Retail in Asia

In Telligence

The physical store is dead

Discover how Amazon could save the physical store

Retailers from Macy’s to Gucci are building immersive experiences into their stores as they fight with Amazon and other online competitors for customers’ attention. But will the investment pay off?

SEE ALSO : Smart retail in the physical store

Gucci’s newest store in Soho looks different than their nearest existing outpost, about a mile away near the World Trade Center. Instead of the white walls and neat rows of handbags that have defined the in-store luxury shopping experience for the last couple decades, shoppers entering the Gucci shop on Wooster Street will find different product categories mixed together in a “world of discovery,” with “cast members” serving as their guides. Perhaps they won’t be shoppers at all; the new space includes a screening room showing a Wu Tsang-directed documentary about New York house music.

Welcome to the world of “experiential” retail. Facing a growing threat from and other competitors for consumers’ time and money, retailers are betting big on spectacle to draw in customers.

This week alone, Macy’s acquired Story, a Chelsea store that undergoes a complete makeover every month or so, and named founder Rachel Shechtman the department store chain’s first brand experience officer.

And on Thursday, Ssense, best known for selling luxury streetwear online, opened a five-storey ode to Montréal that features a cafe, bookshop, art installations — and the occasional item for sale. In an Economist Intelligence Unit survey of 256 retail executives last fall, 80 percent said they offered in-store events or product demonstrations, or planned to do so in the next three years.

The concept is simple in theory: design stores around aspects of the retail experience that aren’t easily replicated online. Can’t match the selection offered by online shops? Then ditch the endless racks of clothes for a few curated selections, peppered with must-have items that can only be purchased in store.

Foot traffic down because everyone’s shopping from home? Lure them out with in-store events. Customers like the ease of making purchases with a few mouse clicks? Give salespeople mobile payment systems. Shoppers don’t want to deal with salespeople, period? Rebrand them as “stylists” (Ssense) or “connectors” (Gucci).

Ssense and Gucci are going a step further and tailoring their in-store experiences to their new locations. They’re trying to reach shoppers bored by cookie-cutter boutiques, including wealthy tourists who might opt to spend time in a concept store even if they can buy the same products closer to home.

Ssense’s concrete interiors are meant to evoke the brutalist architecture that defined Montréal’s heyday, but with a modern warmth intended to entice the company’s young customers to hang out. Gucci’s new store evokes Soho in its gritty 1970s and 1980s glory — back when many luxury brands wouldn’t come near the neighborhood. The brand even went so far as to reprint a December 1985 issue of Andy Warhol’s Interview magazine, featuring Madonna.

So does experiential retail work? Some signs point to yes. Luxury brands are racking up huge sales with exclusive product drops, a precursor to the in-store experience model. Investors are snapping up shares in mass-market chains like Macy’s and Target, a vote of confidence in those companies’ efforts to fend off Amazon by modernising their stores, The Wall Street Journal reported Thursday.

And the new store concepts seem to be a hit with younger consumers: a National Retail Federation survey found last year that 49 percent of millennial and Gen Z shoppers visited stores more often than they did a year earlier, compared with 17 percent who made fewer visits.

This strategy isn’t without risks. Gucci’s Soho store’s interactive LED walls don’t come cheap. It’s also not clear that wowing shoppers with art installations and ever-changing decor convinces them to spend more. The same NRF survey found over 40 percent of shoppers felt in-store displays and tablet-wielding employees had “no impact” on their shopping experience. About 10 percent said these technologies actually made their trip to the store worse.

By contrast, about two-thirds of respondents liked the option to pick up online purchases in store and the ability to make mobile payments. To these customers, a seamless shopping experience is more important than an entertaining one.

Many luxury retailers, which are used to dealing with demanding customers, are integrating convenient features like in-store pickup and seamless checkout into even their most high-concept stores.

Farfetch wants to use customer data and a suite of apps to help retailers treat their best customers like regulars, whether they’re visiting an outpost in Dubai or Denmark. Gucci is using its new store to test out 3D films and other technologies it may later roll out to other locations. Ssense customers can select items online and have the clothes waiting in the store to try on within an hour.

As more retailers hop on the experiential bandwagon, the pressure to continually upgrade store displays and technology will only grow. Technologies that once seemed futuristic, like digital display mirrors, start to elicit yawns when every store in the mall has them.

SEE ALSO : Why do we need to embrace Experiential Retail?

Even the best-designed stores won’t help if customers don’t like the product. Costs are likely to rise as dozens of chains compete to offer the most memorable experiences, leading some brands to open fewer but more expensive stores. Customers may also grow tired of being bombarded with “experiences” every time they need a new pair of jeans.

In the end, experiential retail might not be the solution to brands’ online problems. But they can’t afford to sit this trend out. Consumers have made it clear that they still want to go into stores, but it’s up to the brands to make sure they have a reason to do so.