The Changing Retail Experience

June 28, 2018
Written by: Ann Natunewicz, CREW San Francisco

Following this year’s International Council of Shopping Center’s (ICSC) RECon, I continue to marvel at how each year’s attendees collectively offer a different perspective on the current state of retailing. At the onset of the Great Recession in the U.S.—with internet sales increasing and store closings making national headlines—retailers, restaurateurs, and owners who talked down the internet’s impact on their businesses were branded “defensive” or “out of touch,” even as the vast majority of retail sales continued to occur in brick-and-mortar stores. Now, a decade later, industry outlooks have evolved with the recognition that the most effective way to reach a variety of customers, in various markets, with more nuanced needs than ever, is a hybrid of both in-store and online experiences.

Reformation's smart dressing room
Reformation’s San Francisco store features “smart” dressing rooms with customizable lighting, docking stations for iPods, touch screens with outfit suggestions, and call systems to request different sizes without going back into the store.

The term “experiential retail” has become ubiquitous and is now the defining, essential strategy for retail brands to remain relevant in our global, omnichannel selling environment (brick-and-mortar stores, catalogs, online, etc.). Relevance takes many forms and influences how retailers evolve their offering, points of differentiation, social activism, digital presence, and the retail storefront itself.

The most important way to make a retail experience relevant hasn’t changed much since the dawn of commerce: offer products or services that customers want. Retail brands must constantly reevaluate and adjust their assortments, reacting to changing customer preferences driven by myriad economic and cultural influences including soaring housing costs, millennials’ quest for individual expression, and “silvers” increasingly seeking experiences over objects in the post-Marie Kondo era. Aided by the onslaught of Big Data, today’s brands further calibrate their merchandising with complex strategies on what to stock in store versus fulfill remotely. If a retailer can get product into the hands of its shoppers conveniently and has correctly judged its value, it is better able to retain existing customers while attracting new ones.

How the Generations Shop
Source:  BigCommerce, “The Complete Omni-Channel Retail Report,” 2017

The Internet of Things has bred an explosion of choices, leaving some consumers overwhelmed by buying decisions. So brands must stay relevant by being able to clearly articulate their market position and points of differentiation. We are seeing some companies, motivated by intense competition (not to mention economics), narrow their focus and, in some cases, return to what’s made them successful. I find it gratifying to see heritage brands re-assert their relevance by emphasizing corporate longevity, family ownership, sustainable sourcing, handmade craftsmanship, or small-batch production. Within a specific category, brands may also choose to focus on comprehensive and flexible customer service, speed-to-market/quick product turns or maintaining a best-in-class position. Having the confidence not to need to be all things to all people sends a strong message.

One of the evolving trends in retail branding is the increasing number of companies willing to take a position on a high-profile political issue, either to complement their brand’s vision or respond to feedback from customers. It is a delicate balance, for even as the lines blur for some aspects of corporate governance, retailers are torn between entering a public debate and risking alienating a percentage of their customers. The challenge for brands and their executives is deciding how far to push the limits.

The importance of a well-crafted and effective digital presence for maintaining a brand’s experience and connection to its customers cannot be understated. Since the early 2010s, brands’ investment in back-of-house functions such as inventory tracking, aggregating point-of-sale data, and warehouse construction has been well documented. So, too, has brands’ focus on expanding their websites’ functionality to be not just be product catalogs but serve as community forums and social gathering places. Instead of detracting from the financial performance of their physical stores, brands are finding that online traffic bolsters their selling efforts and reinforces the value of their physical locations.

For the retail storefronts to continue to be front and center in the experiential retail movement globally, brands must work to ensure that their real estate stays relevant to the consumer who knows she has other options to procure the goods and services she wants. Brands may still close stores and be more selective in opening them, but many continue to prioritize thoughtful investment in high-quality, high-profile physical locations. Data from the past several years have shown dozens of pure-play online retailers, also known as digitally native vertical brands (DNVBs), finding that they can’t generate additional scale without a physical selling space. Each finds a unique way to translate its online experience to a storefront, and in doing so redefines the value and relevance of its brand and the space that it occupies.

Ann NatunewiczAnn Natunewicz is Vice President, Retail Services for Colliers International in San Francisco. She specializes in representing landlords and retailers and is active in Colliers’ international platform. Prior to joining Colliers in 2011, she spent 12 years in development and marketing with three of the country’s largest equity retail REITs. Natunewicz serves on the CREW San Francisco Board of Directors.

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