5 property centred organisations that need to change in a virtual society

In an increasingly virtual society, a number of organisations or organisational types with large property portfolios or physical presences on our high streets and in our malls are struggling to adapt to the new order. With the news that Blockbuster is preparing for a “pre-planned” bankruptcy in September, Fastcompany have posed the question:

How should it restructure? Should Blockbuster become an all-digital service? Should it focus on kiosks? Should it close down all of its physical stores?

We think a similar question applies to a range of organisations that have to answer a very large question. If your competition is increasingly online, but you have significant physical assets, what can you do to compete?

The answer is to look to the things a physical presence can bring that technology cannot, as yet, achieve. Just as businesses are beginning to realise that if you can work individually (or collaborate online) from any location, the workplace needs to be redesigned around physical collaboration, so too do these organisations need to realise that if you can buy products, or take a course, more conveniently online, the physical environment needs to be redesigned around a different type of customer experience.

Here are five organisations that are either currently facing these challenges, or will face them in the next decade, and our thoughts on some of the things you could do to radicalise the customer experience if you are to retain a physical presence. Of course, to properly solve these issues is a project in itself, which needs to be worked through h in a systematic and robust way, but these are some broad brush ideas.

The video rental store

It has been a long and slippery slope for video rentals store. Increasingly prevalent in the age of VHS, when it was significantly cheaper to rent a video for a night than to buy the video, they have been challenged first by the falling price of video in the form of DVDs, then by “rent-by-post” companies such as Netflix in the US and Lovefilm in the UK, and are increasingly under pressure from online streaming services and content on demand. It’s a question of convenience. The customer can now get movies straight to their TV without having to leave their armchair: so what next for the video store?

Many independent stores have already been wiped off the map, mostly by huge chains like Blockbuster that could offer more and newer stock when they first came on the market, so focussing on Blockbuster and its immediate rivals, they need to look at what customer experiences they could provide that could not be achieved elsewhere.

Home movies are not now the battlefield in this front, unless Blockbuster wants to become a wholly virtual presence, but it faces too much competition from too many players in better conditions than they are for this.

Instead they have to attract groups that want a movie experience that cannot be achieved in the home or the cinema: within each store, install a number of cinema rooms, the equivalent of karaoke rooms in Japan, that small groups can rent for the evening. FIll it with high end “home cinema” equipment that vastly exceeds what the typical home would have, with full THX surround sound, high definition and transducers that “shake” your seat in synchronisation with the action on the screen.

Make it exceptionally comfortable and lay it out not in cinema style, but in a horseshoe of sofas. Soundproof the walls and let groups make as much noise as they want. This is not a cinema where you have to be quiet, but a social gathering. There should be a huge and easily navigable database of movies accessibly from the room: if they want to watch Back to the Future cinema style, this is the place to do it.

The bookstore

Last year, UK book chain Borders filed for bankruptcy, blaming intense competition from internet booksellers.

Though it took Amazon many years to turn a profit, they have become the first port of call for many book buyers, if nothing else to check out the user reviews on a purchase. Though it will take a day or so to arrive by post, and if you want it quicker the postage outweighs the savings made online, the convenience is king, here. Not only can they offer more stock, but again, you do not need to leave your house to get what you need.

The book chain, then, needs to offer a reason to leave the house beyond that of price, or speed of purchase. The ability to simply physically browse shelves of books to “judge them by their cover” is not enough of a draw. Co-locations with coffee shops help to bring people in, but many shops do not let customers actually read books in the store, since it damages the book.

The main issue is that reading, unlike movies, is an individual rather than a social experience – it is not easily shared. This puts a barrier in the way of transforming the physical real estate in ways that can compete with online experiences.

The solution will rest in creating engaging and alternative experiences within the stores. Tapping into book clubs, which tend to be about fiction. Hosting an array of speakers on the variety of business, self help and other non fiction topics. Writing courses. This needs to be about experiences connected to reading, not just about buying books.

The bank branch

Retail banking is one of the oldest of professions, but whilst major technology shifts in the past decade have begun to change the way customers interact with banks, the branch experience has only seen incremental change despite a revolution in customer expectations.

Aside from teenagers who are not allowed to bank on the internet, and the generations upwards of baby boomer who still pray for some level of one to one customer services, many now simply bank online unless they have to go into a branch for a very specific reason, such as paying in cash, cheques, or making an international transfer.

Nevertheless, society is becoming increasingly cashless, and although cash may not disappear completely for some time, cheques are certainly being phased out and it our interaction with money will become increasingly virtual as we gain a number of benefits, such as accurate money management.

At this point, the bank branch needs to evolve. In some banks, the cashier has already begun to be brought out from behind the bulletproof window, and it is easy to assume banks will become more about engaging with customers again around money management, as the bank managers of old once did, and as opposed to being just about processing money.

The university

University education, for many academic courses, has often been very didactic: lecturers stand in front of large theatres and preach to half asleep students, and the students then go and study at home, in the library or in the labs.

In the past years, university education more than any other type has shifted into an online presence. The University of Phoenix in the US and the Open University in the UK allow very large numbers of students access to courses that can be studied from the home.

This has led traditional universities to finally begin to ask how they could help students learn in more practical, engaging ways. Although some disciplines, like medicine, have long experimented with innovative pedagogies like problem based learning, there is a lot to change in other disciplines, and some academic professors can be very resistant to that type of change.

Ultimately this will come down to issues of supply and demand, and as yet there is still enough demand for traditional places that there is less incentive to change. But the next decade will see a revolution in university provision, and as the holders of some of the largest amounts of real estate in the world, they will undoubtedly need to transform their estate, and will see a huge reduction in lecture theatres and an increase in more innovative and collaborative types of learning space that provides a greater learning experience throughout the campus.

The supermarket

Though online grocery shopping has been less successful in the US than in other locations around the world, its success in the UK shows its huge potential. The main obstacle online shops needed to overcome was proving to the customer that they could choose and deliver the best quality of fruit and vegetables, as these are amongst the only items in a store you look at carefully before picking.

In particular, the UK success story is Ocado, despite their difficult recent IPO, which uses Waitrose produce and has focussed on quality produce. The delivery charge is affordable, and shopping online brings additional benefits such as retaining a regular items list to speed up the shopping process. In the future, we can expect them to integrate recipes and shopping lists more fully, set up your own recipe lists, and even begin linking to your own stock control systems in the next ten to fifteen years.

As with the video store, it’s a question of convenience. When it becomes more convenience to shop online, the demand for physical grocery shopping will decrease. Expect a longer lag time for the tipping point on this than with video stores, book stores, DVD/music stores, on perhaps the scale of the bank branch, but it will come.

Again, the key question will be: what experience can we provide that is impossible online? The beauty of the supermarket, of course, is that it can appeal to more senses than just the visual senses, which is what we shop online with. Supermarkets can cook with their produce and give taste tests. They can integrate wine tasting and delicatessens (and provide a local shop feel for quality inside a larger shop). As UK supermarket Waitrose is doing, they can get celebrity chefs to create new dishes and co-locate the ingredients for those dishes together.

But most of all, they need to begin to appeal to the type of food shopper that hates to prepare in advance, that does not want to know what they will be eating for dinner on Friday on a Monday night, and wants to be able to browse, be inspired and purchase things they would not have thought of or come across via searching online. This solution will be about spontaneity, but will mean that stores will begin to need to be laid out in very different ways.

What other types of organisations have large physical presences but are being increasingly challenges by virtual competition?