What’s next for retail?

While e-commerce is becoming increasingly more prevalent among private consumers, most of the sales are still made in physical stores. In Denmark, e-commerce sales made up 12.5% of the total sales last year (Dansk Erhverv, 2018), which signifies that the days of brick-and-mortar stores are still yet far from over. However, 84% of the Danish population were reported in 2018 to have made purchases online (Dansk Erhverv, 2018), so a steady growth in e-commerce is to be expected over the years – keeping traditional retailers on their toes.

So what’s the deal with physical retail stores? The on-going prophecy of the impending death of physical stores may be true for stores that maintain the status quo and refuse to re-invent themselves to match the needs of the future consumers – the digital natives. However, it is our experience that retail managers who think big, innovate and experiment are here to stay.

Retail re-invented

According to a study by Deloitte (Deloitte, 2019), there are particularly two important themes to anticipate for the year ahead.

  1. In-store revolution
  2. Re-inventing retail

The in-store revolution shows a tendency for traditional retailers to reduce the number of stores while at the same time going full-scale on opening large concept stores. Retailers take on much more risk by innovating at scale and experimenting with customer experience. The re-inventing retail theme illuminates how the retail model adapts itself to consumer trends such as:

  • Sustainable models of consumption that focuses on recycling products
  • The need for each consumer to express their individuality through personalized items
  • And finally, the rise of social influencers.

The Realms of Experience

Most of the re-inventions of retail mentioned above center around experience: The experience of the customer and how they relate to the spaces of retail stores. According to the following model (1998, Harvard Business Review), there are 4 dimensions to experience, the 4Es.

In terms of store layout, it is important to design your store so that it incorporates the three realms of entertainment, escapism and esthetic in particular. Why? A visually appealing store is not only memorable for the customer and entices them to share the experience with others – it also creates a space for the customer to escape into. Esthetically pleasing store fronts have been a hit on social media, to the credit of influencers, whom are quick to shoot and share their in-store experiences online. Another element of escapism is storytelling: In order to construct an authentic experience that is believable, the story you tell should make sense and should be reflected in how you choose to design your store.

Now that was escapism and esthetic. What about entertainment? The term retailtainment was coined by George Ritzer in his book, “Enchanting a Disenchanted World: Revolutionizing the Means of Consumption” (1999) to describe the use of the five senses to influence the customers to getting into the mood of buying. Make sure to engage all five senses in order to improve the customer experience and keep the customers pleasantly surprised with exhibitions or merchandise that encourages the customer to interact with the store.

How do we measure experience?

With that said, how do we actually go about measuring experience? How do we evaluate on the effectiveness of our visual merchandise and their ability to capture the attention of customers? While it is always an option to resort to surveys and asking customers directly, e.g. in exchange for a gift card, there are also less obtrusive ways to obtain knowledge about customer experience that are equally valuable.

Tracking – Using industry standard sensors, retailers can get a full, stitched overview of their store, which enables them to accurately track each customer and get insights about their walking patterns. This could be relevant to determine whether the store layout has been designed appropriately. Does the customer tend to avoid certain spaces? Do the product placements have to be adjusted?

Dwell zones – Other useful metrics are those related to occupancy zones within a store, e.g. dwell time and the number of people in certain zones. One way to use these insights is to determine the hot and cold zones in a store. Another way to use this information is to evaluate on whether certain marketing initiatives work as intended. For instance, if one were to incorporate fragrances in a particular area of the shop, does it in fact make customers stay longer or does it have an adverse effect?

Keep in mind that a customer has limited memory of their experiences in-store. In fact, according to a study by Daniel Kahnemann, “When More Pain Is Preferred to Less: Adding a Better End” (1993), who coined the term Peak-end rule, a customer only remembers the experience in snapshots – the Peak, and the End. By tracing the customer’s journey throughout the store and noticing where they stop or rush through, retailers can either adjust their “peaks” and “ends” to match that of the existing, observed walking patterns or they can change up the layout of the store in order to directly manipulate the customer’s journey throughout the store.

Overall, while the two above mentioned methods alone do not provide direct measures of the customer experience, one can combine the information along with other qualitative sources to infer useful insights about how customer interacts with the story, told by retailers.

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