay awhile.
Personal shoppers create custom looks for their clients via digital tools on the retailer’s web site. Saks
shoppers who engage with sales associates via digital tools have recorded a 50% increase in average
purchase size.31
The data from Saks confirms our own findings: 44% of shoppers told us positive
interactions with their favorite brands on social media had led them to spend more with those brands.
Large retailers such as Walmart and Target continue to refine different store formats — from suburban
megastores to city-friendly quick-stops — in step with location and demographics. Meanwhile,
Amazon’s more recent foray into physical stores underscores the importance of an omnichannel
presence — being available when and where customers want.

25. | 25 |
Shoppers told us they want a seamless shopping
experience, both online and in store. In fact, many
use several different channels as part of their
broader shopping experience. When they shop in
store, they are looking for value. And knowledgeable
sales staff who can explain and demonstrate product
offerings. Online, they care more about convenience.
All in all, however, positive, omnichannel
experiences typically lead to larger overall purchases
and long-term customer loyalty.
As the spate of store closings in early 2017 illustrate,
only the nimble will survive. Traditional retailers
don’t have the luxury of starting with a clean
slate as new entrants do; however, they are able to
leverage their strengths — a loyal customer base, the
proximity of store locations, and long-term vendor
relationships — to complement online offerings.

26. | 26 |
1. Fitz Tepper, “Uber Has Completed 2 Billion Rides,” Tech Crunch,
July 18, 2016.
2. Brian Barrett, “Netflix’s Grand, Daring, Maybe Crazy Plan To
Conquer The World,’ Wired, March 27, 2016.
3. PwC, Total Retail, 2017.
4. Lindsey Rupp and Molly Smith, “Retail Malaise Puts Pressure on
Chains to Shutter More Stores,” Bloomberg, January 23, 2017.
5. Mark Heschmeyer, “Shopping Center Owners Brace for More
Downsizing as Space Rationalization Still in Early Stages,”
Costar.com, January 4, 2017.
6. Katie Evans, “NRF 2017: New Report Unwraps Holiday Web
Sales Insights,” Internet Retailer, January 16, 2017.
7. “Walmart Has Completed Its Acquisition Of Jet.com,” Fortune,
September 20, 2016.
8. Steve Nellis, “How Walmart Can Play Amazon’s Game,” The
Information, August 12, 2016.
9. Tien Tzuo, “To Compete With Amazon, Walmart Should Cut
Itself In Half,” Tech Crunch, September 8, 2016.
10. Chris Isidore, “Amazon Prime Now Nearly Reaches Half Of All
U.S. Households,” CNN, January 26, 2016.
11. Miriam Gottfried, “How To Fight Amazon.com, Best Buy-Style,”
The Wall Street Journal, November 20, 2016.
12. Christopher De Sousa, ”The Amazon Effect: Store Closures
Everywhere,” Seeking Alpha, January 16, 2017.
13. Panos Mourdoukoutas, “Starbucks: From a Third Place to
Another First Place,” Forbes, October 26, 2014.
14. Nir Eyal, “How Two Companies Hooked Customers On Projects
They Rarely Use,” The Observer, September 22, 2016.
15. PwC, Holiday Outlook, 2016.
16. Curt Mueller, Andrew Schmahl, and Andrew Tipping, “Same
Day Delivery? Not So Fast,” strategy+business, Winter 2013.
17. GCP, Investor Presentation, September 7, 2016.
18. Miriam Gottfried, “How To Fight Amazon.com, Best Buy-Style,”
The Wall Street Journal, November 20, 2016.
19. Alex Golden, “Four Things to Know About Space,” The Los
Angeles Times, August 25, 2016.
20. Amazon Press Release, “Sellers on Amazon are Thriving:
Fulfillment by Amazon Delivered More than 2 Billion Items for
Sellers Worldwide in 2016,” January 4, 2017.
21. Janelle Nanos, “Inside Staples, a Sunny Co-Working Workbar
Space,” The Boston Globe, September 13, 2016.
22. Ethan Hartley, “Work’s on Tap: Workbar Opens Inside Staples,
Wicked Local Danvers, November 2, 2016.
23. Adobe Conversation Team, “Cyber Monday 2016 Smashes
Online Shopping Records,” Adobe Conversations,
November 30, 2016.
24. PwC, Lessons from Digital Leaders, September 2015.
25. Matt Lawson, “Rethink Measurement for Growth, Association of
National Advertisers, September 15, 2016.
26. “Why Retailers Could Pay A Price For Not Accepting Mobile
Payments,” Knowledge@Wharton, November 22, 2016.
27. IEEE, “It’s Not All About The Benjamins: IEEE Global
Cybersecurity Survey Reveals Death Of Cash By 2030,” March
17, 2016.
28. Don Davis, “Amazon Ramps Up Its Holiday TV Ad Spending,”
Internet Retailer, December 30, 2016.
29. Adam Levine-Weinberg, “I Visited a Macy’s Backstage,” The
Motley Fool, January 4, 2017.
30. Brittany Burhop, “Macy’s is Closing 68 Stores but it’s not all bad
News,” New Beauty, January 05, 2017.
31. Elizabeth Holmes, “Why Can’t a Store Be More Like a Website?”
The Wall Street Journal, September 27, 2016.
Endnotes

27. | 27 |
Steven J. Barr
Consumer Markets Leader
415 498 5190
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Barbra Bukovac
Consumer Markets Tax Leader
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barbra.bukovac@pwc.com
Ron Kinghorn
Consumer Markets Advisory Leader
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ron.kinghorn@pwc.com
Jonathan Sackstein
Consumer Markets Assurance Leader
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jonathan.s.sackstein@pwc.com
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Phil Bloodworth
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