Retailers are going back to their basics in an effort to stay fresh
Everywhere you look, retailers are creating unique in-store experiences and refreshing technology in the name of “reinvention.” A little voice is shouting that big changes are the only way you’ll continue to be heard.
Take a breather.
Succeeding in this environment isn’t about throwing everything out. It’s not about jumping on the “everybody’s doing it” bandwagon, either.
“Reinvention is focused on uncovering what made the business great in the first place — its unique DNA — and then using it to systematically reimagine a stronger, more relevant and productive version in the least amount of time possible,” says Joe Jackman, CEO of customer experience firm Jackman Reinvents.
“The question isn’t, ‘Will I have to reinvent?’ but rather, ‘When is the right moment to begin?’” he says. “The answer is simple: Begin before growth runs out. … Businesses today must begin to figure out their next act before the current one comes to a close.”
Fresh growth, same DNA
Consider Brookfield Place New York in lower Manhattan. Some years ago, a number of large financial tenants moved on, leaving significant vacancies. At the same time, public transportation in the area was burgeoning: Fulton Center — a subway complex closed since being damaged in the Sept. 11, 2001, terrorist attacks — reopened in late 2014 as a $1.4 billion downtown version of Grand Central Terminal.
“We could tell that this major renaissance was going to happen,” says Michael Goldban, senior vice president of retail leasing for Brookfield Property Partners. “We started thinking about how we could fit into it, how we could make the property relevant for the residents, the office workers and the tourists coming downtown.”
The result, which opened in 2015, is more than a luxury mall; it has become “almost like a community center,” he says.
Each day brings about 50,000 people to the immediate surroundings; Brookfield Place draws them with more than retail: There’s a 35,000-square-foot Hudson Eats food hall with 14 restaurants, a French market called Le District and an emphasis on world-class arts.
The success of the Brookfield reinvention harkens back to Jackman’s point about the importance of DNA. Brookfield’s strategy was to serve locals first with dining, shopping and entertainment options. As the surrounding area transitioned from mainly a financial district to a more diverse business, creative and residential community, Brookfield was ready to morph right along with it.
IKEA has undergone a reinvention of its own, related to the DNA of its Scandinavian culture. The functional home furnishings retailer has long offered traditional foods to “share our Swedishness with the communities where our stores are located,” according to Peter Ho, product food developer.
By the end of spring, however, all 41 U.S. stores will feature three zoned food areas — one for a fast meal, one for families and another that represents the Swedish version of a coffee break with time to connect: “fika.”
IKEA is far from the only retailer to incorporate food as a focus of reinvention. Think of Urban Outfitters and its recent purchase of the Vetri Family restaurant group, which includes the pizza chain Pizzeria Vetri.
‘Competing on experience’
Other reinventions have to do with technology, especially when it comes to “seamless retail.” David Munczinski, founder and CEO of Brickwork, says profitability is being strained against individual channels.
“We believe that the only way to successfully operate in this environment with these increasing customer expectations is to operate as a post-channel retailer,” he says. “Instead of looking at coordination alone, it’s looking at unique assets within these channels and finding ways through technology and alignment of organizational structures and teams to unlock them … and orchestrate them into customer-focused and customer-centric business models.”
It’s seen in, for example, a Bonobos customer being able to book an in-store appointment via mobile, coordinating digital and physical assets to drive value.
“The store is a center for customer experience and customer engagement,” he says. “There is unique customer engagement you can’t get trying to stuff someone through an online conversion funnel. The retailers that are doing well are competing on store experience.”
Brickwork aims to create a “new digital presence” for physical stores where online-to-store funnels work through search-optimized store pages, event management and appointment management systems that bring web and mobile customers into the store.
“For Millennials and Generation Z, the share of their wallet is shifting from goods to experiences,” says Munczinski, whose company was a 2015 finalist for Shop.org’s Startup of the Year. “The way people are spending their money is changing. … As that wallet is shifting to experience, whether it’s dining out or traveling or hospitality/tourism, retailers need to adjust, and that means changing the experience of the store.”
There has been a great deal of industry discussion about experience across channels — “‘omni’ this and ‘multi’ that,” Jackman says. “It has taken a while, but I think enlightened retailers have realized they have one brand and one channel: the customer channel. And the customer channel is either joined up and optimized, or it’s not.
“When it’s not, a lot of money is left on the table and a lot of customers are left underwhelmed,” he says. “In my view, there is no longer any excuse for an inconsistent experience across touchpoints.”
Understanding the journey
Bridget Johns, head of marketing and customer experience for RetailNext, believes data is the way to make it happen.
“If retailers can understand what’s happening with shopper journeys, they can use some of the same tools their online counterparts have been able to employ, and can drive a more efficient, friction-free shopping experience for customers,” she says.
“If a retailer is not solving the fundamentals of the frictionless shopping experience — no lines at the queue or for the dressing rooms, having the right product in the store … and if a product isn’t in the store, having an easy way to fulfill that shopper’s mission without a lot of rigmarole — they will lose those customers,” Johns says.
These elements build loyalty; when a retailer can’t fulfill the customer’s reason for coming to the store, it doesn’t really matter what technology is being used. Analytics can help retailers discover, for example, how many people walk by rather than walk in; whether they walk straight into the store or turn left or right; whether they stop at fixtures; and which products they carry into the dressing room compared with the ones that make it to the point of sale.
The results of such knowledge can be staggering; RetailNext has seen a 6-8 percent increase in sales if the store is better aligned to shopper traffic or labor scheduling is optimized.
The most important thing, Johns says, is that the addition/reinvention has to be authentic.
“It has to feel like it’s part of the brand, and it has to elevate that shopping experience for the customer,” she says.
The challenge is that retailers can think they’re making big changes and moving quickly ahead — when in reality, consumers have been waiting for them to catch up. “The pace of change for consumers is far outpacing the pace of change for retailers,” Johns says.
The customer “truly is in the driver’s seat today,” Jackman says, “given the ease with which they can now access competitive offers, compare prices, understand product origins and backstories, hear what their peers and the media are saying, amplify their choices and peek behind the business curtain,” he says.
Jackman, whose company’s high-profile successes include the reinvention of Duane Reade and, more recently, Dave & Buster’s, also notes the pace of change — and its impact on the need for ongoing reinvention.
“The reality today is that the lifecycle of brands and their underlying business models is shortening, which means reinvention is required much more frequently than in the past,” he says. “We believe that successful businesses in the future will be those that are in a constant and fluid state of reinvention.”
Within that context, Jackman sees two types of retail reinvention taking place: “Meaningful updates of the current customer experience — a fresh way of showing up and delivering essentially the same proposition as today — or a whole new delivery of the core purpose of the brand.
“More and more, we are seeing a shift toward the latter: breakthrough thinking and real, often technology-enabled, opportunities reimagining entire business models based upon the original core idea or invention,” he says. “Think of mops becoming Swiffer, taxis becoming Uber and movie rental stores becoming Netflix.”
“I could tell you about how pure-play online retailers are opening physical stores, or how digital technology is infiltrating and becoming meaningful in the in-store experience,” Jackman says. “But retailers know these things already, and this would miss the real point.
“Online and offline are merely touchpoints of customer experience and should be treated holistically. We have to get past thinking of them as separate, organizing our businesses into separate siloes of management — including separate teams and profit-and-loss statements — and managing them as if they are separate worlds.
“For each brand there is only one customer experience,” Jackman says, “so let’s get on with fully orchestrating absolutely every aspect of it.”
NRF members come from more than 45 countries and all sectors of retail, from Main Street merchants to online retailers.