While legacy companies like Sears are shuttering their doors, a growing number of online-first companies—from Amazon to Rent the Runway—are opening new storefronts and transforming the shopping experience. Senior Lecturer Jill Avery and Associate Professor Antonio Moreno discuss the new rules of retail.
Q: What’s different about the physical storefront in this renaissance of retail?
Jill Avery: There’s a lot of experimentation around what a store is and what it could do. In this new worldview, a store has to create a branded experience that goes beyond the purely transactional—one that aims to build a relationship with the customer and communicate the brand in an experiential way. There’s still a purpose for physical shopping in today’s environment; it just has to feel different from what we’ve gotten used to as consumers.
Antonio Moreno: People still like going to a physical store to have an experience and learn about products, but now that can be decoupled from the act of taking possession of a product because there are better and cheaper ways of doing that. Malls are going to increasingly transform into places for experiences, not just for taking inventory home. What probably will not survive are the retailers that are more like a warehouse, or just physical repositories of goods. Real estate is too expensive for that purpose. The opportunity to think about online and offline as complementary channels has opened up possibilities that would not have been imaginable with the more traditional, siloed approach.
Avery: I would give the example of Glossier, which is a digitally native, direct-to-consumer cosmetics company. They have one permanent showroom in New York, but everything else that they’ve done, from a physical retail perspective, has been a pop-up. The whole point of the retail experience is not to sell the product, but to introduce you to the brand in a way that can be shared with others through social media. There are special areas in the store that are set up for selfies, where you can take a picture of yourself in Glossier pink and share that on social media. They might serve a small number people during a pop-up experience, but if those people send that message out on social media, the effect is an exponential multiplier. Glossier’s expectation is that you will move your purchasing to the digital space after visiting the pop-ups, so it’s not meant to be a channel of distribution; it’s an acquisition engine and a way to make a brand splash in a particular market.
Moreno: Warby Parker also has photo booths in some of their stores, where you can try on the glasses and take pictures of yourself. What’s brilliant about this is that it gives you this theatrical experience but with some operational benefits: If you want to receive the picture, you have to give them your email address. And when you are browsing frames, they offer to send you a link with the frames you have seen. They present this as a service but it’s also very valuable data, because they can link offline and online, and they know that you were in the store on a particular day and what frames you saw, and they can follow up with an email saying, “Do you want to buy this now?”
Avery: We tend to default to thinking about a consumer’s functional goals: I want something quickly and easily at a low price. But consumers buy for many other reasons. They might have social goals or they might want to have an experience that’s delightful. Retailers have to build these functional, ego-expressive, experiential, social, and recreational goals into the journey, so that each customer acquisition, distribution, and retention channel is contributing in a different way.
I think it’s interesting to look at where Amazon is taking us, which is into a frictionless buying process: How do I make it as fast and easy and convenient for you to get the products that you need? But part of the joy of shopping at places like Marshalls or T.J.Maxx or the old Filene’s Basement is the idea of hunting for a bargain. That friction is designed to make you feel like you’ve conquered something, and we’re seeing companies build more intentional friction back into the buying process.
Q: What might that look like in a retail space?
Avery: It could be on the inventory side or in the way the physical experience is designed: making you wait for a purchase, making you want something that’s not available, things like that. Maybe it’s making you navigate through a store in a way that’s not linear, making you linger and pause and consider, rather than an easy search-and-grab.
If you think about the origins of Starbucks, it was a process filled with friction: The barista would ask about your family and educate you about coffee growing regions in Africa in order to create an intimacy. Stores were designed as a place for lingering and relaxing. For customers who were looking for an in-and-out buying experience, that was frustrating and frivolous. Just give me my coffee! But for others, there was value created in a moment of conversation and connection that wasn’t about ease, speed, and convenience.Q: What are the big questions for legacy retailers trying to find a way forward in this new space?
Moreno: How to remain relevant. Most retailers are now sophisticated enough that they’re thinking about brick-and-mortar and online as a joint effort. It’s taken them awhile to start thinking about the ideas that have come from these direct-to-consumer brands, but some are trying to do things that are a little bit more on the experimental side. Kohl’s has launched an interesting initiative to process Amazon returns, for example. It’s difficult for Amazon to process all those returns, and Kohl’s saw the fact that this would bring a lot of traffic to their stores as a positive effect, particularly younger people who would not otherwise go into the store. For Kohl’s, this is a way of remaining relevant.
Avery: I would add that each retailer needs to know who they are, what value they want to provide, and then understand the customer’s purchase journey for obtaining that value. That gives you all of the markers you need to design an omnichannel system that’s going to feed into the goals that consumers have while they’re shopping. How do you compete against Amazon? You make something happen in physical stores that can’t happen online. If you think about the history of the department store in America, they were the circus when the circus wasn’t in town. There was always something going on, with free ice cream and performers and a pleasant place to gather. Legacy brick-and-mortar retailers have amazing assets, but they need to think about what’s unique about having a physical space to convene with consumers and how that can be leveraged to do something that can’t happen in the digital world.
This article first appeared in the HBS Alumni Bulletin under the title "Clicks and Mortar."
[Image: iStock]
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