10 ways the retail store is changing



The retail store isn’t dying. It’s just transforming, and most people are being left behind.

The debate over whether a company should adopt an omni-channel presence is already several years old. Now, the savviest businesses in the world are not only playing with how products are bought online, but they’re changing the physical retail experience into something totally different.

Experience, knowledge and assistance are now the critical elements of a store – not turnover. Old metrics like sales per square footage are going out the window.

It only takes one look at an Apple store or IKEA to know the retail store isn’t dying. Not at all – it remains as important as ever. It’s just changing.

In August at the Online Retailer Conference in Sydney, futurist and consultant Doug Stephens – who has worked with some of the largest companies in the world from Disney to Microsoft – detailed his vision about the future of the retail store. And it’s something any business owner will want to pay attention to.

“We don’t go to restaurants for nutrition, we go because we enjoy the atmosphere,” he says. “It shows why players like Google, Amazon and eBay are talking about opening up physical locations.

“Brands need to be physical,” he said.

The retail store is changing – and you need to know how. Here are 10 ways the physical location will be transforming over the next few years:

The philosophy of the store is changing

The dominant purpose of the retail store has been to move product. With bricks and mortar the sole way to move money, inventory is the biggest factor in moving stock out the door.

That rule no longer applies, which means the purpose of the store is changing to something completely different. It’s still an important channel, but it’s only one of many.

You only need to look around and see how this is changing in Australia. Myer and David Jones realise this, which is why they’re changing how their in-store experience feels, while at the same time pumping up their online commitments. In some cases, Myer has closed stores altogether.

The purpose of the store in the overall make-up of business is changing – which means companies should be less eager to expand as quickly as possible.

Old metrics are not as useful

This point rolls on from the last. With the philosophy of retail changing, the metrics used to determine ‘success’ change as well.

“For those who have bricks and mortar stores, you need to look at the strategic function differently.”

This means things like sales per square foot are less relevant, when the purpose of your store is not meant for inventory but for brand exposure. Again, you need to think of the physical store as just one part of the overall retail experience.

“Those metrics have become antiquated,” Stephens said.

“We’re seeing new metrics using mobile tech and analytics to get a sense of how those things work. Bounce rates, page views, and so on; these types of metrics are becoming integrated with the physical store.”

Access needs to be everywhere

The notion of omni-channel retailing is old hat. In fact, Stephens said if businesses are just now thinking of turning their operations into a multi-channel affair, they’re “already five years behind”.

“You’re better off thinking of purchases along a path the customer is walking,” he said, whether that be in a tweet, or a video.

Stephens pointed to eBay as a good example of the future here. The company has been testing a courier service, so users are able to purchase a product and have it delivered to them in a couple of hours no matter where they are – they simply track the customer through their mobile device.

“Our whole concept of access has changed,” he said. “We no longer wait to get distribution; we believe we can get it wherever we want.”

While it’s probably too much to ask businesses to start sending out couriers for all their product, it’s a legitimate point to make – businesses should be catering to customers’ expectations that deliveries can be made at any place, and any time.

It’s all about ‘moments’

With retail now so disjointed, offering a buying opportunity to customers is more about capturing them at the moment they want to buy, rather than offering an experience they don’t really want.

In practical terms, this means you need to be everywhere. If a customer is browsing Twitter and feels like buying, helping them do that gets you a sale. Interactive videos and other media work the same way.

“It’s less about conversion,” Stephens said, “and more about creating those moments.”

By investigating different types of media like videos, even things like blogs and infographics, you’re creating more opportunities for customers to experience a ‘moment’ of wanting to purchase something.

The size of your store will probably change

With the store becoming less prominent, the need for huge floor spaces will change.

This much has been obvious for a while – companies like Borders have suffered and ultimately collapsed due to their hunger for vast physical footprints.

“Many stores are downsizing their footprints and are making their stores less relevant,” Stephens said.

If you operate in the physical store business, then don’t be surprised if you find yourself downsizing any time soon. Remember, the purpose of your store will be different – so the square footage isn’t going to be as necessary.

Distribution experience – not product

If the purpose of the store is diminishing, then what exactly is the purpose of a retail store at all?

Stephens said the function of the physical store is to deliver experiences, rather than products. Just look at an Apple store, or some of Net-A-Porter’s physical experiments. They’re based on experiences, rather than simply shipping product.

When people come to your store, they need to be able to create or experience something, rather than simply buy.

“It’s going to be about making something, experiencing a product or simply creating something. That could be with a computer, or even in more specialised shops, like building a bicycle,” he said.

This also means staff will change

Because retail stores are changing to more of an experiential purpose, the staff also need to change. No longer do bored staff have any use in a retail store. More knowledgeable and practical staff members are the way to go.

“The days of the clerk are over,” Stephens said. “We’re moving into a world where we’ll have fully animated or automated experiences.”

Automated experiences

And speaking of automated experiences, they’re looking more and more likely. Stores like Hointer – a jeans shop in Seattle – are making the shopping experience much more automated. Customers at Hointer find the jeans they want, and they’re delivered to the dressing room via a large mechanical system.

While in the dressing room, the store’s robotics can automatically retrieve different sizes and bring them to you.

There are still people who work at the store, but fewer than any normal store of equivalent size. And they give fashion advice – they’re not just there to make sure no one steals anything.

We’re already seeing more of that happen here in Australia – stores like Country Road are experimenting with tablets for the in-store experience, while Shoes of Prey has established booths in David Jones locations so shoppers can use tablets to design their own product.

More about data but you have to be fair

Businesses hear about big data all the time, but they probably don’t know what it is or how to use it properly. Retailers will be able to access more data than ever before in the future, and customers will be willing to give it to them – but Stephens said they have to be willing to provide something in return.

“Retail is going to become more of an inclusive data share, so customers will say: ‘I’m willing to give you information, but give me something in return.’

“You’ll need to give a better experience, and actually tailor the experience to the person.”

Your competitor is changing

You need to think big.

Smaller retailers have a difficult time getting accustomed to the internet because they assume they’re too small to actually experiment with anything worthwhile. But that assumption is wrong – smaller companies have been able to do a lot with technology.

Stephens said because the industry is now becoming bigger, you need to think big as well.

“Your competitor isn’t down the street anymore. Your competitor is a 26-year-old living in his basement eradicating what you do,” he said.

“You need to think exponentially in terms of change.”

When it comes to the future of retail, you need to think big – or go home.

This article first appeared in SmartCompany.

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