Investing for Retail Growth

Greene

The physical store still rules

After the Holiday season, it’s clear that shoppers bought both online and in stores to complete their lists, with the roles of each becoming more distinct. Shoppers go online to “spearfish”, or find specific items for convenience, whereas they visit brick and mortar stores to get ideas and instant gratification.

But holidays are not indicative of broader shopper behaviors.  Retail is a 12-month business and we see stores as key for overall retailer health, yet few retailers are seeing their value as a pillar of growth. A report last fall in the online publication Retail Dive states that:

“A big weak spot for retailers is their brick-and-mortar stores: Despite the fact that 80% of sales accrue from brick-and-mortar for the retailers keeping their investments flat, just 10% of them are prioritizing remodeling and refreshing existing stores as a key growth strategy to increase store productivity.”

Walmart reduced earnings expectations for the next 2 years, and the CEO announced that he is pushing to make Walmart better at retail basics—neatness, merchandising, and efficiency. More related to operations than store design, these actions recognize the brick-and-mortar factor in growth. But are they enough?

Target is betting on iBeacon and NantMobile technologies as bolt-ons to the current store experience, but these are available to all retailers.  For others, investment in growth means spending to upgrade their eCommerce business, fulfill an omnichannel imperative, and engage shoppers with mobile apps.  Yet the promise of an integrated mobile retail experience remains elusive.

Innovation isn’t only about technology

 Technology investment at the sake of neglecting stores is costly, as tired-looking stores fail to project the new tech enhancements, leaving customers bored and uninspired. For the most part, the modern retail experience is like a 1995 Camry with an iPad duct-taped to the dashboard. Meanwhile, new “pure-play” E-retailers are opening stores that raise the bar for a contemporary well-designed retail experience.

But there are emerging advances in understanding how people shop and engage with stores that can enable productive and delightful shopping experiences. Less tangible than silicon chips and RFID, they are getting second class treatment- but brick-and-mortar innovations can deliver high “bang for the buck”.

New science, new results

The science of shopping has evolved from tricks of the trade to controlled experimentation. Early innovations in retail design, like loop traffic patterns and axioms like “shoppers always turn right” are legendary, but not adequate. Shopper behavior is subconscious and cannot come from merely quizzing shoppers. We can apply findings in behavioral economics, for instance, that can help design displays that make products seem more valuable or desirable. Application of how the brain works when seeking items in a store, how it separates what is relevant from what isn’t, and decoding how shoppers navigate by intuition are all areas of new knowledge that we utilize to revise how the store experience is designed.

So how can investing in innovative store design drive growth? We believe in three distinct ways:

Growth through better Shopability:

“Shopability” is a powerful innovation area for stores. Shopability is organizing stores to help shoppers find what they need faster, so they can better spend time discovering what they want. Using knowledge of how the brain processes by seeking patterns, organizing complexity into clusters, and “de-selecting” what isn’t relevant before selecting what is, inform retail planning innovations.

Furthermore, automated RFID-based scanning and cashless payment methods can lead to multiple points of entry and exit for large stores to enable more convenience and drive more trips, completely changing retail store planning paradigms.

Growth through Demand Creation

Stores have to work not only harder, but differently. Shoppers today are more often on missions and not doing as much browsing. Webrooming, shared lists, and digital coupons are the tools of mission shopping. Triggering desire is the realm of the physical store, and innovations can add surprise and discovery to the routine.

Because retail is a sensorial experience, stores can trigger positive emotions that an online experience cannot. An aroma, a color, even the attraction of an energized crowd can spark an unplanned purchase. Great retail design amplifies these effects to delight shoppers and drive sales; it inspires, educates, and creates demand.

Growth through Brand Strength:

Brand is the secret ingredient in a brick-and-mortar growth strategy. Understanding the desired shopper allows us to craft a relatable brand that appeals beyond product and price; fitting into their values and aspirations. A strong brand idea that is woven throughout the retail experience is a powerful customer retention and acquisition asset. People are attracted to what’s new and fresh, then stick with a brand that goes beyond meeting their needs by providing an experience that understands them- and stores can deliver this better than any other channel. Ecommerce players who are creating bricks-and-mortar versions of themselves get this.

L-Brands’ CEO Les Wexner recently reinforced the importance of stores. At his last investor meeting he stated that remodeling Victoria’s Secret stores has paid off and the importance of physical stores “is way bigger” than the Internet for retail.

At ChangeUp we know that the physical store is the best stage to deliver an experience that attracts attention, builds valuable relationships, and drives growth. The technology arms race will end in a dead-heat as effective strategies are copied and become ubiquitous. In contrast, the store is the true differentiator, and the ultimate way a shopper will experience a retailer’s unique point of view and appeal.

Bill Chidley is a Partner and Co-Founder at ChangeUp. Creating Innovating Experiences that Drive Growth. http://www.changeupinc.com

Tweet the author at @chillbidley

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