The Store of the Future – How and Why are Brands Investing in Physical Retail?
Digital brands are investing in physical stores to grow. So how do retailers use stores to connect with consumers, and what does the future store look like?
November 14, 2019
Author: Elliott Jacobs
The shift towards digital in retail is inevitable. Traditional retailers are focusing on their digital strategies, fretful of the ‘retail apocalypse’ and ‘death of the high street’.
However, perhaps the forecast isn’t as apocalyptic as many thought. Yes, the convenience of digital channels and the advancement of technology means eCommerce will continue to eat up physical sales. But brands are seeing the value of stores as more than merely spaces for sales and inventory.
- Getting physical in retail
- In-store data
- Retailtainment – experiential retail
- Embracing multi-channel
- Are we ready for the store of the future?
- Collaboration opportunities
In fact, eCommerce pure-play retailers are now investing in brick-and-mortar stores, pop-ups, events, and other physical retail strategies to drive growth. Amazon, MADE, Glossier, Casper – the brands we’re accustomed to seeing online are investing in bricks over clicks. So, what do they get out of a real-world presence? And what does the store of the future look like?
With digital advertising costs increasing and the proliferation of content from brands and influencers, cutting through the noise and rising above an increasingly saturated online market has become harder and more expensive.
And, despite advancements in digital shopping channels, consumers still appreciate the merits of a physical experience. Brands need to see this as part of their wider marketing mix. The store is no longer just a sales space, but an opportunity to scale marketing efforts by engaging with consumers in a different way.
The majority of Gen Z (63%) still enjoy the physical shopping experience. They like to touch the product. They appreciate great customer service. They see it as an experience, and these younger generations are known to buy experiences over products.
Due to the costs involved in physical retail, brands need to make sure they maximise these real-world interactions – as guide-shops or experience spaces, concepts, showrooms or long-term pop-ups. These are spaces to showcase the quality and functionality of products in the real world, trial new products and get feedback, experiment with packaging and merchandising, connect more intimately with customers and portray brand values, all while delivering excellent customer service.
Remember – data is the bread and butter of the digitally-native retailer. It’s at the core of their marketing and operations, and has kept them a step ahead of traditional retailers. These in-store experiences and interactions with customers offer a wealth of data to a brand: in-store sales, product engagement, merchandising, pricing, and customer feedback.
Slowly, we are seeing in-store technology creep in to the physical retail space. But brands need to see past the gimmick and provide value with technology. For example, the new Adidas London store allows customers to request alternative sizes and colours from an interface inside the changing room.
Collecting data in-store using smart mirrors and interactive screens, gives visibility to retailers, in a similar way to online data. The store of the future is all about offering the experience of Apple, but the convenience of Amazon.
The aim is to provide full visibility around customer behaviour and intent, mirroring what’s possible online. Think of it as the physical cookie. This will facilitate personalised recommendations, personal coupons, seamless payments, flexible fulfillment, and cross-channel purchasing and loyalty benefits.
The potential impact of a physical experience – ‘retailtainment’ – is a useful tool in the multi-channel toolbox available to retailers. Some stores are permanent, and pop-ups have grown exponentially in number, but what’s key is offering something in the physical world that cannot be found on consumer’s smartphones or laptops.
It’s likely that the stores of the future will be focused on entertainment, education, and events to encourage awareness and footfall rather than purely sales. Catering to the Instagram generation is crucial.
There are countless examples of these in-store centrepiece experiences. Only recently, we saw a huge mirrored skate ramp installed in a Paris department store. Louis Vuitton’s London flagship is as much a modern art exhibition as it is a retail outlet.
Some brands and retailers have the budgets to collaborate with top musicians, directors, artists, designers, architects, and other leading brands, delivering unique experiences that push the boundaries and captivate audiences. However, it doesn’t necessarily have to be on this scale to have a positive impact.
Retailers are being creative in offering innovative, fun, and Instagrammable experiences in-store, without breaking the bank. Product vending machines, customisation stations, coffee bars, augmented and virtual reality activities, live product demonstrations and in-store treatments, virtual assistants, workshops, and live product launches, there are countless ways of engaging an audience in store.
These are most powerful when linked to other media, as part of a multi-channel strategy. Social media or email campaigns can drive traffic to an in-store launch, whilst coupons found in-store can qualify for discounts via the mobile app. The connection between blogs, vlogs, YouTube channels, product pages, Instagram posts, and in-store offers is crucial here.
Customers want to discover products on blogs, watch a demo on YouTube and be able to then find it in-store with advice from a sales advisor. Then they want to be able to re-purchase the product online, whilst being offered other related products or recommendations to complete the look.
Are we ready for the store of the future?
These changes don’t happen overnight. Landlords, malls, and municipalities play their roles in facilitating change. We’re moving away from retail units being merely shell spaces for shelves and a counter. Spaces need to be versatile, able to stock masses of inventory for a product launch one week, then cleared for an in-store performance or workshop the next. Leases need to be flexible, allowing brands to test and trial without long-term commitment.
Rows of shelves and counters might be replaced by coffee bars or touchscreen monitors. Stockrooms are becoming less valuable than in-store space. And with the rise in click-and-collect, do stores need a dedicated area for this service? Then there’s the smart equipment that we expect to be implemented in the future. Smart cameras and sensors can’t be installed overnight. How and where will this data be stored, and can real-time visibility be provided for staff in-store, through endless aisle or other technologies? Will 5G have an influence?
We’ve seen some new physical retail concepts that aim to connect people with products, brands and other people in different ways. Take Re:store in San Francisco, positioning itself as a WeWork for Instagram brands, curating labels such as Sézane, Boy Smells and Lisa Says Gah. In the process, brands pay upwards of $350 per month for a presence in the immersive, experiential and Instagrammable space, as well as a 20% commission. Texas’s Neighborhood Goods does something similar.
There are many reasons people visit town and city centres, and out-of-town retail parks for that matter. Retail is one of them, but there’s also dining, entertainment and leisure, employment, healthcare, hotels, professional services, and more.
These areas need to encourage collaboration, providing fresh and fun social spaces and experiences that you can’t get online. Some of the strongest recent growth has been in food and dining, as well as entertainment and leisure. There’s a space here for collaboration.
Can retail brands collaborate with microbreweries, celebrity chefs, or street food shacks? What can retail learn from hotels or restaurants in terms of customer service? Can sportswear outlets capitalise on local sports events? Collaboration opens the door to many possibilities.
Therefore, it’s important municipalities take a ‘bigger picture’ approach to evolving town and city spaces. What’s driving footfall into these areas, and how might this change in the future? What can municipalities do to encourage collaboration and investment? These questions transcend retail.