The changing role of the store

The formulaic store which has traditionally focused on efficient product fulfillment has been on a trajectory of change for some time now. Much like almost everything in our lives, the global pandemic has accelerated the need for stores to function differently to address real changes in shopper behaviour and the impact of the ecommerce mash-up.

For physical stores, the focus now more than ever, needs to be on how to build customer engagement as the store becomes an important channel in the loyalty battleground. Flagship stores continue to transform into destinations for entertainment and experience while smaller formats are being increasingly adopted as “purposeful” stores curated to more effectively meet the unique needs of the local community they serve. In this role, we are seeing trends towards retailer collaborations, partnerships, and pop-up applications to surprise and delight in order to more effectively reach, engage and enhance the customer experience on each visit. Back in December 2020, Sephora and Kohl’s announced a partnership that Sephora stores will be integrated within existing Kohl’s locations. The goal of this special collaboration is to offer Kohl’s consumers — especially those who have never stepped foot in Sephora, oftentimes because they don’t live near one — the total beauty package. Similarly, starting this August, Ulta partnered with Target to roll out at 100 Target stores nationwide with hundreds more locations opening in coming years. This new shop-in-shop experience includes wide-ranging beauty assortment with a new curation of established and emerging prestige brands. Both collaborations benefit by driving more traffic without the full expense of a store, tapping into a new customer base, and getting better utilization out of a big store space.

Increasingly, we are seeing consumers turn to physical retail stores to ‘go shopping’ rather than ‘do shopping.’ Going shopping means taking more time to embark on an enjoyable shopping expedition where consumers indulge in exploring options and engage in the hunt for interesting, exciting and new products. As such, we will continue to see physical retail stores move beyond merely being a location to warehouse products as they shift towards being conceived more as a marketing channel where awareness and engagement become just as important as ringing up a sale. How retailers achieve this requires a new toolkit emerging from the worlds of technology and data.

Change in technology being implemented by retailers as a tool rather than entertainment.

While technology continues to deliver on the fun factor, enhancing the user experience and enabling convenience, retailers are increasingly seeing the necessity of leveraging technology to drive a more effective operational business. Agility and responsiveness are two universal business imperatives that look to benefit from technology integration. For example, the rising interest in strengthening inventory management systems with AI-based tools not only makes demand forecasts more accurate but also improves a retailer’s ability to satisfy a customer who walks in the door, physically or online. Tools such as facial recognition are used to easily identify customers and pull in data that can aid a series of engagements and transactions. In addition, virtual fittings used in the selling of fashion and accessories, or 3-D avatars used as mannequins or greeters are other examples of how retailers are using technology-based solutions to not only improve operations but also enable the shopping experience with greater personalization and improved service. And it does not stop there – artificial intelligence (AI) and augmented reality (AR) also being deployed to improve e-commerce operations, reduce costly product returns, and provide better online experiences for customers.

While the length of the pandemic has altered consumer preferences and shopping behaviours, it has also accelerated trends that were already in play. Retailers need to accelerate their learning of shopper preferences, and how to effectively attract and entrench shoppers as the steady return-to-normal continues.

Consumers expected to “revenge spend” as shopping restrictions are lifted.

With rising vaccination levels, consumers are achieving a greater level of comfort in returning to more normal, unrestricted behaviours, with the possibility of edging back to the pre-pandemic normal by the end of this year. In a recent survey conducted by Numerator, 80% of US consumers indicate that they expect to be celebrating one or more of the upcoming fall/winter holidays normally this year.

With the economy expected to gather momentum, attitudinally consumers certainly have a lot of pent-up desire to indulge in going shopping and being entertained with the myriad of options that are available to them. The availability and desire to spend their disposable income on things beyond the necessities will likely translate into a surge in activity that are opportunistic for retailers. To do this successfully will require building a deep understanding of the shopper in terms of who they have become, what they want, and how they want to experience it. Data mining strategies and technology-enhanced operational models will help retailers maximize their efforts, minimize friction, and optimize customer-facing engagements. Return on experience (ROX) will be a critical component in achieving the desired return on investment (ROI) and ultimately, a secure brand-customer relationship.