Everybody knows that online shopping has made a massive impact on the bricks-and-mortar retail industry. The story is usually reported as if online shopping is merely another fungible avenue (albeit a faster, easier and often cheaper avenue) for buying things and that it is gradually killing bricks-and-mortar retail outlets. Fortunately, this story is far from true, and a more nuanced reality is coming to the fore as the years wear on, and people have more time to think deeply about the competition between online and bricks-and-mortar and the different niches they can and should fill.

For one thing, online retail is over a decade old, and yet we are still here in the on-premise retail real estate business! Even among Millennials, the most online generation yet, almost 80% of purchases are still made on-premise. What people are figuring out is that online and on-premise retail are not enemies locked in a battle to the death. They are complimentary channels that, with intelligent planning, can each serve different purposes with consumers. Online and on-premise are settling into a permanent coexistence, and the new model of retail is gradually coming into focus. Naturally, no on-premise retailer in the 21st century can expect that his business can continue, unaffected by price and performance pressures from the competition with online retailers.

On the other hand, retailers that are willing to face the future and actively integrate their on-premise retail establishments with a holistic plan that includes a big online component may well see greater successes than they have seen in the past. Much has been written about what this “integration” means in the on-line space (practically every mom & pop bodega now has a Facebook page!) But at the same time that on-line marketing experts are plying their trade, a quiet revolution is happening in the on-premise retail space.

Here Come the Browsers

Whether you call it “window shopping,” “browsing,” or “just looking,” today’s consumers are doing more of it than ever. Consumers enjoy the on-premise shopping experience, and increasingly they expect a kind of “shopping mini-holiday” – one that looks, sounds, smells and feels comfortable and inviting. With the increasing “re-urbanization” of America and in light of the fact that a large number of younger consumers now live in much smaller downtown condos and apartments – not the more spread-out suburban houses of the past – they spend a lot more time in on-premise retail establishments and seek out places that welcome longer visits. The “Spy, Buy and Fly” shopper of the past has been replaced by “Stop, Drop, and Flop.” Retail establishments are using these consumer preferences to establish deeper customer relationships and better product marketing. Especially when the actual sale can be carried out either on-premise or online, they are finding a real competitive advantage in the Internet era. Most retailers are figuring out that it makes sense to appeal to consumers in the on-premise space in ways that online simply cannot and (probably) will never be able to do.

How Cinema is Competing in On-Premise Retail

In no industry is this competition between online and on-premise retail more brutal than in the Cinema business. Moreover, nowhere is the industry response more illuminating of the path forward for all of retail. With video piracy, Bit Torrent and online streaming on “all you can eat” monthly video plans, on-premise Cinemas are facing an Internet competitor that brings savage price competition (often the competing price is “free”). The industry has been forced to reinvent itself to offer movie-goers a luxurious on-premise experience that they just cannot get at home.

Cinema proprietors have thought deeply about their business and how they can effectively differentiate themselves from the online experience. Many Cinemas these days are finding new relevance and success by moving to the high-end. Gone are the sticky floors, creaky fold-down theater seats, and stale popcorn. All of these are replaced by comfortable leather recliners, gourmet food and alcohol beverage choices served at the seat, and top-quality digital visuals and sound. Interestingly, going to the Cinema has become what it once was in the 1920’s – a destination experience. By re-focusing on all the sensual elements of the on-premise consumer experience, Cinemas are gradually finding their place in the 21st century under the most challenging conditions imaginable.

Space, Scent, Sound, and More

Other smart on-premise retailers are following this same path. Developers are putting a lot more thought into aspects of retail real estate that may have been “mere details” in the past. Developers have thought for a long time about how shoppers move through the space. Now they also think more about where shoppers can lounge and talk. They have employed popular music for a long time. Now they think about subtler issues like the acoustics of a space. Even when there isn’t music, how does sound propagate or dampen? Is the space acoustically comfortable? And on and on – what does the space smell like? Do customers have easy opportunities to touch the merchandise in a casual atmosphere?, can the sales staff and the customers chat and interact comfortably? By differentiating the on-premise retail space as a part of an integrated, holistic approach to consumers that includes both online and on-premise, retailers are getting their stride and starting to figure out what the “new model” of retail will look like in the 21st century.