Is the Internet of Things Dead?

Following the disruption that digital has presented to brick-and-mortar, assumptions would be made that brands simply move away from the in-person customer experience. But that’s not what we’re seeing in banking or retail. Now big digital brands are ushering in what we’re calling the experience of things.


Looking at the retail landscape today, consumers are accustomed to seeing brands jump on the digital bandwagon.

These brands are either enhancing digital capabilities to augment their physical channels or in some cases, inching ever closer to digital omnichannels, where physical plays little, if any, role in a brand’s new approach. Take Macy’s, for example. Following another disappointing holiday sales season, Macy’s has just announced the closure of another 68 stores this year. To stop the bleed in their physical stores yet still boost sales, the company is hanging its hat on digital to revitalize the brand.

In our last blog entry, we addressed the role of digital disruption in shifting the brand landscape, making it critical for companies to create a seamless brand experience across all the channels customers come in contact with. Not harmonizing all retail channels to work synchronously can have devastating consequences. According to Digiday, “Fifty-seven percent of consumers will not recommend a business with a poorly designed mobile site.” And the disruption continues, including “Fifty-three percent of consumers have stopped an in-store purchase as a result of using their mobile phone” either because of a better price online or at another store.

For brick-and-mortar, disruption means their physical stores and all digital touch points – from e-commerce to social media – need to be aligned to deliver meaningful content that consumers find helpful and relevant to them. Think simply migrating to e-commerce will solve the disruption issue? Consider that when shopping online, “nearly a third of shoppers opt for in-store pickup.” If a brand opts to go solely online, customers will move to another store offering more options. As we have seen, e-commerce may not actually close the sale, but rather enable shoppers to browse products and options online to facilitate the sale. In short, brick-and-mortar is absolutely still relevant; it’s just evolved.

Evolving Physical Channels

That’s exactly what we discussed during a Bain & Company event in October. In attendance were top banks from around the globe addressing the role of the branch in today’s disrupted environment. While we have witnessed a migration away from physical branches overall, the number of bank branches in top U.S. cities is actually up between 2% and 17% over the past five years. Sean Keathley, Adrenaline’s president, explains these seemingly contradictory trends, “What this means is that overall more banks are closing more branches than they open, but for those keeping their branches, banks are reenergizing the branch environment and moving those branches to more concentrated population centers.”


In short, bank branches are going where the people are – to cities – because people still want the physical bank branch. Does that mean that people are heading back to bank branches in droves? No, but consumers want the branch setting for the more sensitive, valuable financial transactions. Further, a full one-third of consumers still prefer branches for most of their banking, according to 2015’s “Reinventing U.S. Retail Banking.” While overall, fewer transactions are taking place at the branch, particular types of transactions and interactions thrive in the branch-environment. So, smart banks are retooling their branches to enhance consumer experience in that physical channel.


Physical Disrupting Digital 

Following the well-documented disruption that ecommerce and mobile channels have presented to brick-and-mortar, collective wisdom would dictate that brands continue to just simply move away from the in-person customer experience. But as we described in banking, consumer expectations are far more complicated than that. Given that many of the best practices in banking today came from watching other industries responding to change, what we are now witnessing may be a second or third-wave of disruption. This time, disruption is not being driven by the Internet of Things, but rather the Experience of Things.

This time, disruption is not being driven by the internet of things, but rather the experience of things.”

Today, what we’re on the precipice of is another major shift having very little to do with digital innovation further gluing us to our computer screens or mobile devices. No, it’s not another app, robotic device or digital tool that is challenging the consumer landscape. What we’re witnessing is far more human than that. We’re watching a wave of big digital-only brands taking significant steps into the physical realm. Taken separately, these can be regarded as distinct actions implemented to maximize profitability, but looked at collectively how these major players are evolving past their digital brands could be game-changers for retail.

Warby Parker


When e-commerce darlings Warby Parker started their eyeglass empire, their goal was simple: to find a way to provide glasses to the masses at a fairer price. “By circumventing traditional channels, designing glasses in-house, and engaging with customers directly, we’re able to provide higher-quality, better-looking prescription eyewear at a fraction of the going price.” But there was a problem with their internet-only model. People like to try on glasses. Sure, you can upload a picture onto a website to see how the glasses will look, but how will they feel on your face?


Flash forward to today, co-founder Neil Blumenthal says he expects the e-commerce disruptor to expand to 800 to 1,000 store locations. According to Inc., Blumenthal describes the early days, “People would come in, and we would lay out the glasses on the dining room table. And we thought it was going to be a sub-optimal experience, but it ended up being a very special experience in that we could build relationships with our customers. They could try on all the glasses. We started to realize maybe there was a place for traditional bricks-and-mortar retail.”


Amazon Bookstores

Another brand capitalizing on the physical channel’s promise is Amazon. In an announcement on January, 9, 2017, the digital giant is reportedly planning to open at least five physical locations in the near future, adding to its bookstore locations in Seattle, Portland and San Diego. But why would a behemoth in the e-commerce space like Amazon with its Kindle and quick front-door delivery need a physical presence? According to Amanda Nicholson, professor of retail practice at Syracuse University’s Whitman School of Management in Knowledge @ Wharton, Amazon may be “trying to redesign a new kind of store…utilizing its technological and data brilliance,” noting their “extraordinary supply chain.”


While the great business minds unravel the business case for Amazon jumping into the physical channel, we actually think it’s much simpler than that. The reason Amazon is opening bookstores is because of the power of the in-person experience. Let’s face it – most of us have a love affair with books. Parents read to their children; we want to “snuggle up” with a good book; heck, some of us even love the way books smell! The reason Amazon is expanding to bookstores is the same reason why Barnes & Noble introduced coffee shops into their stores. What could be better than spending time savoring a good story, experiencing what it feels like to get to know a new set of characters, all while we sip our coffee or tea?


Amazon Go


Another interesting expansion into the physical is Amazon’s new service Amazon Go. This service streamlines the process of “Grab and Go” allowing users to run out and get a quick bite between meetings without the hassle of waiting in line. Using advanced shopping technology, Amazon has created a quick solution for our on-demand lifestyles, because let’s face it, we all have to eat. These small stores, each at less than 1,800 square feet, are “conveniently compact so busy customers can get in and out fast.” So, again, just as with its e-commerce portal, Amazon is selling speed and convenience, but it feels customized and curated just for your busy on-the-go life.


Digiday reports that expansions like these come even as traditional physical retailers are scaling back their brick-and-mortar footprints in response to growth in online shopping and diminishing store traffic. What does this wave of disruptors know that other retailers don’t? Warby Parker and Amazon are using their deep understanding of audience to create and curate new experiences for their customers. They know that the best online experience can’t rival the best in-person experience – whether you’re trying on a new pair of glasses, cracking open a new book and sipping coffee while you read or grabbing lunch on-the-go without lines.

Welcome to the Experience of Things. How can we serve you?

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