Just Browsing! The Science of Experiential Retail

29/10/2018

For all the benefits of e-commerce, retailers recognise that people still value brick-and-mortar, leading some to craft unique in-store experiences. Our research partner, Canvas8, spoke to Steffen Jahn, assistant professor at the University of Goettingen, to learn how experiential retail impacts brand perceptions.

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Report Highlights and Data

  • Experiential stores are not primarily designed to sell merchandise but rather to improve brand perceptions
  • However, enhancing the brand experience can help sell exclusive and premium products
  • This change in perception is facilitated when shoppers go into a store for recreational rather than just transactional purposes
  • People are more likely to change their opinion of a retail experience if they're already familiar with the brand
  • Online purchases accounted for just 9.3% of total retail sales in the US in Q1 2018 (US Census Bureau, 2018)
  • 98% of Gen Zers say they still like to shop in brick-and-mortar stores (NRF/IBM)
  • 45% of Americans would pay extra for goods and services if they received a high level of customer service (Accenture, 2016)
  • 49% of British Boomers have stopped buying products or services because of bad service (Institute of Customer Service, 2016)

People looking for a place to relax in the middle of Manhattan might have found a new and fairly unlikely hangout spot. Burrow, a start-up that sells sofas online and delivers them in boxes, is getting into brick-and-mortar, launching a store in SoHo where customers are invited to have a cup of coffee, take a nap, or watch free Netflix all day. This type of experiential space is becoming increasingly popular among both up-and-coming and more traditional brands. In this type of retail context, the focus is not so much on selling products as it is on giving customers an entertaining or exciting experience that changes their perception of the brand.

Despite the ever-growing presence of e-commerce in our lives, online purchases accounted for just 9.3% of total retail sales in the US in Q1 2018, highlighting how brick-and-mortar stores still seem to play a crucial role in shopping habits. As a result, brands from various sectors are trying to craft original and exciting experiences through flagships and pop-ups. With these strategies becoming increasingly important in defining their image, Canvas8 spoke to Steffen Jahn, an assistant professor of marketing at the University of Goettingen and author of Selling the Extraordinary in Experiential Retail Stores, to understand how experiential spaces impact people’s perceptions of retailers.

Why is this topic important to understand?
Digitalisation has led to some problems for brick-and-mortar retailing, but experiencing a physical store still has its benefits. We were interested in physical stores that are designed to provide an intense experience and whether they have beneficial outcomes for brands. We saw numerous pop-up stores – which are not primarily designed to sell merchandise but rather communicate a message through an experience – opening up and we wanted to examine if this had a tangible benefit for brands.

Experiential retail stores are different from common brand stores because they are not primarily designed to generate sales. These stores are valuable for many luxury brands, but we don’t know if they can generate sales for more common consumer goods. We know that flagship stores have a positive effect on how the brand is perceived and experienced by consumers, however, pre-existing research did not consider the brand perceptions people already had before entering the store. We didn’t know if flagship or pop-up stores were actually able to update this perception of the brand experience.

How did you test your hypothesis?
We did two studies. One was an experiment where we showed participants footage that simulated a mock store. One of these mock stores was like a flagship with experiential elements and the other was a ‘normal’ brand store. We also manipulated the shopping motivation of the participants, so one group had a recreational mindset when entering the store, while the other group wanted to actually buy something.

The second study was a field study where we surveyed visitors to a flagship store. We asked them questions before entering the store and after leaving. We measured pre-existing perceptions of the brand experience, asking consumers questions on how they perceived the interaction, sensory stimulation and emotional response with respect to the brand.

What were the key findings?
We could see that flagship stores were more effective for consumers in the recreational mindset. These stores updated the brand experience and improved perceptions. We also found that, although they weren’t primarily designed to drive sales, these stores are especially good at selling exclusive, premium or collectable products.

We found this process is facilitated when consumers have a recreational motivation to be in the store – not just to find and buy something, but to actually explore the store. This updated perception is also facilitated when consumers have a clear idea of the brand. If the brand is already a familiar presence in the consumer’s mind, the experiential store is more effective in updating the overall brand experience. The other important finding is that a good experience inside such stores can lead to additional sales, especially of exclusive products that are not available elsewhere or that are a bit more premium.

We demonstrated that allowing people to understand and learn about the brand by interacting with it can be beneficial for brand communications. This shows innovative retail concepts can be an effective means for brand communication, not just for distribution and sales. Results show it works well from an economic perspective to invest in these stores and design them in an attractive and engaging way that helps consumers have an experience they cannot commonly find elsewhere.

Insights and opportunities

Despite the rise of e-commerce, in-store experiences are still very important for shoppers, including tech-savvy Gen Zers, 98% of whom still like to shop in brick-and-mortar locations. Even Instagram is hoping to update its brand perception and position itself as a shopping platform by opening a pop-up in London’s Covent Garden, where it will promote online fashion and jewellery brands.

When in-store, many shoppers are demanding more of retail staff, with 45% of Americans saying they’d pay extra for a high level of service. In the UK, meanwhile, 67% of people say unhelpful service is their biggest frustration when shopping at supermarkets and almost half of British Boomers say they’ve stopped buying products or services because of bad service. Some brands are aiming to boost the overall experience by training sales associates to become experts, or to integrate technology and interactive media within the customer experience. Take Calvin Klein as an example. Going beyond face-to-face assistance, the brand partnered with Amazon to equip the fitting rooms at its pop-up shop with Echo devices to answer people’s questions.

People appreciate streamlined in-store experiences, with seven in ten British supermarket shoppers say queuing is their biggest frustration. Brands have the opportunity to meet these demands by designing their spaces with customers in mind without letting anything break the enchantment of the experience. Eyewear brand Warby Parker, whose store layout is inspired by libraries, designed a mirrored rack layout to display the same products on both sides of the store. While this solution could be seen as a waste of 50% of rack space, it keeps customers from having to crowd around shelves to look at or try on frames.

Unique experiences can get people in store by playing on their curiosity, sense of novelty, or fear of missing out. According to a 2017 survey of over 3,000 Gen Yers and Zers, almost half of them cite novelty, entertainment and food as key motivators for visiting stores more often. Italian bank Intesa Sanpaolo capitalised on this by partnering with one of the country’s top chefs to open a pop-up bakery in its Milan branch. It sought to revive the appeal of its retail spaces by giving them a more homely and simple feel.

 

This article was first published by our research partners, Canvas8, here.

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