Stores Go Both High-Tech and Homey to Lure Shoppers In
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.
The solution, Paul said, is for merchants to come up with compelling, distinct shopping concepts, like Apple's (AAPL) Genius Bar -- they have to become "the place to be."
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.
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.