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The Future Of Retail: Experiences Per Square Foot

Posted March 18, 2014
Posted in Big Data, Blog, Customer Service, Marketing, Shopper Marketing, Social Media, Store Experience, Strategy, Technology, The Future

By Doug Stephens

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This is a just partial list of retailers who have closed or plan to close significant numbers of stores in the near future.

Radio Shack, JC Penney, Sears, Best Buy, Office Max, Staples, Abercrombie & Fitch, Aeropostale, Sam’s Club, Target, Barnes & Noble, Toys R Us, Macy’s

 

Death By Old Metrics

 

The common reasoning behind the closures is diminishing same-store productivity. Some are the victims of polarizing economics, some of the Internet and others of intense competition, but whatever the root cause, the net effect has been the same – their stores are not deemed to be “productive” by conventional measures like sales per square foot, sales per operating hour and sales per employee, which is precisely the problem. In a world where e-commerce is now growing globally at close to 20% each year and consumers no longer rely on stores as their sole means of access to product, can we really expect to measure store productivity the same way we did in the mid 1800’s?

And if we do use the same metrics of performance, are we not simply signing the death warrant for physical stores?  I think so. I would also contend that retailers that allow this to happen are missing out on an historic opportunity.

 

From Distribution of Products to Distribution of Experiences

 

The big shift, you see, is that while stores are ceasing to be vital for the distribution of products they are becoming more profoundly crucial for the distribution of experiences.  The store allows the consumer to engage the brand, its products and its culture in a visceral and emotional way that simply cannot be replicated online. Therefore, as more and more sales are attributed to mobile, social and online channels, the store’s strategic importance has to shift to delivering more powerful, galvanizing experiences that forge love and loyalty. In short, the store is becoming a media experience!  And if executed properly, I would argue that the physical store experience is most powerful form of media a brand has at its disposal.

 

New Metrics For A New Era

 

But if stores truly begin selling experiences, then we need new means of quantifying and qualifying their success and productivity at doing so.  That entails using completely new technologies that allow for the measurement of the store as a media form.  These may include mobile I.D. tracking to gauge the store’s ability to draw shoppers across their threshold and video analytics to measure dwell times, navigation paths and engagement with different merchandising and product elements of the store.  Beacon technology to initiate and measure direct interaction with shoppers in-store and big data analytics to tailor and personalize the experience based on customer history and preferences.  In-store social sharing tools that allow shoppers to share their experiences as they happen, along with social media monitoring metrics to quantify downstream buzz about the brand and the experience consumers enjoy in-store.  And of course, apps and other opt-in platforms that help connect the offline and online actions of the consumer in order to track product sales resulting after the store experience.   The result should deliver a 360-degree view of the store’s performance and value to the brand – beyond simply unit sales out the door.

All of these technologies exist…right now!  But retailers need to embrace them and more importantly embrace the paradigm shift they represent;  that we can no longer measure retail store productivity based solely on holdover metrics from the industrial age.

 

Don’t Down-size the Store. Right-size the Experience

 

It’s also clear that we need to redesign stores to be more effective and Get-My-Book.001efficient at delivering these high-octane experiences. But (and this is important) that doesn’t necessarily mean that stores should be smaller, like so many retailers seem to believe.  In fact. it may mean just the opposite. Consider the work that Verizon did with their lifestyle store in The Mall Of America, creating six different lifestyle zones to allow customers to experience their technology.  Look also at the design of Canadian retailer SportChek’s 77,000 square foot store in Canada’s West Edmonton Mall.  These weren’t decisions based on making the store smaller or larger but rather on creating a remarkable and differentiated experience.

Treating the store as media is not to suggest that the goal is no longer to influence product sales.  Product sales are key.   But clearly the sale of products is no longer strictly tied to the store itself.

In short, the era of the store as the primary distribution channel is rapidly coming to an end.  The era of the store as media is upon us. Measure wisely.

COMMENTS

  • Karen Herman  says:

    Doug, enjoyed reading your book and love your comment, “Don’t downsize the store. Right size the experience.” A consumers retail experience needs to be designed to be unique, interactive, experiential and educational. Glad you are sharing this message!

    Reply
    • Doug Stephens

      Doug Stephens  says:

      Thanks for the comment Karen! And thanks also for reading the book – glad you enjoyed it. Incidentally, I read a piece of research recently that said we carry the memory of experiences with us much longer than we do the memory of things. All the more reason for retailers to focus on experiences.

      Reply
  • Karen Herman  says:

    Doug, I agree. The days of cookie cutter footprints for big box build-outs are over. Consumers are excited about retail that engages them and they do remember their brand experiences. BTW, I’ve given your book as a gift a few times!

    Reply
  • David Biltek  says:

    A recent story in the NY times about a new retail concept called ” Story” illustrates your point here is the article:
    http://www.nytimes.com/2014/03/15/business/a-store-with-media-in-mind.html?_r=0

    and the store: http://thisisstory.com/

    Reply
    • Doug Stephens

      Doug Stephens  says:

      Thanks for this David! I actually taped a segment of a web show I do called The Future In Store in Story and met with Rachel Shechtman, the owner. She definitely views the store as a media piece, very much like a magazine. Great example! Thanks for the comment.

      Reply
  • Lee Kent  says:

    Thanks Doug! Being a customer experience advocate myself, you hit this nail on the head. I would add that along with the store being media, there is also the store as a service(s). I would love to see more written about ‘Service Design’ concepts. My ‘pet’ topic. 😉

    Reply
    • Doug Stephens

      Doug Stephens  says:

      You raise a great point Lee! Personally I view service design as a key component of the overall brand (and therefore in-store media) experience. Definitely critical to get it right. Those that tried and failed to imitate Apple in the market proved that a great experience isn’t just about store design and fixtures. The deliberate and purposeful design of the service interaction is equally, if not more important.

      Reply
  • Jim  says:

    Doug, if retailers no longer compete on price, but instead on the quality or ‘value’ of their experience will we soon be complaining about “experience overload”? I already find the visual stimulus overwhelming sometimes, and I’m imagining every mall looking like Times Square! We will get to a point where we will need a guide to navigate us through the “best” or customized shopping trip like a tour guide through an unfamiliar city.

    Reply
    • Doug Stephens

      Doug Stephens  says:

      I can only speak for myself Jim but in an average year of shopping I’m lucky if I can count on one hand the number of truly exceptional retail experiences I’ve had. I would welcome a little “experience overload”. When I shop (whether in the U.S., Europe or elsewhere) I’m stunned at the lack of experiential elements in stores. Most retailers are still mired in the distribution era. But to your point, creating an experience isn’t just about installing more screens, playing the music louder or pumping cologne into the store. It’s much grander and more holistic than that.

      Reply
      • honkean  says:

        I don’t agree that the “experience” will be overload because different group of target audience will need different “experience”. Beside that, the target audience will keep on change according education level, technology advancement, personal income and also law. As a retailer, i think most important is to be more sensitive to what the shopper need and this including store experience.

        Reply
  • Kate Hyslop  says:

    Yes! It’s great to see more discussion around this shift. As well as “the experience of being in store” being a big focus, we’re also seeing a trend here in the UK toward retailers redefining themselves as providers of value-add services, expertise, experiences and education.

    For example Pets at Home’s in-store pet nutrition consultations, Hobbycraft’s in-store crafting classes, and Jessops’ re-focus on in-store photographic training, to name a few. Each of these brands is asking themselves “what can we do that Amazon can’t?” and the answer lays in the (often untapped) value of the expertise that they already have on their shop floors.

    Reply
  • chad  says:

    I love this….

    I’ve been in the retail space for quite some time. Working with mostly fashion houses, and malls. I work in the beacon space currently and I left my background in retail to pursue this because it solved so many problems. Mainly creating meaningful engagement at scale. My problem was that I could never do something interesting at scale. I could only do something with a handful of my locations, but new techs like beacons change that. It’s very exciting times. Thanks for writing this mate.

    Reply
  • Mark Tomchik  says:

    Interesting article. Curious what are your thoughts on the store experience as it relates to engaging the seniors, versus aging boomers, versus the Xgeners versus the Millenials etc? Not 100% sure I buy-in that your concepts transfer across all demographics. Thanks for sharing, I will buy the book and maybe the answer lies in the content! Well done.

    Reply
    • Doug Stephens

      Doug Stephens  says:

      Thanks Mark. I agree that not all age cohorts would regard the store experience, or their needs of it, the same way. I’d also concede that within demographic cohorts – millennials for example – attitudes are not homogeneous. But if we accept that any remaining GI or Silent generation shoppers are a fraction of baby boomers, and that even baby boomers (now all over the age of 50) are receding in terms of their replacement spending, we’re left with GEN X, Y and Z to fuel the economy. Within these three age groups we see disproportionate levels of connectedness, smartphone adoption and willingness to shop and buy digitally. Therefore, one can only assume that their need of stores, as a traditional means of distribution, has to wane. They simply shop differently than any other demographic groups in history and technology is driving that behavioral change.

      Reply
  • Jon Sayah  says:

    Doug
    The lighting showroom business has been the same for over 50 years with very little advancement. Now with LED, Connected Lighting and the Internet of Things the lighting retail industry is ripe to change. I have followed you for several years and believe have followed your advise on creating a new LED Experience Center in Dallas, Texas that is quite revolutionary. If you are ever in Dallas, it would be worthwhile for you to see our Lights Fantastic Pro Experience Center focused on LED and Connected Lighting that is now open a few miles from the new Nebraska Furniture Mart. You won’t believe what you can Expect from Lighting and how Rethinking Lighting can make your life better.

    Reply
  • Jeremy Langley  says:

    The fascinating question (for me at least) that this raises is how store leases are valued, in particular for mall owners, who, like Media owners are on the hook for delivering the desired audience to the media. Many leases are still agreed with a proportion allocated to turnover-based variables, but given the retailers ultimate channel neutrality on where the sale comes from this seems like a problematic model.

    Reply
    • Doug Stephens

      Doug Stephens  says:

      I think you’re absolutely right Jeremy. The current leasing model, which is often based on a percentage of tenant sales, will soon be untenable, as more sales move to online. I foresee a time, not so long from now, when landlords will charge their tenants according to more of an advertising model or “card rate” based on the number of consumer impressions the landlord delivers to the tenant. But just as TV networks are responsible to supplying program ratings to potential advertisers, landlords will have to be able to verify the traffic levels and potential impressions that their complex and its marketing program is delivering to each individual tenant. I suspect that they’ll turn to a number of new offline analytic technologies like mobile ID tracking and anonymous video analytics to supply these measurements. When this occurs, stores will be more truly regarded as a legitimate form of media and less a mere format for distribution of product.

      Reply
  • Larry Reiner  says:

    HI Doug,
    I always enjoy your writing. Especially about “right sizing the experience”.
    There is no one that would not agree with your thoughts, however the problem is that big retail today dpends on the brands for everything from fixtures to sales help contribution. This idea is great but very expensive and the brands are being squeezed to the point that they want to drive the consumer to their own website where they realize a larger return. There is no question that showrooming is bvecoming

    Reply
    • Doug Stephens

      Doug Stephens  says:

      I don’t disagree that retailers are under immense margin pressure Larry and that in large part, it’s what prevents them from becoming more transformational in their innovation. That’s precisely why the economic model for retail MUST change. Consumers are demanding better experiences from brick and mortar retail and yet retailers need to fund those better experiences. Under the current wholesale to retail profit model (which dates back centuries) this is impossible. Therefore, I see the economic model of retail moving to more of a media model, where brands pay retailers directly to be represented in great store environments with outstanding consumer experiences wrapped around their products. You can read more on this idea here http://www.businessoffashion.com/articles/opinion/future-retail-end-wholesale

      Reply
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