Over the years, there has been a dramatic shift in the way people shop – a shift which is increasingly undermining previously tried-and-tested retail practices and threatens to shake the high street to its core.
Online shopping – which has long been the norm – continues to grow in popularity as the ‘Internet Generation’ start to earn disposable income. Couple that with rising costs and business rates and, for many retailers, maintaining physical stores has become almost unviable. These challenges are reflected in the number of iconic brands we’ve seen close in recent months, from Maplin to Toys ‘R’ Us.
Yet, despite the spate of depressing headlines, it’s not all bad news. Don’t believe the hype: stores aren’t dead.
Rather than worrying about physical stores disappearing, we should start asking ourselves what the store of the future will look like – and it all starts with the customer.
Drive loyalty through customer experience
Online or offline? Department store or standalone brand? Fast fashion or luxe? When it comes to shopping, customers are inundated by choice – and the customer of the future will be even more so. In a world of increasing unpredictability, retailers can’t rely on functional loyalty to drive sales. Instead, we must get to grips with the different ways in which customers are interacting with brands and breathe life back into physical stores in order to capture their emotional engagement.
How best to do this? By tapping into the new experiential economy. The store of the future must focus on experiences over purchases – and that goes for everything from design to staffing.
For examples of how the experiential economy is already benefitting brands, we need only adopt a global perspective. Take Rare Market in Seoul, a small concept shop that’s already earned headlines from American Vogue and UK Harper’s Bazaar for its Instagram-worthy pink carpet and artful clothing display, or the Museum of Ice Cream in the US, which achieved worldwide fame due to the colourful, interactive exhibits.
A great customer experience goes beyond aesthetics, of course. After fixed cost, the most expensive element of running a physical store is the staff, so it makes sense for them to be as engaging as possible when it comes to customer interactions. Your staff are the face of your brand, so consider hiring people who are already enthusiasts for your products or market. This is particularly important for high value items, such as phones and cars. Apple stores understand this, creating an open environment with products on display and knowledgeable staff ready to talk to you.
When it comes to FMCG, convenience will be of the utmost importance, as will creating an omnichannel experience.
While people will still want to pick up a pint of milk at the corner shop, at the other end of the spectrum we may see a shift towards subscription models for predictable consumption, such as ZooPlus has done for pet food. Supermarkets could combine the convenience of an online bulk order with the in-store experience by offering online subscriptions with in-store collection at the customer’s convenience. An added benefit of this, of course, is that being in a physical store encourages browsing and additional purchases in a way that ecommerce is yet to replicate.
Understand when to invest in innovation
Keeping up with the latest technology and data innovations is a challenge for retailers; yet, without any innovation whatsoever, they’ll lose their competitive advantage in an increasingly brutal and volatile environment. The key is to focus on people over product and so only invest in the innovations that align with your brand. If you draw people in through your low pricing, your customers won’t necessarily be swayed by an in-store experience filled with the latest AI, for example.
The store of the future has to be as frictionless as possible in order to survive. For some retailers that might mean introducing facial recognition, app-based selling or smart changing rooms. For others, it might mean a clear layout and well-informed staff. Innovation should begin and end with your customers.
Leverage data for competitive advantage
Changing consumer behaviour and purchasing mindsets are difficult to keep up with, while relevancy is growing in importance. Instead of relying on promotions, data science can be used to take the guesswork out of what the next generation of consumers will actually want from a store. When properly understood and implemented, data science can improve everything from ranging to store location planning.
However, when it comes to data, retailers face a long tail issue; while the majority of high street retailers are only getting 5 or 6 visits a year from any one customer, the loss of even one of those visits has a huge impact on their relationship with, and understanding of, that individual. With that in mind, retailers must look to boost their transaction data with other data sources in order to truly get to know their customers and make their stores the ones that matter.
Take ranging, for example: rather than relying on a ‘one range fits all’ strategy, the store of the future needs to be ranged for the local community and competitive set it’s serving. Data can be used to understand which products are selling well in particular stores and so stock can be adapted accordingly. A step beyond this would be to introduce aggregated personal data to understand which products are usually bought together, in order to make more specific customer recommendations.
Ultimately, whether you’re a fashion brand or a supermarket, all retailers must adapt to improve revenue, stay relevant and drive greater conversions in the future.