“The reports of my death are greatly exaggerated.” This famous Mark Twain quote, utter after a newspaper mistakenly printed his obituary, could also be applied to the state of physical retail stores. Even before Covid, online sales’ growth created questions about whether we were heading towards a store-less future. Covid accelerated this trend. Online sales in December grew 55.2 per cent over the previous year and accounted for 13.6 per cent of all non-food sales. I
. In a recent interview for Shopology, Jonathan Reeve from EagleEye doubled down on his prediction that online will account for 50 per cent of sales by 2030. He may well be right. Even so, this doesn’t also mean that stores are dead. Stores are still a significant part of the retail mix and influence many online sales, even if that influence is not always obvious. The store’s role is evolving, and what makes an exceptional store is changing as a result. While judging Inside Retail‘s Retailer Awards recently, I was struck and inspired by the many examples of phenomenal new store formats that Australian retailers are adopting. Rather than moving away from stores, innovative retailers are evolving their stores to support a broader omnichannel strategy. This raises an interesting question: Given the rise of online and digital channels, what will an exceptional store look like in the future? Here’s what to look out for. Fundamentals first There is a crucial caveat to cover before considering how stores are evolving: experiential retail, showrooms, technology, and other new trends mean nothing if the fundamentals aren’t there first. While they don’t grab headlines, simple things such as products being available for purchase, stores being easy to navigate and helpful staff matter much more than any experience or technology. Our TBC CXI research group regularly surveyed consumers about exceptional retail experiences they had and what made them stand out. More than 80 per cent of the experiences they described tracked back to these retail basics. So, the message is this. I’ll advocate below for stores to become experiential locations that blend with other channels and technologies in meaningful ways. But when I do so, I’m assuming these retail fundamentals are already in order. I’m talking about what takes a store from good to exceptional, which means it already had to be good. Let’s explore the role stores play now and what that likely means for the future. Experiential stores Online and digital channels are great at giving consumers access to a broad range of products whenever and wherever they want. Instead, stores are better off focusing on what online cannot: providing consumers with an opportunity to physically interact with products (and staff) to be inspired, educated, and engaged. This is the idea behind experiential retail, which itself evolved from the Experience Economy. Stores now and in the future are most beneficial when they are focused on these types of experiences. One of my favourite early examples of this was the ‘Nike Town’ formats in the US. I still remember first walking into one years ago and being blown away that I could put on shoes and run on a treadmill or shoot hoops in a store! Of course, this has now become common, including among the <Inside Retail> awards finalists. In-store experiences have further evolved, however. Recycled bag retailer Freitag’s new Kyoto store is designed like a warehouse and let’s consumers create accessories from actual offcuts from the production process. Mattress store The Dreamery by Casper in New York allowed consumers to book a 45-minute nap session to test a mattress before making a purchase. The key to what makes these experiences exceptional is that they are directly linked to the brand’s products or services. While experiences such as cafes, pop-up bars or live music can be entertaining, their impact can be fleeting. Instead, experiences focused on showcasing what a brand has to offer and getting consumers hands-on is a better way to create engagement and ultimately sales. Think about how you could leverage your stores to provide consumers with a memorable experience that showcases your brand’s unique aspects. A useful question to ask yourself is: “What are my stores offering consumers they can’t get elsewhere or online?” Blended stores A question I commonly get when talking about experiential stores is: “How will this drive sales?” Or even a step further: “Won’t consumers just visit my store, have a great experience, and then leave to buy products online?” My response to this is multi-part. First, recent research, which I summarised in a previous edition of Inside Retail, shows that ‘showrooming’ like this is actually relatively uncommon. When it does happen, it is usually due to basic retailer errors such as products being unavailable or hard to find. Second, if your products are so easily substituted elsewhere, then you may have a broader problem than just showrooming. But the third and more meaningful answer is what I’ll refer to as blended stores. The idea is, just like stores now shouldn’t be purely transactional, they also shouldn’t be purely experiential. Stores need to blend experiences with products, transactional capabilities and technology to integrate with other retail channels. Steve Dennis, consultant and author of Remarkable Retail, refers to this as “harmonisation”, and suggests it is the next step from omnichannel retail. Endless aisle technology was an early example of this idea, allowing brands to extend their in-store range by providing consumers with easy access to the online store. The recent increased focus on click-and-collect through the pandemic is another example of stores blending across channels and purposes. Newer examples are pushing blended stores even further. Burberry partnered with Tencent to open their Shenzhen flagship in 2020. When entering the store, consumers are assigned a digital avatar and can use WeChat as a digital concierge service. Uniqlo’s Harajuku flagship has a wall of 240 touchscreens that combine with the brand’s Stylehint app and use Google Image recognition technology to provide inspiration and direct consumers to products in-store. So the key to blended stores is to move beyond thinking about how stores compete with online or digital channels. Instead, work on how they can be blended to create an engaging experience while still offering and capturing transactional value. A final word Even as stores are being used in new and exciting ways, the Covid pandemic has created shifts towards online and digital retail, and moved foot traffic out of CBDs. As a result, we will likely see store closures in the short- to medium-term as retailers course correct or cut costs. This still doesn’t mean stores are dead or are going to die anytime soon. Instead, it means that smart retailers will evolve how they use their stores. They’ll get the fundamentals right, offer an amazing in-store experience, and blend their stores with other channels and technologies to close the loop. Those will be the exceptional stores consumers will be excited to shop at into the future.