Hey, all you consumers out there who’ve been shopping more and more online: Retailers are spicing up their brick-and-mortar stores to keep you walking through the door. Their game plan? To design store environments that are equal parts high-tech and homespun.
Companies at the National Retail Federation’s convention in New York City this week explained how they’re courting today’s digitally wired consumer by bringing interactive technology into stores, such as the new self-service cosmetics kiosks at Macy’s (M). But they’re also working to engage shoppers on a more personal level by fashioning stores that double as social hubs, with everything from health and wellness centers to cupcake shops.
At the convention, merchants talked about crafting “experiential” shopping environments that reflect contemporary consumer purchasing behavior (think mobile checkout), while finding fresh ways to create what Starbucks (SBUX) CEO Howard Schultz has termed “a third place” for shoppers between work and home.
And stores are becoming cozier in more ways than one. Those stadium-sized establishments that blanketed the retail landscape over the past few decades? It looks like there will be fewer of them now that the growth of e-commerce has rendered much of that store space obsolete, said industry executives at the show.
“Store size and footprint are getting smaller,” said Alison Paul, vice chairman and U.S. retail distribution leader for Deloitte LLP, during a session titled “The Next Evolution: Store 3.0.”
“People don’t need as big a store because they can get everything online,” echoed David Jaffe, CEO of Dress Barn parent company Ascena Retail Group (ASNA), during the session. Several attendees cited Best Buy (BBY) as one retailer in the process of downsizing.
Retailers don’t want their stores to be reduced to mere showrooms for their e-commerce sites, he said.
While online retail sales are still a small percentage of total retail sales, e-commerce growth rates are outpacing traditional brick-and-mortar stores every year, according to a new Deloitte report. “In fact, the average growth rate of online sales has been about 20% annually, while the growth rate for traditional retail sales lags far behind, averaging about 3% per year,” the report says.
Hence, “retail executives are feeling pressured to deliver a better, more differentiated experience for customers,” the report says.
A High-Tech Transformation
Retailers are tapping technology to bridge the gap between their e-commerce sites and physical stores.
Macy’s, for one, taking a page from merchants like Sephora (LVMUY) that sell department store beauty brands in an “open-sell” — or self-service — environment, is testing Beauty Spot kiosks in four stores.
Beauty Spots feature interactive touch screens where shoppers can browse a mix of cosmetic and fragrance brands without the assistance of a sales person, sample testers, access detailed information about products and beauty trends, how-to content like “get this look,” and find promotional offers. Shoppers can print out a list of products they’d like to purchase as well as download the information to their mobile devices.
With these kiosks, Macy’s is looking to appeal to consumers — particularly younger shoppers raised on stores like Sephora — who prefer to shop for beauty products on their own, as opposed to with the guidance of a sales person behind a makeup counter.
Adidas (ADDYY), too, is leveraging new technology to extend its store inventory. The sportswear retailer/wholesaler has developed a virtual footwear wall that puts a seemingly limitless selection of digital shoes from its global product mix at shoppers’ fingertips.
By interacting with a 3-D digital display that serves as an extension of the shoe shelf in a store, shoppers at brick-and-mortar stores can inspect products not in stock from any angle, rotate and zoom in on the virtual shoe, and pull up product information.
The virtual footwear wall launched in Adidas’ London store, and could debut in the U.S. market in 2013, said Chris O’Malley, director of retail marketing for Intel, which makes the technology that powers it.
Meanwhile, retailers such as Dress Barn and Canada’s The Bay department store have tested touch-screen window displays that allow passersby to pull up product information on brands and special promotions.
Stores are also gauging shopper interest in Quick Response codes. Retailers have been testing QR codes throughout their stores, where shoppers can scan them with their smartphones to get the scoop on merchandise and discount offers.
But of all the new technological bells and whistles on display at the NRF show, it’s mobile payment systems that are most likely to go mainstream — and quickly, industry experts said.
That’s because mobile shopping is “blowing up,” said a Google representative at the Google Wallet show booth.
Google Wallet is a mobile app designed to transform your phone into your wallet. The app stores users’ credit card, retail loyalty card and gift card information in their smartphone. Shoppers can then pay at store registers simply by waving their phones in front of a terminal, and automatically receive store rewards and discounts. So far, 25 retailers — from Macy’s and Walgreens (WAG) to Jamba Juice (JMBA) — are set up so that shoppers can pay with Google Wallet.
Adding a Homespun Flavor
At the same time as merchants are upgrading with new technology, they’re also cultivating their softer side. Retailers are testing new ways to entice consumers to linger in stores longer by creating shopping environments that are social, homey, delight the senses and add an element of surprise.
Whole Foods Market (WFM), for one, is experimenting with new merchandise and concepts to add “differentiation through experience,” Walter Robb, co-CEO of the grocery chain, told DailyFinance at a post-show cocktail party held by investment firm Financo.
As part of Whole Foods’ efforts to promote healthy eating, the retailer is testing a wellness club in its Tribeca store in New York City. Shoppers can “sign up for it like an HMO,” he said. Paid membership includes cooking, exercise, health-education classes, as well as community events such as talks with published authors and inspirational speakers.
And in its store on the Bowery in New York City, Whole Foods is testing a Beer Room stocked with over 1,000 beers. Cerevisaphiles are on tap to offer shoppers their expertise.
Homey touches even extend to dressing rooms.
Dress Barn and sister chain Maurices set out to conjure “a third place” by re-imagining its dressing rooms as “more of a social experience,” Jaffe said.
Trying on clothes “can evoke negative emotions for women,” he said. To that end, they set out to create a warm, inviting area by adding comfortable seating outside the fitting rooms for friends and family, stringing up chandeliers for ambiance, and as a personal touch, placing plaques on fitting room doors where shoppers can write their names.
Bloomingdale’s is luring shoppers with trendy sweet treats. At its Manhattan flagship, the tony department store has added a Magnolia Bakery, the hip New York City cupcake shop that became a household name thanks to Sex and the City. It’s about shoppers finding “the unexpected,” Mike Gould, Bloomingdale’s longtime CEO, said at the cocktail party.
The bakery is just one facet of Bloomingdale’s push to add elements with “a wow factor” to its stores, Gould said.
Tagged: Adidas AG, Best Buy, Bloomingdale’s, brick and mortar, BrickAndMortar, DressBarn, ecommerce, Finance, Google, Google Checkout, Howard Schultz, Jamba Juice, Macy’s, National Retail Federation, online