News & Insight

Want to beat Amazon? Then think beyond the physical store

Christian Nellemann

High Streets are in crisis, but it's too early to abandon it.

High streets are in crisis. In the UK, nearly 6000 stores closed their doors last year – the highest number since 2010.

As I’ve discussed previously, this isn’t simply a consequence of Amazon stealing customers. The high street crisis is a complex, nuanced challenge – and demands a response based on innovation, collaboration, and an understanding of localised issues.

But for businesses that sell physical products, there is another question to ask: do I have to open a physical store, or is there another way to do business? And I’m not just talking about selling online; through technological innovation and a systematic rethink of what a physical shop actually is, new opportunities are arising.

Changes driven by technology

Online selling is great, but it doesn’t answer the physical need customers have to see and experience products. So can technology offer a solution?

Visual recognition technology and augmented reality could have the answer. Samsung Bixbyallows a customer to scan any product or packaging anywhere in the world, and immediately identifies what it is and how to purchase it. It’s become so mainstream that it’s now available on the newest Samsung phones.

Technology like this is a total game-changer. With visual recognition, experiencing products can happen anywhere and everywhere. Tommy Hilfiger recognised this, and started creating shoppable events and catwalks. Nike’s SNKR drops have gone one step further, literally sending their customers to random destinations throughout the world to find limited edition footwear through their own augmented reality scanning app.

Then there is virtual reality. VR could allow a customer to fully experience any kind of product from footwear to bathrooms, from any destination. It sounds sci-fi, but Ikea have already been testing this as a means of selling kitchens for years. Let's not forget that the touchscreen technology in our pockets was sci-fi too in the very recent past.

If I were setting up a new business that sold products, I’d be thinking carefully about a tech-based approach to engaging my customers that took some of the pressure off bricks and mortar.

Changes driven by rethinking the store

There is an even simpler way of not selling through a traditional store: sell from somewhere else.

In an organic, localised way, this trend is already well-established. Independent record shops, for example, have seen a revival over recent years. But in many cases, these record shops also sell coffee, alcohol, and double as event spaces for everything from daytime yoga sessions to evening book clubs. Multiple businesses are helping themselves, as well as each other – and all from the same premises.

Taken further, this trend is manifesting itself in other ways. In the US, West Elm – a high-end furniture brand – has opened boutique hotels featuring their furniture, which guests can then buy. West Elm not only broadens their income stream, but sells furniture in a classic, try-before-you-buy manner. It’s a brilliantly simple idea.

At the same time, brands rethinking the store are seeing beyond traditional locations. In cities all over the world, businesses are starting to acknowledge a simple fact: customers aren’t coming to high streets, so they have to get nearer to wherever their customers are instead.

We can see this in the re-emergence of stores inside metro and underground stations. In the UK, prolific online-only retailers like Moonpig and Funky Pigeon have exclusively opened stores in these locations – and warehouse style retailers like Argos are opening micro-storesin these same spaces. It’s hard to make these spaces work, and it’s hard to make them inviting. But it’s worth the effort: while high street footfall is shrinking, 5 million people pass through the London Underground every day.

Lessons for all business owners

For bigger and established businesses, the answer to the high street crisis isn’t to abandon it. High streets remain cherished, and those packed with retailers who offer meaningful experiences continue to perform well.

But at the same time, bigger retailers must start to look at other ways to engage customers and sell their wares. Through technology, collaboration and bigger thinking, they can make it easier for customers to find them – or they can find new spaces that better suit their daily habits.

Meanwhile, for newer, smaller businesses, I think the opportunities to get ahead are huge because they are absolutely in reach. The technology I’ve referred to is not only getting exponentially better every year, but exponentially cheaper. Visual recognition technology has gone from tech labs to our pockets in a matter of years. Tech moves much, much faster than we do.

But sometimes, the breakthroughs won’t involve any technology at all; it can be as simple as rethinking how a business could sell your product. There are no limits here – indeed, the only limits are those we place on ourselves.


Christian Nellemann is the Founder and CEO of XLN, a provider of low-cost phone, broadband, energy and card processing services exclusively to small businesses. A serial entrepreneur, he’s a two-time winner of Ernst & Young’s Entrepreneur of the Year award and one of only 17 inductees into their Global Hall of Fame. He is passionate about small businesses, and is a featured columnist for Follow him on Twitter @christianxln