The role of the physical store post-lockdown

The role of the physical store post-lockdown

Retailers have been hit by an escalating “perfect storm” of issues recently – digital disruption, business rates increases, a weak Christmas peak, and now the Covid-19 virus. Businesses with greater debts, low cash reserves, and reduced margins were sadly always going to struggle, and that epitomises most legacy high street retailers. The recent lockdown means many retailers have no revenues, but are still forced to pay rent and salaries, and yet have seasonal stock in stores that is rapidly depreciating in value that they can’t sell. 

Many familiar names will struggle or fail in the coming weeks, as the disease accelerates a fundamental shift in how consumers shop. This can clearly be seen already in the shocking news from Oasis, Warehouse, Debenhams, Arcadia and Cath Kidston here in the UK, and familiar names like Neiman Marcus in the US. The lockdown, even when it eases, will have a lasting legacy of rewarding businesses that embraced their digital transformation, or had supply chains and business models that were flexible to dynamically adjust to the change in how consumers engaged with them. 

The importance of digital

Department stores and fashion brands are hardest hit, having failed to find a role in the modern consumer shopping journey. Squeezed out by Amazons breadth of catalogue, brands such as Nike who could go directly to consumers, wholesale discounters like SportsDirect who could undercut them on price, and luxury experiences such as Selfridges that could command a premium, they have nowhere to hide. 

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Even John Lewis, ever the high-street bell weather, have struggled and they have a remarkably successful digital business. What once made these businesses a destination was a combination of curation and service, so simply creating a digital store of product hasn’t been enough. 

In truth, the problem is not easy to solve for. The combination of lots of seasonal stock in stores, combined with a lack of automation in warehouses, means that sickness and social distancing have massively reduced most digital businesses capacity to deliver, at a time when digital purchasing has surged by as much as 500% for some businesses. What could be the golden opportunity for businesses to take digital market share is slipping away from established businesses.

What happened? It’s easy to think that digital transformation is just creating a digital channel. Or to think that it goes further, and applies to call centres, marketing and loyalty. But hubris meant businesses stopped there and haven’t truly looked at transforming the core of what they do. Digital impacts product design, B2B buying, supply chains, order optimisation, fulfillment and returns, and too late these companies that digital expansion inevitably exposes the weakest link in your value chain, regardless of where it is in your business. 

Experience and data-led retail

If businesses are to recover quickly, then digital will be key. The first step in any recovery plan needs to be data. Data about buying behaviours, to inform your product strategy, and data that can feed into your acquisition marketing.

Buying behaviours have shifted forever, but that hasn’t changed the simple reasons why people shop. People will want to get out of their houses as the crisis eases, but fear will linger over non-essential trips. Attracting people back into stores means understanding when people will shop, what they are shopping for, what is your brands role in facilitating that mission. It can’t be just about a transaction: it will need to be an event that they can get more out of than just a product. 

So a data-led strategy is crucial across all channels: yet Publicis Sapient research found that retailers are still challenged when it comes to effectively leveraging their data and implementing AI at scale. 

  • Early investments in customer experience and leveraging data for marketing are already paying off for large retailers, with organisations planning continued investments as they look ahead. 
  • Almost all respondents said they planned to expand their customer experience budget over the next fiscal year and were confident in linking customer experience investments back to ROI.
  • This was conducted pre-coronavirus, but investment in experience will be all the more important afterwards to attract customers back through the doors

More importantly, the kinds of analytics that have long been available online are now available in store through products like RetailNext. However, excepting a few startups, most businesses simply haven’t invested in trying to create a single view of ALL customer behaviour – it’s frequently limited to just digital interactions. Those that use this time when stores are closed to refactor store space, instrument the physical experience and then rebalance their stock between stores and warehouses are going to come out of the current crisis stronger. 

Experience as entertainment 

Once stores re-open, retailers need to make sure that every visit is an occasion to remind shoppers that it’s not just about getting out of the house, it’s about an event that lifts your weekend. Some stores will have the advantage of being placed in malls where this is built in – Westfield White City with its multiplex cinema, dining and Kidzania will likely do well as a destination. 

But for stores that don’t have this luxury, what can they do? The foundation is to focus on the customer mission and journey throughout will pay dividends. For example, for click & collect Publicis Sapient is working with a number of clients to not only make improvements to digital experiences pre-purchase, but to create more efficient and more impressive collection experience, and then to close service experience using online as well for any refunds, substitutions or vouchers for following purchases. Applying techniques like service design to the customer journey allows us to find opportunities to heighten the experience with moments of delight – simply addressing customers by name, offering a free beverage for high-value customers whilst they wait.

Beyond this, we can then start to find those elements of the store experience which will ensure customers seek you out again and again. Sometimes it will be the cocktail bar on the 2nd floor of Nordstrom in NYC, or the yoga class in your Lululemon store before store opening. Apple’s experiments with turning parts of their stores into open classrooms so people can explore the full power of their devices have also proven to help heighten the overall impact of stores.

But whatever the solution is, it has to be aligned with your brands purpose, and the overall mission and needs that your target audience and your consumers expect.

The future will be the combination of digital and stores into a truly holistic experience for those who want it: 

  • The ability to touch and feel the fabric and quality is not always going to be important to shoppers buying a discretionary product – sometimes “good, now” is better than “perfect, later”
  • There are somethings that can’t be delivered – advice to find the perfect foundation, whether the arm length of that jacket is just so, how that sofa feels to sit in, or trying on multiple outfits with friends for that special occasion. Stores need to service the needs that can only be addresses in person.
  • Shoppers will always want a good price, but many are willing to pay a premium for the security of knowing how it was sourced, that they can trust the merchant selling it, and that they will be looked after if anything goes wrong
  • Entertaining customers and giving people a reason to return is not about cheap thrills – it needs to be done in harmony with your brand, and address an unmet need or mission for consumers

Finding a proposition that works for each brand, that works for its mission and principles, is key to determining its role in the high-street of the future.

Andy Halliwell senior director, Retail Strategy, at digital consultancy Publicis Sapient

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