There is a common notion about shopping these days. The traditional retail store is dead and Amazon and other e-commerce retailers are the future. Every few months you will see some traditional big box retailer closing its doors to a certain amount of their locations. Our reaction is always the same for the most part, we feel bad for the people that lost their jobs but have no mercy for the company that has come across hard times. Why do we do this? We’ve all had it happen to us once. We go to the store for something simple or rudimentary like a cable to charge our phone. Needing it quickly, we see that it is double the cost at Amazon. So when one of these stores closes down, we think to ourselves “serves them right for charging me double for a USB cable”.
I often wonder if this pretty common thought process comes across the minds of the companies that are closing these stores. Do they just assume that the brick and mortar store has indeed failed, and there is no sense in fighting the good fight to keep it alive? It is easy to come to this conclusion looking at the giants of retail that have closed doors over the last decade or so. Names such as Blockbuster, Sears, Kmart, and Circuit City. Can you blame people for thinking that retail is dead and no longer serves a purpose? Absolutely not. So when it came out recently that Bose had decided to close all of its retail locations on most continents, at first I wasn’t surprised. But then upon further thought, I have to question this move. Not because brick and mortar is the future, but rather its purpose has changed with the times.
Despite the popular idea that retail is dead, the bulk of revenue and customer sales is still at a brick and mortar level. Roughly 16% of all purchases are made online, which is a far cry from the extinction of retail that has been reported. So there is still a market for physical retail, why would Bose make a decision that they no longer need a presence? Like most matters, the answer is more shades of gray than black and white.
Bose is a company with many distribution channels. It is also a company that caters to a very niche market, high end consumer audio products. As they increase their display presence inside of other retailers such as Target and Best Buy, the need for their own retail space loses more and more importance. Additionally, with the increase in tech blogs and YouTube reviewers Bose gets a fair share of representation of attention online. Years ago this was not the case. The headphone and personal audio space was relatively non-descript. People were aware of companies like Sony but other than that it wasn’t really in the public consciousness.
From the perspective of an executive at Bose, they may look at these factors as justification for them not having a standalone retail presence any longer. The product has name and brand recognition. The YouTube community has largely embraced their QuietComfort headphones and various bluetooth speakers. Even their soundbars and home audio market has picked up online coverage and recognition. In a very black and white sense, the stores are not pulling their weight from a numbers perspective. Therefore, in the eyes of the executives and shareholders it makes fiscal sense to close these stores.
I would offer a different take on this, and a reasoning as to why this is a mistake. In the modern buying experience with more options than ever, an experience is what makes customers want to spend their money. The numbers of sales from a retail arm of a tech company are largely irrelevant. That store’s purpose is to deliver the experience in a perfect setting so that when a customer is thinking about their next purchase to consider the product. It is one thing for Marques Brownlee or Michael Fischer to tell you that the Bose 700 headphones sound amazing. It is completely another for you as the consumer to walk into the Bose store in your nearest super shopping mall and experience the hype for yourself.
This isn’t a foreign concept. Take Apple for example. Apple has 272 direct retail locations across the United States and over 500 stores internationally. Apple stores produce very little sales in the grand scheme of things for Apple. Their conversion rate of people that walk into the stores is also very low. So why do these 272 stores exist? The experience of the Apple hardware ecosystem. Apple retail stores have roughly a 1% conversion rate. People are coming into the store but not buying there. Apple knows that most of their customers will be purchasing their iPhones from their carrier and their iPads and MacBooks from Best Buy or Target. This is where Apple lets their distribution do the work for them.
The function of their store has been and always will be for the customer to experience the beauty of the new iPhone and its amazing camera. To see the new MacBook Pro and see how that Retina display really pops off the screen. To have their Apple sales reps gush about how amazing the HomePod, Apple TV, and AirPods are. They could care less if you buy it from them, because they know that once you are sold on the devices that they have on display you will buy them from one of the many places that will proudly sell you an Apple product. The Apple store lets you see all of the configurations and colors of all their devices so that when you go into your carrier store or big box retailer you already know what you want.
For a company like Bose with such a diverse and immersive product portfolio, you would think that this kind of experience would be of the highest importance. To be able to offer the customer a chance to experience the headphones audio quality and noise cancelling capability. To be able to go into one of their demo living rooms to really see what having a Bose surround system in their own living room would be like. It really is inconsequential if they buy it from the Bose retail store or from Best Buy, the point is that they buy a Bose setup instead of one from Sonos. Bose by not seeing this are missing the point.
Also consider what kind of shopping malls typically house the Bose retail locations. They are located inside very large shopping malls, in many cases outlet malls. These outlet malls get a tremendous amount of traffic, typically for people looking for sales on clothing from stores such as Nike, Calvin Klein, and Express. So these customers are not looking for a store like the Bose store. But they recognize the brand, and might go inside to see what’s new with the company. This is where the presence of this store’s existence is vital. To plant the idea of quality and the need for considering Bose for their next audio purchase.
As Bose fully exits this space, you are seeing more companies trying to revitalize the retail experience in addition to their online experience. Best Buy started this years ago by adding elements to their store such as mini store in stores with experts trained specifically for certain products to give meaningful product demos to prospective customers. Amazon purchased Whole Foods to diversify their portfolio but also to have a brick and mortar location to showcase their Echo and Fire TV products. Even Google has dabbled with this idea by having pop up shops to showcase their made by Google products in major markets like Chicago and New York.
The reason these companies have this renewed commitment to the brick and mortar experience is really quite simple. The American consumer has come to peace with making purchases online. But for some things, experiencing the product before you buy is vital. What good is a phone that you want to buy if you can’t get a feel for it in your hand before you decide to make a purchasing decision? These companies know this, and this is why they have created the marriage of brick and mortar with online e-commerce, instead of pitting both of these channels against each other.
The idea that the point of a retail store has lost its value is merely a lazy notion created off of the realization of how profitable Amazon is. The reality of the situation is that while Amazon’s e-commerce contributes to quite a bit of its profits, that number is equal to the profits generated by its ad business and Amazon Web Services cloud platform. And this trend will continue, as Amazon has repeatedly said that AWS is their highest growing portion of their business. So the notion that Amazon is such a monolith is a bit overstated, but they are nonetheless a market leader in e-commerce.
We can conclude that there are three elements that seem to lead to creating a successful tech brand. Those are multiple distribution channels to sell your product, a strong e-commerce presence, and a standalone retail location to properly showcase the product. By doing this, a company can create buzz about a product online, sell it both online and in person, while also building interest for this product in their official retail location to complete the experience.
The last element of this is the maintenance and troubleshooting aspect of these tech products. Having a retail store allows customers who may be having issues and growing frustrations about your product a place to figure out those issues without having to be subjected to a customer service phone call. This is an element that has made Apple more favorable in the eyes of the general public. If you have an issue with your iPhone then you can take it to an Apple Store and have trained employees look at it. This is not the case with Android phone manufacturers that would have a customer send in their device for service leaving them without a phone for days and weeks at a time. This is the solution to the problem, completing the experience for the customer before, during, and after the purchase.
Yet Bose has decided that this model is not for them. They have seen the numbers for them that online is the future. And perhaps in the home audio sector this is the case. However, a part of me can’t help but feel that this is misguided. Taking away an avenue for your potential clientele to try out your products, to build excitement around them seems like missing the mark. Now, this could all be remedied if Bose went the automated kiosk route to allow customers to demo their products in some way. But for the time being, it seems that they are content with small displays in national retail and an online presence. As someone who has been around retail for many years now, I understand their position, as it has many valid points. However, there is a magic to experiencing a product in store for the first time. And Bose has decided that they are above such experiences, which is ultimately the loss of the consumer.