Can in-store experiences save retail?

Discussion
Photo: RetailWire
Jul 26, 2017

Knowledge@Wharton staff

Presented here for discussion is a synopsis of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

In-store “experiences” are often portrayed as the way stores can combat the juggernaut of online ordering via Amazon.com and other sites, but are they worth the effort and money that retailers are pouring into them?

Wharton marketing professor Peter Fader notes that competing to create ever-more-stimulating retail environments could lead to an “arms race,” much like the way online retailers have competed to reduce shipping costs and have basically trained customers to expect free shipping. What’s more, it’s easy for businesses to copy in-store event ideas from each other so they no longer serve as differentiators.

Plus, Prof. Fader says, with many of the things we shop for, we’re not really looking for a fun and engaging experiences. If you’re just buying underwear or a dish drainer, you probably want to get in and out as quickly as possible. He also questions the ultimate payoff of experiences such as “smart” digital walls and mirrors and free glasses of champagne at the designer Rebecca Minkoff’s SoHo store. He comments, “As if that is going to keep people from going to Amazon: ‘Oh, I can get champagne.’”

In fact, Prof. Fader characterizes many of the initiatives that brick-and-mortar retailers engage in — at a time when many companies are forced to close their doors — as merely “rearranging deck chairs on the Titanic.”

While acknowledging creating in-store experiences have a role in the marketing mix, Prof. Fader believes a better strategy for retailers is to focus on data and analytics: to understand their customers’ lifetime value and find ways to make the in-store experience better for individuals who are more valuable to the business. Essentially, the idea is to treat different shoppers differently and solve important customers’ pain points on the spot, rather than trying to “wow” everyone en masse.

Yet he says that as a group, retailers are risk-averse, afraid of data, and too set in their ways — and he believes they are making a mistake.

“A magic [dressing room] mirror, anyone can have,” says Prof. Fader. “But a deep understanding of your customers — you just can’t buy that.”

DISCUSSION QUESTIONS: Are retailers better served focusing on data analytics for a better understanding of customer behavior or creating unique in-store experiences? What are the limits to the value of such investments?

Braintrust
"Some categories will benefit from the in-store experience. Other categories will be the domain of the online retailer."
"I so agree with this article that I am at a loss for words."
"Whether that sale is made online or in-store is less relevant that understanding the real motivators behind what makes customers buy."

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38 Comments on "Can in-store experiences save retail?"

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Dr. Stephen Needel
BrainTrust

I agree with Dr. Fader: in-store experiences is an overused term that is easily matched or subject to habituation. Retailers need to make sure the experience is not unpleasant. It would make for an interesting test by a retailer — a retailer could create experiences in one set of stores and not in another comparable, isolated set of stores and see whether sales increase in the set with the experiences.

Mark Ryski
BrainTrust

A great in-store experience is one that ends in a sale. Focusing on data and analytics to better understand customer behavior is critical, and I agree with the professor that retailers need to do more on this front. However, the professor is over-generalizing what in-store experiences are and minimizing how store experience helps create conditions that result in satisfied shoppers making a purchase. Creating a great in-store experience at Costco is a very different proposition than an Apple store and every retailer needs to understand what’s important to their customers.

Sunny Kumar
BrainTrust

Using data to provide a more personalized experience, even personalized pricing, for customers in-store on the face of it makes sense. Especially if the more enhanced experiences are delivered to the more loyal and valued customers. However this would require a significant shift in terms of what retailers look to as there core KPIs. Things like market share and growth may become difficult to measure and obtain in a world where new customers only get the basic experience.

Sterling Hawkins
BrainTrust

Retailers definitely need to shift some of the core KPIs that are driving their business as they become more loyal customer centric. New customers could be granted a special enhanced experience for some period of time as the personalization catches up. Key in all of this is really using the data to drive the personalized experiences.

Charles Dimov
BrainTrust

Professor Fader is right that for many commodity items, shoppers are not looking for the “wow” factor in the purchasing experience. It definitely makes sense to pick the area of retail where customers want to be amazed with a unique, value-enriching shopping experience. Make the shoes the main attraction and a wondrous purchase experience and the elegant stockings are merely the side order of fries with that meal.

If you are selling pure commodities then stick with the analytics. If you are selling brand-differentiated products (style, unique characteristics, high-value items, etc.), then focus on the purchase experience.

We always encourage customers of brand/value goods to focus on the new omnichannel strategies. Get your customers engaged, give them purchasing options, then make their purchase experience one about which they will tell friends and family!

Gib Bassett
BrainTrust

I agree completely, but he’s also right about most retailers being risk averse and uncertain as to how to best leverage data and analytics to improve individual shopper outcomes. Over the past several years retailers have rushed to acquire a lot of Big Data and analytics technology without a clear plan for accelerating development and operationalization of business-focused use cases. There is an art to this process that hasn’t played out at scale in most retailers, but must if analytics are to help retailers execute profitable and differentiated in-store experiences.

Bob Amster
BrainTrust

There is no pat answer. Strategies in retail should and will vary with the product category. Some categories will benefit from the in-store experience (remember if you can the department stores of old: the glamour, the assortment and the service). Other categories will be the domain of the online retailer. As the author points out, shopping for some things is a ho-hum event. Data analytics will play a part but getting customers into the store is more closely related to the shopping experience.

Brandon Boston
Guest

I don’t believe you can make a “unique” in-store experience without a focused understanding of your target customer’s data and analytics. The art of a great experience is understanding exactly how to help your customer achieve their goals with your product. How can you do this without a deep knowledge of your customer?

Shep Hyken
BrainTrust

Data will give you a better understanding of the customer. You can use that data in numerous ways, one of which is contributing to the customer’s in-store experience. So it’s not a choice. The retailer that takes advantage of both may have a better chance of winning that customer’s business, both in-store and online.

Manish Chowdhary
BrainTrust

Retailers need to focus on both data analytics and the customer experience. Creating a unique in-store experience can be like creating a unique unboxing experience. Engaging with the customer and gathering information during that process is key — what works and what doesn’t. How the retailer processes and applies their findings is also important. Consumers will continue to shop online, but keeping the consumer brand loyal is also important.

Brandon Rael
BrainTrust

Dr. Fader has some very valid points. However the level of multi-sensory experiences the customer expects clearly depends on the type of retail establishment. Data and analytics most certainly can drive personalization and curated assortments, yet the most critical component in the shopping journey is to remove friction and pain points that could lead to diminished customer loyalty or, ultimately, losing the customer to another brand.

The new and innovative showroom-like hybrid retail model works extremely well, as it’s fully integrated with mobile and desktop apps and profiles. They have one view and perspective of the customer which really resonates, as the showroom serves as the testing ground, experience-first focus, and the “guides” serve as the closers — so to speak — to help drive the conversion and cultivate long-standing relationships.

Yet this entertainment-first model doesn’t have to be applied to the entire retail industry. This would not work, and is not a critical component with a commodity, basics-like business. In this scenario, data and analytics can effectively drive inventory optimization across channels which will enable a more seamless customer experience.

Mohamed Amer
BrainTrust

As a society we are going through a major trend wherein “experiences” are increasingly more valued than material possessions. When you can connect emotionally to a physical product and wrap it in a personalized experience, then you’ve done three things: differentiated yourself from the competition, desensitized the price lever and validated your customer’s decision to make you part of her life.

It’s a false dichotomy that forces you to decide between data analytics OR experience. Consumers value uniqueness, exclusivity and personalization. Creating excitement in a store environment separates you from online-only competitors. On the other hand, advanced analytics are a must for retailers to engage consumers with relevant, personalized and insightful context-aware communication across devices and channels. This type of personalization is key to having your customer self-identify with your store and brands.

Ian Percy
BrainTrust
Apparently I don’t want an interesting and engaging experience when I go retail shopping. What I really want is for that retailer to “have a deep understanding” of me. Do I have that right? You know, I’ve come out of a lot of shops being impressed with the range of inventory and how informed and helpful a salesperson was or what a good deal I got. But I’ve never come away thinking “Boy, did they ever have a deep understanding of what my life is all about.” Are most retailers risk adverse and set in their ways? Duh. That’s about the only comment I’d give a nod to. Professor Fader says you can’t “wow” everyone en masse, though that is exactly what Big Data efforts try to do. “Individuality” in the Big Data world is a myth. So how, exactly, is a store going to show a deep understanding of my needs? The local Hyundai dealer is having a “Big Tent” promotion with balloons, special t-shirts and lots of fan fare. I dropped in to see my next car, the Genesis 80. $52,000! I looked over the car. Sat in it. Took one of the expensive brochures and left without… Read more »
Bob Phibbs
BrainTrust

As always Ian, you are spot on!

Tony Orlando
BrainTrust

Ian, as always you provide some real common sense and, as an independent, I feel like the ACE Hardware of the supermarket business. Giving all the personal touches and world-class homemade food samples makes a huge difference to our core customers. Big Data means nothing to me. If you want to understand what a customer is thinking, how about you engage in a simple conversation? You’ll find all the data you need.

Selling online is different, and if I am to stay around in this business I must keep doing what I’ve been doing for years, which is focusing on the way we treat our customers. They will always buy from me when I can have that simple conversation. Walmart or any other big chain will never match that experience. Pretty simple, and yet the most effective selling tool in history.

Ian Percy
BrainTrust

I don’t know anyone who understands this better than you, Tony!

Dave Bruno
BrainTrust

Experiences are indeed the future of the store. However, we must avoid experience innovation for innovation’s sake. We must seek to develop experiences that move the customer toward marketing’s “Holy Trinity” of mind share, advocacy and conversions. The professor answered this question himself when he stated, ” … a better strategy for retailers is to focus on data and analytics: to understand their customers’ lifetime value and find ways to make the in-store experience better for individuals who are more valuable to the business.”

Ralph Jacobson
BrainTrust

In-store staff responsiveness is one of the last differentiators for retailers. When shoppers need help, staff should be 1.) Aware of this need, 2.) Trained to respond to this need and 3.) Able to follow up with the shopper for any subsequent needs.

If the shopper just wants to grab and go with a couple products, the store staff also needs to recognize this and ensure the checkout process is unencumbered. This all sounds simple, however this is rarely achieved consistently.

Ian Percy
BrainTrust

On the mark Ralph. You said it much more succinctly than I did.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Analytics that lead to actionable insights matter, in particular as a means to identify problems and opportunities. Analytics allow retailers to focus on the customer experience, streamline processing, improve the value of engagement and make the retail location more attractive. Some experiences such as inventory visibility, wayfinding to product, product features/benefits and access to promotions deserve to be commoditized and a part of every retail location. But every retailer and brand can bring experiences toward better engagement that distinguishes the visit. Data informs — experiences engage.

Doug Garnett
BrainTrust

His critique of the “experience” theory is excellent. However, I was disappointed that his recommendation to replace it was tactical and not strategic.

We need to stay focused on the critical issue: People need to WANT to shop at your store — for whatever reasons are important in your category and your role in their lives.

In general that means a good array of basic product you need, making products easy to find, having some surprises (deals, interesting new products), a good experience with the store layout, displays and the right interaction with your store help (not invasive, but helpful when needed, etc).

Data and customer value are critical — but only when they enhance or come through the fundamentals. In and of itself, data analysis will not make retail succeed. Shopper satisfaction comes from product (the right mix), price (the right strategy) and people (those who staff your store).

Richard J. George, Ph.D.
BrainTrust

I tend to agree with the Wharton findings. The noted consideration is a sustainable differential advantage. Grocery stores have an opportunity to positively differentiate themselves from the online competitors by being the best in the following areas: fresh, local and customer intimacy.

Michael La Kier
BrainTrust

There is no silver bullet to fixing retail. That is such a generic overstatement given the size of the industry and different types of offerings. I agree with Dr. Fader to question the ultimate payoff of experiences — asking about ROI is critical for all retail initiatives. It should not be about “Shiny Object Syndrome” but about understanding YOUR customer and what motivates them to buy, then going after that.

Dan Raftery
BrainTrust

Ralph Jacobson and Ian Percy hit it. In-store experiences that are appropriate for grocers deliver efficiency, not entertainment.

Joan Treistman
BrainTrust

Call me old-fashioned, but numbers alone are not the answer. A good store experience is one where customers are glad they are in the store and don’t hesitate to come back. What does it take to make that happen? Well, find out where shoppers are glad and where they’re not, where it matters and where it doesn’t.

Yes the answers can be in the data, but the kind you gather from speaking with customers and non-customers, not from previous transactions alone. It’s a blending of what information you have and what you still need to get the understanding that contributes to effective strategy and tactics.

Yes in some cases, like the quick in-and-out purchase, it seems unlikely that the “store experience” matters … unless the experience focuses on helping the shopper get in and out quickly.

Tom Dougherty
BrainTrust

I so agree with this article that I am at a loss for words. Retailers don’t want to see the writing on the wall and won’t transition to a different model. Sears should have become Amazon. The catalog was an ancient form of online sales. But they never understood what they had permission to be.

Is the savior analytics? Numbers won’t point the way out of this whirlpool of a drain. It’s time to invent something new. The opportunity to reinvent is fast slipping away. Ask Macy’s.

James Tenser
BrainTrust

To gain the most from this discussion, we need to distinguish between contrived store “experiences” (like digital mirrors or glasses of champagne) and the “shopping experience” (where things happen as they should according to the purchase objective).

Finding the desired items available for sale is a positive shopping experience. Waiting a minimal time to check out is a positive shopping experience. Visiting a clean restroom, when needed, is a positive shopping experience. Assistance from a capable, knowledgeable, pleasant sales associate is a positive shopping experience. You probably get my point by now.

Many of these experience wins are derived from highly competent systems, practices, and people. Many are enabled by excellent data management tools. Having the right items consistently available for sale begins with data management, for example.

Prof. Fader is spot-on when he calls out some unique experiences as wallpaper over a cracked facade (my words, not his). I’m not sure that advanced analytics represent the only alternative, but I do believe retailers must deliver great shopping experiences by mastering the fundamentals.

Scott Magids
BrainTrust
25 days 23 hours ago

It’s not an either-or scenario. Those unique in-store experiences are driven by data analytics and a better understanding of what the customer really wants and what drives their purchasing. Whether that sale is made online or in-store is less relevant that understanding the real motivators behind what makes customers buy.

Professor Fader is right in saying that the idea is to treat shoppers differently rather than attempting to “wow” everyone as a group, and that’s where the analytics come in. Good analytics doesn’t just provide basic demographics about large groups, its true value comes in identifying emotional motivators of shoppers at a more granular level. The uniquely powerful in-store experience being delivered with smart shelf technology for example, doesn’t just recognize a demographic, it recognizes each individual customer as they come into the store, and makes recommendations based on the motivators that drive each individual shopper.

Cynthia Holcomb
BrainTrust

Best in-store experience? Simple! A customer walks out with a product they love and are very excited to have found. How to do this? Merge customer purchase history with technology to spit out in-store individualized preference based product recommendations. Singing and dancing will not make a customer happy. Get the customer what they want. And of course, be true to the tenets of your brand.

Jeff Hall
BrainTrust

We believe the in-store experience remains an opportunity of differentiation for many types of retail brands — specialty, luxury, niche, etc. Customer intelligence via data and analytics should be recognized as one increasingly important layer toward delivering a positive, memorable or even emotionally-engaged experience, however the data piece is just that — one piece of an overall strategy and vision.

Being intentional in creating the in-store experience is also important, by ensuring store associates are equipped with the proper training, resources and engagement capacity to acknowledge, relate to, assist and thank customers based on each customer need state — essentially personalizing the experience by customer through a framework associates can understand.

Ken Morris
BrainTrust
The store is not dead and the customer experience matters! Consumers love the theater of shopping and that is why pure-play online retailers are starting to open brick and mortar stores. While the in-store experience is not as important for commodity products, it is extremely important and relevant for apparel and other products consumers want to touch, feel, demo or try on. Providing the same experience for all customers is not a differentiator. However, personalizing the experience based on analytics and “customer context” to create a unique, personalized experience for each customer is a differentiator. BRP defines customer context as “the interrelated factors of customer insights and environmental conditions that make the shopping experience relevant.” With advances in technology (networks, WiFi, mobile, NFC, Beacons, etc.) retailers have the ability to access more customer information than ever before and in real-time. Retailers have the ability to know what a customer has in her closet, what she previously purchased, what she browsed on the Web site and abandoned in her online cart, when she is near your store and even exactly what she is browsing and where within the store. In addition to customer insights, customer context considers environmental conditions such as… Read more »
Craig Sundstrom
Guest

I don’t see why this is being presented as an “either/or.” I would think the one (analytics) would lead to the other.

Jett McCandless
BrainTrust

The importance of the customer experience is equally important in brick and mortar retail and eCommerce. If a customer has a bad experience, they’re far less likely to return to your services. Data analytics is vitally important to figuring out the finer points of the customer experience, so they’re not mutually exclusive by any means.

Unique experiences might be fun, but they’re terribly difficult to execute in a flattering way. Some attempts at providing a unique experience can be off-putting or come across as desperate. The real value lies in closing the retail loop that gets customers coming back again and again. These behaviors need to be tracked.

Marge Laney
BrainTrust
25 days 21 hours ago
I agree with Prof. Fader, to a point. Retailers need to know their customers and that means understanding why and how they shop their stores. And, they need the data that tells the story of how their customers shop their stores. I disagree that the sole focus should be high value customers. The low value customer today, could be the high value customer tomorrow if their experience meets their expectations. As he points out people shop to buy things and most want to get in and out as quickly as possible. A better focus would be to eliminate pain points that drive customers away or online. The fitting room is a great example. Make sure that the fitting room experience meets your customers expectation. I agree that magic mirrors and champagne are bells and whistles that retailers don’t need. What they do need is technology that helps associates run the fitting room efficiently, and provides real insight into their use. Retailers should implement technology solutions that solve problems and alleviate customer pain points, and use the data that these technologies generate to make changes and connect with customers in a meaningful way.
Jeff Miller
BrainTrust

Creating unique in-store experiences fits great for some retailers (Lululemon, REI, Sephora, etc.), but for vast majority it will not make the difference vs Amazon. Instead of “experiences” or events, retailers should focus investment (time and money) on hiring high quality people, training them properly and ongoing, and then paying them a wage with growth/learning opportunities in a great work environment to retain people who represent the brand. Apple stores are less about experiences and more about knowledgeable, helpful and efficient people they hire and keep.

Jennie Gilbert
Guest

Purchasing something is an emotional decision and I still believe that one (great) way to create positive emotional connections is through amazing experiences in a physical retail location. It’s not the only way to do so, but I think it would be a mistake to assume all purchases are strictly utilitarian and data driven. Many consumers want to enjoy the process of shopping for and purchasing something in addition to the actual product they end up with. I’ll buy my paper towels from Amazon Pantry, but when I’m spending the afternoon shopping for new clothes with my mom, I’d rather go to a beautiful store that lets us sip on champagne while we’re browsing. If your retail business’s goal is customer intimacy, the “wow” in-store experience is still essential. If your biggest strength is operational excellence than not so much — but this purely value driven space is, in my opinion, for the Walmarts of the world to play in and not a place for small retailers to aspire to anyway.

Jackie Breen
BrainTrust

The best in store experiences are the ones that provide a seamless shopping experience between online and store. If retailers take the time to dig into their data and really understand their customer’s behavior, they will likely see this to be the case. While unique in-store experiences can create hype and buzz, ultimately, understanding the customer and tailoring experiences to focus on customer satisfaction will result in the highest return on investment.

Cate Trotter
BrainTrust
I don’t think in-store experience is limited to just “wow” moments or developments like magic mirrors. It’s what it says on the tin — the experience in the store. You can have a great in-store experience that just helps customers find what they want, pay and leave quickly. Data and analytics can certainly help with that. If we look at Nike’s fantastic New York flagship, the space caters for all sorts of customers — you can just walk in and buy some trainers and leave. Or if you’re someone who is really into the brand or your training then you can engage with the treadmills or the basketball course and the data tracking and really find the best product for you and understand your performance. Both are valid in-store experiences, but it’s about catering for both types of shoppers. I also see a lot of in-store experience improvements benefiting all customers such as mobile payment points to reduce queuing. Even if you’re just buying some socks you still don’t want to spend time in a queue. I absolutely believe the in-store experience is of utmost importance, but what that means in practice depends on the retailer and their customer. With… Read more »
wpDiscuz
Braintrust
"Some categories will benefit from the in-store experience. Other categories will be the domain of the online retailer."
"I so agree with this article that I am at a loss for words."
"Whether that sale is made online or in-store is less relevant that understanding the real motivators behind what makes customers buy."

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