For those with roles in the design, construction or operation of retail stores, there is a need to maintain some perspective on the rise of e-commerce, as well as the enduring qualities of physical retail. In 2015, the U.S. Department of Commerce reported that e-commerce sales accounted for slightly over 7 percent of total retail sales. That figure also includes online sales generated by retailers with a physical presence. Amazon, by far the biggest e-commerce retailer in the U.S., generated approximately $107 billion in sales worldwide in 2015. By comparison, Walmart sold $486 billion in goods worldwide. While Amazon’s $107 billion in sales is no small change, it still only accounts for less than one-fourth of Walmart’s total sales. Also, keep in mind that on average, a Walmart Supercenter sells around 142,000 SKUs, compared to Amazon’s 480,000,000+ products.
While price and convenience drive many of our purchase-making decisions, they may be the only factors influencing shopping choices online. Physical retail, however, provides a sensory experience, and through that experience, brick and mortar retailers can realize advantages where e-commerce cannot compete. Perhaps that explains why many companies that started exclusively as online retailers, including Warby Parker, Birchbox, Modcloth, and even Amazon are now building brick and mortar stores. Experience is a broad term, though, and there are certain types of experience that are more timeless, impressionable and influential than others. Before getting into the various qualities of experience, let’s consider two ways that simply having a physical store influences the retail experience.
First, online retailers are often challenged to sell products when consumers cannot experience their tangible qualities. The ability to touch, hear, smell, see or taste a product is necessary for many of us before committing to a purchase. Personal preference in the quality or fit is something we often do not want to risk. While many online retailers provide return options, taking that risk potentially consumes unplanned time and expense. Another reason to shop in store can be explained by the desire for instant gratification. Knowing that a product is in stock provides incentive for the time and cost of the trip.
The physical store also provides opportunities for retailers to reinforce their brands by creating experiences that keep customers in stores longer, and keep them coming back. Just as thriving downtown scenes, mixed-use developments, entertainment and luxury shopping districts all create destinations for people, individual retailers are attempting to become their own destinations. There are many examples of these efforts, such as in-store cafes, bowling alleys, games with lifelike robotic animals, aquariums and even in-store Ferris wheels.
Oftentimes, technology drives the attempt to create unique and memorable in-store experiences. For instance, Samsung recently opened a 30,000-square-foot flagship store in New York City, and the store doesn’t even sell products. It provides a technology-based experience, and through that experience, owners and executives hope to sell their brand. This year, Neiman Marcus and other retailers began installing smart mirrors in select stores to allow customers to video themselves in a prospective garment or outfit, and then compare it side-by-side with other apparel that they want to try. While technology can be an important part of creating in-store experiences, it becomes most effective when used to enhance one of the three drivers behind our purchase making decisions—price, convenience, and experience. Technologies that fail to do so may become short lived novelties.
While experiential technology and product tangibility can enhance a store visit, the experience of human connection can be the most powerful and influential. The influence of human connection in a retail environment manifests in many ways. It may be as simple as knowing that a certain company invests in well-trained, knowledgeable employees who are helpful when their assistance is desired. Human connection certainly exists when relationships develop between sales associates and customers. Spaces that are designed to bring people together, such as cafes and restaurants often contribute to social/human connection. Another example can be seen in stores that are designed and built within the context of their local community. Taking this approach to the built environment portrays a level of respect or homage to the culture of that particular area, and can help establish a community connection.
The various Disney theme parks represent one of the pinnacles of experience-based retail. Let’s imagine, however, a rule preventing parents from attending the parks with their children. If this were the case, Disney World would probably go out of business. Why? Because it’s the social experience, and the hope that going to a Disney park will bring the family closer together that keeps them going there. In other words, at a place that offers some of the most sophisticated entertainment technology in the world, the real motivation to go there is driven by the desire for human connection.
As further evidence for the power of human connection in retail, consider the examples set by companies like QuikTrip, The Container Store, Publix and H-E-B Grocery. All of these companies have been recognized for higher-than-average employee retention. Moreover, they have also been noticed for excellent customer loyalty. It comes as no surprise that when a company’s employees are happy, they tend to treat their customers in a way that reflects their happiness. As Kip Tindell, CEO of The Container Store, said, “We believe that if we take better care of our employees—by paying them better and training them more—that they in turn will take better care of our customers. This keeps our customers coming back to see us over and over again, which ultimately benefits our shareholders, too!”
So what does all of this mean for us with roles in physical retail? While the retail industry sees constantly changing trends and new uses of technology, the basic elements of good design still hold true. We are still attracted to spaces that evoke desirable feelings, and spaces that flow and function in a way that make them convenient and inviting. While the specific elements of design will change from one retailer to the next, when the focus of those design elements enhances convenience and experience for the users of that space (both customers and employees), they are more likely to create a positive impression. When combined with good in-store service, those positive experiences are likely to be advertised to their friends, and keep customers coming back.
Sources: U.S. Department of Commerce 2015 Q4 Report | Walmart 2015 Annual Report | Variety | Retail Customer Experience | Supply Chain Quarterly | Business News Daily | Business Insider | Chain Store Age | The Seattle Times | Forbes | Harvard Business School | Supermarket News | Fortune | And Now U Know
Matt has more than 18 years of experience in the architecture and construction industry, and is part of BRR’s business development team.