The future of retail is experiential  and not dead

2018/8/23

Retail is likely to change as much in the next five years as it has in the past fifty. As seen with the number of retailers who have recently filed for bankruptcy, the impact of digital media is forcing enormous changes for bricks-and-mortar stores, but retail isn’t dying, it’s evolving. It’s becoming more convenient, more experiential, faster, and available through every digital channel.

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A Seismic Shift
Last year’s Black Friday sales in the US provided an example of this shift. Traditionally Black Friday was the day that shoppers would line up outside stores before opening time to try to get the best bargains. Last year’s analysis showed that the peak of visits really came towards lunchtime. Instead of queuing to get the get prices people are looking for offers online and particularly on their phones, and then going out to find other bargains in the physical stores.

The level of consumer sales is rising, but a larger proportion is spent online. eCommerce is still tiny compared to in-store sales, at about 10% globally, but it’s growing at about 20% a year and is likely to hit one-fifth of total sales within five years.

The big names like Toys R Us and Maplin declare bankruptcy, but other groups like Sears, Marks & Spencer and New Look, are closing less profitable stores and re-trenching.

Department stores became popular because they stocked a large range of products in one place, carefully curated to appeal to the profile of the shoppers. The large size and buying power kept the prices down. However, online shopping can immediately offer a far more extensive choice than any physical retailer ever could.

Delivery and click & collect have made e-commerce an even more viable competitor to traditional shopping. Where goods would sometimes take weeks to arrive, they can now be delivered in hours. Amazon has over 100 million members of its Prime programme around the world, giving free next day delivery for an annual fee. According to Business Insider, Americans are predicted to spend $32.6 billion on shopping with same day delivery in 2022, up from just $3.4 billion in 2017. Other retailers like Target and Walmart are trying to compete with new ways to order online and collect in-store, including having purchases delivered to shoppers as they wait in their cars.

Even online shopping is changing. Amazon is incredibly powerful, but large dedicated e-commerce sites are not the only way people buy online. There are lots of small niche sites now selling direct. Content sites such as Highsnobriety, which features stories on sneakers and lifestyle, has ambitions to make 30% of its revenue through e-commerce. Others are selling through social media. Instagram, in particular, is now home to thousands of micro brands, competing on a level playing field with big brands, using clever targeting, minimal inventory and 3rd party fulfillment platforms like Shopify.

Shops Need to Evolve

It is in this shifting context that shops need to evolve. They need to have the same convenience and range as customers expect with online, but with a level of experience that can’t be beaten by websites and apps.

Two early pioneers in new retail concepts were Apple and Rapha. Apple’s flagship stores play on the idea of a store as a town hall. In addition to letting potential customers get hands-on with its products, and have ‘genius bars’ where customers can get advice on how to fix their devices, and also spaces with a programme of regular events for many tastes, including live art, tutorials video editing, and children’s activities.

Rapha, an upscale cyclewear brand, uses the idea of a store as a clubhouse. Rapha initially introduced its stores as pop-ups to prove the concept, and now has more than 20 in cities around the US, Europe, Asia and Australia. Each ‘clubhouse’ has a café, screens showing cycling, and organises regular group rides, as well as functioning as a store.

New Stores with new Concepts

New stores are trying to reinvent what retail does in creative ways:

  • Story — A department store in 10th Avenue, New York, which uses regular updates and refreshes around a theme, a bit like different issues of a magazine. They aim to feature 70% of what customers already know and 30% that will ‘surprise and delight’. It’s currently doubling as a shared work space (a bit like WeWork), and visitors to its site can book a free work session.
  • thredUP — The thrift store reinvented. thredUP started online but now has two physical stores in California and Texas, with a plan to open up to 100 stores around the United States. Stores are much smarter than traditional second hand stores, with a focus on well-known labels like J Crew, smart layout and merchandising, and in-store stylists to help customers.
  • Forty Five Ten — A luxury department store in Dallas, named after its address, 4510 McKiney Avenue. It curates a frequently changing collection of luxury goods, including lots of plays on its name — for example 5 seasons, 5 senses, and 10 edits (for instance their ten favourite white shirts).
  • Missguided — The store is an Instagram playground. This London store is filled with photo opportunities to make a shopping trip an experience for their young female customers. Highlights include inspirational quotes, a monster truck, and a vending machine for cans of ‘Unicorn Tears’.
  • Bonobos — The clothes shop’s stores have all the stock and all the sizes, but once people have found what they want they need to order through the app. This means a greater level of choice for the same sized store, as there is no need to keep stock. Zara is also trialing this concept in London.

Technology reinventing retail

New technology is bringing new levels of convenience and experience to shopping. Cosmetics brand Charlotte Tilbury uses smart mirrors with augmented reality to let shoppers put on different looks virtually in seconds, trying out new colours and styles. Rebecca Minkoff brings an element of online ordering into the changing room with screens that let shoppers order different sizes and colours of items they are trying on. Assistants bring the items to them, without them having to go back into the main store.

Apps are also making shopping easier. Target and Nike both have apps that help shoppers find what they are looking for within the store, allowing them to search and then directing them to the right part of the store, or even the right shelf. Ikea’s augmented reality app lets people visualise new items of furniture in their homes through their phones. Ikea is also introducing new services: It is now offering a home assembly service to people who buy flat-packed furniture, through its purchase of TaskRabbit.

Live video apps are being used to create ‘watch-along’ shopping shows in China. Shops’ presenters stream from stores to show themselves making purchases, and their viewers can participate, buying the same goods, in a re-invention of TV shopping channels. It’s possible that this will be the next big thing among social media influencers in the West too.

Final thoughts

Retail is changing, and retailers need to adapt. Marks & Spencer is just the latest to announce store closures, but it is part of a plan to restructure and adapt to a more digital world. While it is bad news for its staff and the communities that the stores served, it may put them in a better position to take advantage of new innovations, make shopping easier for customers, and and to redefine that they stand for.

 

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