1. In-store experiences
2. Omnichannel retail
3. Leveraging data through tech
4. Downsizing and showrooms
5. 'Store as platform'
This article originally published May 23, 2016.
With a world of products available for virtual perusal, stepping into a brick-and-mortar store seems to have lost its appeal to most shoppers.
In February 2017, Sears announced it would cut costs by as much as $1 billion and lay off 130 corporate employees, while J.C. Penney said it expects to close two distribution facilities and 130 to 140 of its 1,000-plus stores throughout the year.
American Apparel has filed for chapter 11 bankruptcy protection twice since October 2015. In 2016, Macy's announced it would close close 100 of its 728 stores, explaining that the properties would be worth more as real estate. Sports Authority went bankrupt and decided to shut down all 450 of its locations.
Many others have failed to meet even their bleakest expectations. Photos of abandoned, dilapidated malls filled with plant overgrowth make the rounds online frequently as more closures loom.
Meanwhile, online-first companies are opening brick-and-mortar storefronts, and 71 percent of people say they would prefer to purchase an item in a store if one was located nearby. Ecommerce is no replacement for touching and feeling a product before making a purchase -- 85 percent of people value this option, according to TimeTrade. Many people prefer to shop in stores, but stores aren’t doing enough to meet their demands and rival the online experience.
“There is no shiny object or silver bullet to this retailer set of challenges out there,” says Pano Anthos, managing director of retail innovation accelerator XRC Labs. In order to stay relevant to smartphone-consumed consumers, stores have to get creative and bring the digital world to the physical world.
Here are five ideas retailers are testing that would make us actually enthusiastic about going shopping again:
When was the last time a big sale made you get in your car and head to the local mall? (Black Friday 2012?) What about the last time an email alert from a store (“free shipping!”) inspired you to make an impulse buy? (Last week?)
Thanks to the convenience of ecommerce, you don’t have to get off your couch to outfit your entire wardrobe or home. That means stores have to offer an experience that will outdo even the flashiest online deal.
At its flagship store in Manhattan, Macy’s has recently hosted dance parties as well as opened a special floor, called One Below, geared toward millennials. One Below contains selfie walls, wearable tech and 3-D printers for custom-made accessories. Members of the young demographic value being able to curate and personalize their possessions, sure, but they also don’t like being stereotyped. They’re turned off by transparent attempts to market to them, and they don’t all dwell on their obsession with selfies like older generations do. Still, these efforts are a sign that Macy’s recognizes the need to offer something more than merchandise alone.
Many stores have offered alternatives such as special events and classes over the years, but today the stakes are higher. “People don’t hang out, because the stores are boring,” Anthos says. “Store engagement gives the consumer a reason to be there beyond simply buying an object.”
In December, Nordstrom contributed to a $15.5 million series B financing round for Shoes of Prey, a company that lets people customize a pair of heels or flats. Shoes of Prey started as online-only, but it quickly realized the demand for people to try on shoes before shelling out. Now, Shoes of Prey operates out of many Nordstrom stores -- a win for both companies.
The problem is, most major retailers are still in the experimental phase. They haven’t done much research to find out if events actually make people want to spend more, for instance. Besides, adding a 3-D printer to a store in New York is one thing, but it’s a huge expense to install them chain-wide, leaving shoppers in the Midwest without more reasons to stop in.
What the companies do know is that many customers expect VIP service. Eighty-nine percent of consumers want shopping to feel personalized, but only 18 percent of them say that retailers are achieving this level of service, according to mobile marketing platform Vibes. A positive interaction with a sales associate can go a long way. But anyone who’s been accosted immediately upon walking into a store knows how annoying that can be.
“It’s very similar to the digital journey in ecommerce,” Anthos says. “You’re looking, thinking, learning, reading way before you’re ready to buy something. Attentiveness and clerks are a very late stage in the purchase process.”
Another example is the movement among stores of asking your name, writing it on a dry erase board on a dressing room door and playing the roles of BFF and personal shopper. But how is that employee supposed to know that just because you’re trying on clothes in a store that sells pink ponchos, that doesn’t mean you would ever wear one?
TimeTrade found that 59 percent of millennials say they would spend more if a personal shopper proposed suggestions. The distinction is that not every sales associate is trained to be a personal shopper, and not every customer believes they have signed an invisible contract to receive style tips.The stores that really want to connect with you are doing more than exchanging shallow small talk. Rather than bombard customers to find out their preferences and persuade them to buy something, more and more retailers are trying to figure out how to get you to open up about how you shop online.
While “omnichannel” might sound like an industry buzzword, it’s the future of shopping. Even today, if you’re shopping in a store, chances are you’ve done a bit of research online beforehand.
At the most basic level, omnichannel retail refers to a consistent shopping experience online and off. But that doesn’t just mean the store and website sell the same merch. It also refers to bait stores cast out to reel you in.
According to Google’s marketing insights arm, Think With Google, retailers want to know how you shop when you’re not in their stores. On your laptop? On your phone? If you made the trek to a store, what prompted you to go? Was it an ad? Was that ad on another website? A promoted Facebook post? An email promotion?
If you’re a shopper getting wind of these tactics, you might feel like stores are spying on you. But they’re doing it all with your interests -- quite literally -- in mind.
Google cites a 2015 IDC study that found omnichannel shoppers have a 30 percent higher lifetime value for retailers than their single-channel counterparts. Stores are desperate to master the art of not only getting your attention, but also making sure that when they do, that you can transfer your online browsing into in-store buying with no hiccups. Think: the end of online-only deals.
Say you’re browsing a store’s website and add a few items in your virtual shopping cart, but you don’t check out. Instead, you travel to the store to see them for yourself. If you sign in when you arrive, maybe by sharing your email address with a tablet-toting employee (à la Apple Store Genius Bar), it’ll make finding and buying those products much easier. Plus, that sales associate will get a sense of your tastes and preferences and be better equipped to provide you personalized service.
This practice falls more in line with hiring a personal shopper. However, there’s a catch-22. Anthos explains: “You want my user information to give me better service, but I want better service before I give you that user information.”
TimeTrade surveyed nearly 5,500 consumers and found that 59 percent would be willing to share their online shopping carts with in-store employees. The idea is even more favorable among millennial and gen Z consumers, at about two-thirds. Retailers have been slow to catch on: 24 percent of them have this capability today, while 26 percent say they aren’t interested in implementing it. They’re still afraid it won’t be a hit.
“Stores are proud of their heritage,” Anthos says. “Their whole model is, ‘we’ve been around for 150, 200 years.’ But that heritage means they don’t change very much, very fast, and when they put something in, if it doesn’t succeed right away, it’s considered a failure. … Startup companies think of failure as a learning experience. That never crosses the mind or the culture of a retailer.”Related: 4 Ways Omni-Channel Retailers Can Step Up Their Shipping Game
As stores move toward providing smooth online-to-offline transitions, they’re also thinking about the data they can mine from your every shopping move. Again, this unsettles many people, but remember, they’re already getting it from you when you shop online.
By 2020, brick-and-mortar stores will have access to the same data and analytics as ecommerce, according to Fitch Ratings. Like improving customer service, stores know that introducing these changes to shoppers will require delicate care. If you’re the type of person who wants sales associates to give you your space, you’ll probably balk at Big Brother monitoring your behavior.
Smart technology is one of the most promising sources of data for retailers, with possibilities including video and Wi-Fi tracking to follow customer’s paths through stores, smart shelves to see what items they pick up and move around and devices called beacons to transmit smartphone notifications to passersby.
When TimeTrade surveyed consumers to gauge their aversion to tech that tracks, such as beacons and Wi-Fi, relatively equal proportions said they didn’t like the idea (39 percent) or they didn’t mind as long as it benefited them (44 percent). As far as smart mirrors, which help customers visualize outfits in various colors, many people are open to the idea -- they’re just skeptical that it will really help them “try on” variations of the same outfit.
The bottom line is, retailers are going to have to prove that their newfangled tech is truly helpful not just to them, but to you.
Take beacons. They’re small boxes, or even computerized stickers, that detect nearby customers and push deals or notifications to their smartphones via Bluetooth. But do you walk around with your Bluetooth on all the time? And if a store asked you to turn it on, would you? What about if a store asked you to download their app?
Even if you say yes, you might get an influx of notifications, disrupting your browsing with deals for items you’re not interested in. You might be in one department and a beacon from another will detect you and send you a blast. The stores are working on that.
“Beacons are, again, very late in the sale cycle,” Anthos says. “When you’re in browsing mode, the last thing you want to is to be hit by ads. You just want to look around.”
Still, Business Insider Intelligence predicts that beacons and proximity marketing will influence more than $40 billion in retail sales in 2016. Soon, stores will find a way to shower you with deals and challenge you to scavenger hunts, all via messages.
If you want to keep your phone free of these kinds of pushes, stores have another plan. Some have added iPads for you to shop and play with.
So many products are available online that the idea of spending hours in a giant store might seem like a waste of time. Even if that store has top-notch customer service and all of the highest-tech bells and whistles, you’re probably used to typing in a search query to find what you’re looking for, so what’s the point of getting lost among the racks?
In addition to closing dozens of stores, Sears is beginning to pilot smaller spaces. The first of these, announced last week, is a 10,000-square-foot store devoted to home appliances in Fort Collins, Colo. The store will include technology that allows customers to visualize new appliances in various kitchen layouts, according to Reuters.
Ecommerce may be taking over retail as we know it, but that doesn’t mean you’re going to buy everything on the Internet. Online-first businesses such as Shoes of Prey, Warby Parker, Birchbox and Amazon have opened physical locations for the majority of customers who like to touch, feel and try on products before proceeding with a purchase. Online retailer Bonobos has a chain of 21 "Guideshops" that don’t carry inventory for purchase. Instead, customers can walk in or make a fitting appointment, then have their merchandise delivered to their home or office. Talk about VIP service.
Same-day delivery is becoming more and more feasible in major cities, and soon the rest of the country will have this luxury. You’ll become accustomed to being able to have anything delivered anywhere, any time, if you’re not already. Plus, when stores downsize, they’ll be able to carry only the items you truly want, so you won’t have to sift through the excess.
In the future, it’s also possible that the sharing economy will influence more stores to offer rental service, Anthos explains. Rent the Runway, another company that started online and later opened brick-and-mortar locations, lets people borrow the latest fashions so they can wear them at a lower cost. If you’re a fast-fashion aficionado, widespread renting could help you keep up with constantly evolving trends.
Shopping at a physical store feels outdated and foreign. You rely on your phone to guide you through the shelves, telling you, say, which sneakers are the highest rated among triathletes. Maybe while you’re in a store, you go on Amazon to check ratings and then see, hmm, Amazon is selling pairs for $15 less ... and with one tap you leave the store empty-handed.
In addition to getting better about price-matching competitors, Anthos presents another concept he thinks stores should adopt, which he refers to as “store as platform.” In this vision of a digital experience translating to the physical world, stores would parallel online marketplaces.
He uses the iOS App Store as an example. It contains a page of “featured” apps, which includes “New Apps We Love” and “New Games We Love” sections, curated by Apple. Users can browse these suggestions, or toggle over to “Top Charts” and see what the most popular apps are among iOS users. (The Google Play store recommends apps for users as well as lists popular downloads.)
Anthos makes the point that physical stores don’t rank products by popularity or reviews, despite the fact that tech-savvy consumers often use these filters when shopping online. He says he believes stores should begin allowing vendors (e.g. Nike and Adidas) to rearrange assortments and displays based on product popularity.
“Right now stores would say, ‘that’s a lot of work,’” Anthos says. “But you spend more time on your phone than you do in a store -- by far. Stores have to start modifying their behavior.”