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Stores of the Future

BY Barbara Thau

It’s 2020, and our shopper is ready to relax after a busy and productive Saturday. She started off the day at Kohl’s, where she tried on several cocktail dresses a store associate had texted her about earlier. The associate knew from past purchases that our shopper favored animal prints and a-line cuts.

She opted for a sleeveless, leopard-patterned dress that she accented with a nylon collar personalized with an Andy Warhol silkscreen. (Kohl’s 3-D printing department created the collar.) She checked out in a flash with a biometric scanner — traditional cash registers being largely a thing of the past in the stores she shopped.

Next up was Kroger, where she scanned the product bar codes with her cell phone on 17 items — from paper towels to skim milk. The items were charged to her credit card in real time and delivered to her home within an hour.

At Bed Bath & Beyond, our shopper sat in on a holiday-themed decorating class. Adjacent digital signs noted the in-store location of the featured items.

Finally, she stopped at CVS to pick up some items featured in the chain’s weekly ad circular, which had been delivered online, of course, with select ads customized just for her.

Retailers don’t need a crystal ball to see that, in the future, America’s shopping emporiums will resemble the scenarios outlined here. The fact is the transformation is already under way. Stores are becoming more efficient, more interactive, more immersive, more personalized and more convenient as the brick-and-mortar experience evolves to accommodate an increasingly digital world.

Going forward, look for stores to play up the advantage of letting customers touch and feel the merchandise, with less attention focused on maintaining inventory. Goods will be ordered and shipped to the customer, the store or a pick-up depot.

“In the future, stores will become a library of products. They will be more informative and with more options. They will double as showrooms — a way to learn new things, buy intelligently and improve your existence,” said Christopher Studach, creative director, King Retail Solutions (KRS), Eugene, Ore.

Checkout areas will be transformed as cash registers are streamlined to integrate mobile devices. Location-based services and the growing adoption of near field communication (NFC) will allow smartphones to act as stand-ins for credit, debit and loyalty cards.

Digital signage will be even more prevalent than it already is, keeping store interiors fresh and exciting. Digital enhancements will more seamlessly link retailers’ in-store environments with their offline ones.

“Stores will become nimble and spry,” Studach said, “changelings — in a good way.”

Savvy merchants will play up the personal aspect of physical retailing.

“Stores of the future will be social — engaging, intimate, designed for contact and conversation, educational in every way and filled with associates who love to talk to people,” predicted Lee Peterson, executive VP creative services, WD Partners, Columbus, Ohio.

What’s more, they will be captivating and inspirational, and more than just a store.

“The store of the future will rival night life venues in its ability to transform customers to an experience they cannot have online,” Peterson said.

Across the retail spectrum, merchants large and small are testing digitally enhanced stores that extend the click-and-buy convenience of the Web. They are reimagining the store from a mostly transactional environment to one that offers consumers an interactive, communal and even educational experience, with a sales staff that anticipates their preferences ahead of time and a layer of customized merchandise.

“In the future, the stores people shop are going to become an extension of their daily life,” said KRS’ Studach. They will reflect the way a person lives and their values, which means stores will feel more personal. They will be more local in look, feel and in the merchandising.”

Experts say that retailers also need to craft stores to accommodate digitally wired Generation Y, or the Millennials, a group that will outnumber baby boomers in size and buying power by 2020.

“Everyone is at risk of overlooking Gen Y, which will mature into the largest single cohort during the next few years,” said John Rand, senior VP retail insights, Kantar Retail.

Showrooming is also lighting a fire under merchants to affect change. In February, Best Buy revamped its price-matching policy to match the prices of major online competitors, as well as other brick-and-mortar retailers.

The rise of big data is also changing the in-store experience.

“Stores will continue to use more and more individually calibrated data to personalize the shopping experience across the board,” said retail consultant Jeff Green of Jeff Green Partners. “Rather than fear the customer who is looking up prices online while browsing in a brick-and-mortar location, chains will build more interactivity and provide more targeted information to further enhance the in-store buying experience.”

Community Hubs, Lifestyle Centers

The stores of the future will feature interactive bells-and-whistles that take a cue from the best of online retailing, while entertaining and engaging shoppers in ways that can’t be duplicated on the Web, experts predict.

Retailers will also tap into how shoppers interact with their favorite retailers on social networks, such as Facebook, said Scott Lachut, head of research and strategy at PSFK Labs, a content provider with such retail clients as Target and Best Buy.

“Retailers have created online communities. Now they are working to translate that offline, and have shoppers congregate in new ways,” Lachut added.

In a bid to connect with its core audience of small business owners, Staples and Office Max, for example, are experimenting with offering co-working spaces and renting out office space. And Lululemon Athletica has already amassed a cult-like following with experiential offerings, such as free yoga classes.

Retailers are ushering in a new definition of “one-stop shopping for time-poor consumers,” said Paco Underhill, founder of Envirosell, the consumer behavior research and consulting firm. Next, Underhill predicted, look for big-box chains to reallocate space to services, be it a dry cleaner or salon, which is commonplace at overseas merchants, such as France’s Carrefour.

Customized, Crowdsourced Merchandise

Amid the proliferation of choice available to shoppers online, one-size-fits-all retailing just doesn’t cut it anymore. In turn, retailers will tap technology to offer shoppers customized merchandise and a hand in the product development process.

“Appealing in a personal way is something shoppers are starting to require, and for stores that means more unique elements, more personality and a lot less of the one-size-fits-all approach,” said KRS’ Studach.

Traditional brick-and-mortar retailers are beginning to mimic scrappy online sites like Threadless, which lets shoppers design their own T-shirts, and Shapeways, where consumers design everything from jewelry to home decor.

At Converse’s new flagship in San Francisco, customers can screen-print their own designs and graphics to make one-of-a-kind items, culling from the retailer’s vast catalog of footwear, apparel and accessory styles.

The rise of 3-D printing is also expected to propel the growth of customized products. The technology could even fundamentally change the purchasing paradigm at home improvement chains, according to PSFK Labs’ Lachut.

In the future, such chains as The Home Depot and Lowe’s will keep digital records of their products and the model a shopper purchased, he predicted, and the merchant will be able to replace a part that is broken with the help of a 3-D printer. This means that consumers won’t throw away a broken toaster or fan as readily as they do today, and that retailers won’t need to carry as much inventory, as replacement parts are printed out as necessary.

At the same time, retail is ushering in a new digital era in the manufacturing of apparel that’s increasingly churned out by “factories run by robots rather than people,” Envirosell’s Underhill said.

In the future, he said, consumers will be able to customize their apparel at retail stores, facilitated by machines that can “cut, stitch and accessorize a garment based on personal measurements.”

“There are several technology companies from Korea with machinery to produce custom apparel,” Underhill added.

‘Showroom’ Stores, High Service

Tomorrow’s stores will be smaller, serving more as showrooms than football fields of merchandise, with a heightened level of personalized service. Indeed, the trend is already in evidence across all retail sectors.

“We’ll continue to move to smaller, more efficient layouts for many chains,” consultant Green added. “The deepening connection between a brand’s online presence and individual locations will mean less inventory and less space to accomplish the same goals.”

Increasingly, stores will seek operational and cost efficiencies by carrying less inventory and investing in technology, such as in-store kiosks and tablets, to showcase their extended online assortment.

The time is right, as online retailing and fast delivery has made consumers “more comfortable with the idea of the product being shipped to their front door, rather than walking out of the store with their purchase,” Lachut said.

Some retailers, including online menswear brand Bonobos, are already testing the showroom model. The e-tailer opened inventory-free Guideshop stores that offer a full display of merchandise and sizes for try-on only. The associates (“guides”) can focus their energies totally on providing one-on-one service to shoppers.

Similarly, an unprecedented level of personalized service built on the shoulders of digital retailing will begin to emerge at national chains, experts say. Merchants will start to leverage granular data on consumers’ shopping preferences in a brick-and-mortar environment, taking a cue from Amazon’s product recommendations, which are generated by its users browsing and buying patterns.

Meanwhile, RFID technology will bring store merchandise to life in new ways and spark add-on sales. Retailers, for example, already are experimenting with “magic mirrors,” whereby a shopper can try on a item of clothing with an RFID embedded chip in it and stand in front of a mirror equipped with an RFID reader. The reader scans the item and offers up a complete styled look of complementary products.

Online/Offline Convergence

Most consumers no longer see a distinction between online and offline shopping; some retailers are beginning to integrate that thinking into their physical spaces.

Formerly online-only eyeglass retailer Warby Parker is opening stores that combine the ease of online shopping with the fun and up-close experience of physical retail. Customers can sign in on an Apple iPad mini so that any website activity can be synced with in-store shopping.

The store is stocked with the full Warby Parker optical and sunwear collections. Nonprescription eyewear is available for immediate takeaway, orders for prescription eyewear and sunwear can be placed and picked up there (or shipped). Stores include a photo booth where customers can take a snapshot of themselves in a pair of glasses, and print it out or get a digital image via email for sharing.

According to WD Partners’ Peterson, one of the things that will most redefine physical retailing in the future is that the store ambience will go from warehouse to fun house.

“With the realization that anything can simply be bought online, driving people to stores instead of their computers will have to be emotional versus functional,” he explained. “Conversations with amazing people and a memorable environment will be the key in terms of trumping the functionality of pressing buttons on a machine.”

Stores will be more efficient, more interactive, more immersive and more personalized.

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Shopko expands footprint in November

BY CSA STAFF

Shopko continues to make good on its growth initiative with the opening of five new Shopko Hometown stores in November.

The retailer opened the doors Monday to three Shopko Hometown stores in Ellsworth, Wis.; St. Peter, Minn.; and Winneconne, Wis. Two more openings are planned on Nov. 11 for Afton, Wyo., and Tomahawk, Wis. Shopko operates 330 stores in the Midwest, North Central, Mountain West and Pacific Northwest regions, including — with the five new locations — 180 Shopko Hometown stores.

"We’re excited to continue the growth of the Shopko Hometown concept with these new stores and expect them to be well-received by residents in each of these five great communities," Shopko interim CEO and COO Mike Bettiga said. "We understand that consumers in smaller towns want convenient access to the same variety of high-quality goods and on-trend merchandise without having to travel a good distance from their community. Our Hometown customers tell us they appreciate the vastly improved shopping experience and access to a broad, differentiated selection of merchandise, including products and brands previously not available to them locally."

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Staying the Same is not an Option

BY CSA STAFF

By Joseph Bona, [email protected]

In media interviews of late, Beth Newlands Campbell, the new CEO of Food Lion, has been offering reporters a frank assessment of the supermarket chain’s ho-hum, middle-of-the-road situation: “Staying the same,” she explains, “is not an option.”

Slogans such as these can only go so far. But in the topsy-turvy world of 21st-century retailing, you could do a lot worse than Campbell’s mantra. Retailing, after all, continues to be rife with homogeneity, commoditization and redundancy. Imagine a team of researchers conducting a blindfold test. They strip the logos from inside a wide range of drugstores, supermarkets and big boxes. Then they bring in some blindfolded consumers. Would these shoppers, once their blindfolds were lifted, actually know where they were? Arguably, many would not have the foggiest idea whether they were in chain X, Y or Z.

Such is the sameness of the shopper experience today. While there are leaders in various retailing categories — among supermarkets, for example, chains like Whole Foods, Trader Joe’s and Fairway have carved out distinct identities — many other operators would likely flunk the blindfold test. Their stores are neither good nor bad. They utilize similar layouts, offer basically the same type and level of customer service, sell the same products at the same or similar price and their store environments are generic at best.

To be stuck in the middle in this way is to be on a clear path to irrelevance. For the likes of Food Lion, the trick is to figure out how to give consumers a clear reason to drive past the competition and stroll into your store. Retailers are in control of their own destinies, but to be competitive they need to exercise that control in creative and strategic ways.

Gone are the days when a lagging chain can take a “me, too” approach and try to eke out an existence by copying successful innovators. Nor can you save a bad retail proposition by making incremental improvements alone — things like cleaner floors, brighter lighting or a new customer-service manual geared toward plastering smiles on the faces of your employees. Basic tweaks such as these might have worked 10 or 15 years ago. Today these kinds of changes are table stakes.

Retailing today is hyper-competitive. The bar is higher than in the past. But if staying the same is not an option, how should retailers tackle the challenge of change?

Start with another timeworn slogan: “Know thyself.” Once you identify an opportunity in the marketplace — something like the brand-building and cost-saving potential of private-label products, or the trend toward prepared food — the next step is to take an honest look at whether this opportunity matches your capability. Do you have the corporate culture, backend systems, financial strength, human capital and other resources needed to pull off the reinvention? If not, is the opportunity you have identified so great that it would be worth the herculean effort required to raise those capabilities?

Brand attributes are an important consideration here. Let’s say a chain is widely regarded for its fast, hands-on service. In focus groups, consumers say things along the lines of, “I go to you because you get me in and out of there in a snap.” It would be a disaster to adopt a new program designed to, say, slow the entire experience down under the pretext that longer dwell times translate into greater spending.

Consider the road taken by William Ackman, manager of the $11 billion hedge fund Pershing Square Capital. At the end of August, Ackman announced that he had finally sold his entire stake in J.C. Penney Co. — about 18 percent of the company — amid internal squabbling over strategy. Ackman, of course, had brought in Apple’s Ron Johnson in a failed bid to remake Penney, which saw its sales and stock-price take a nosedive. As CEO of Penney, Johnson had sought to enrich the customer experience, redesign the stores, beef up the roster of brands and otherwise reinvigorate the chain. Unfortunately, though, there was a mismatch between the perceived opportunity and Penney’s capability to execute on it. Johnson’s vision had merit, but it was an expensive and ambitious about-face that required securing the buy-in of shoppers, employees, shareholders and the media. With a clearer message and greater reserves of time and money, the strategy might have worked. Unfortunately, this was not to be.

The Penney saga also highlights the pitfall of launching a reinvention after the company’s market position has deteriorated. A weak position translates into a reduced capability for serious change. And so, even when times are good, true leaders tend to think hard about where they will be, not just a year or two from now, but also 10 or 15 years down the road. They understand that, regardless of how swimmingly things might seem today, a fierce competitor could rear its head tomorrow. As a result, leaders see innovation as a necessity. They constantly look for ways to improve design, product delivery, customer service and more.

This involves risk. A product line might fizzle. A test-store rollout might go nowhere. A ballyhooed mobile app or in-store technology program might fail to live up to its promise. But this is just part of the cost of admission in retailing today. Ultimately, what matters most is the willingness to keep looking forward so that you can move the needle in the direction of the next big idea. This does not have to mean chasing one tech trend du jour after another. If your business is not particular visual in nature, forget about the Pinterest page. The focus should be on how individual technologies and services can bolster and fit into the overall mission. Where does the company need to be in the marketplace? Who does it most want to serve? What do these customers want, and how can you meet or exceed their expectations?

Staying the same is easy. Innovating is hard. But by being honest and realistic about the limits of the brand and the actual capabilities of the company, it is possible to stay on the leading edge. Otherwise you fall prey to inertia, which is no option at all.

Joseph Bona is president of branded environments at brand agency and retail design consultancy CBX. He can be reached at [email protected].


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