Will 2017 be the year retailers start making their stores relevant again?

Discussion
Photo: RetailWire
Jan 12, 2017
Nikki Baird

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

Normally at this time of year I’m thinking futuristic things. What will be the cool and exciting things that will happen in the year to come? When it comes to retail, I want to see the future of shopping — all the glory of fully-realized virtual reality and sensors and algorithms that sense and respond to my every need — before I even realize I need it.

But we’ve got a long way to go to get there, and the store is not just a yellow light on the warning panel, it’s starting to turn over to red.

Here’s how the conversation usually goes.

Retailer: My stores are in trouble. We need to do something to make them healthy again.

Me: Your stores are obsolete. The shopping process you built your stores to serve no longer exists except as an exception, rather than a rule.

Retailer: Well, I can only afford to make incremental changes in stores. So what kind of technology can I buy that will make my stores suddenly relevant again?

Me: One technology investment is not enough, and it won’t make any difference if you don’t understand how that investment is supposed to help stores reshape the store experience.

The store as it is designed today increasingly plays a smaller and smaller role in the shopper journey. One technology investment, one training video is not going to change that underlying reality.

I see more and more retailers recognizing this fundamental gap between what stores are and what they need to be. I think 2017 will be the year of that tipping point — when more retailers acknowledge that stores as they exist today will not be the physical selling assets of tomorrow, and they cannot be made into that selling asset of tomorrow with merely cosmetic changes.

This is a dangerous time for store-based retail. As I’ve said before, stores won’t die. I am positive that there are retailers who will figure out the future of the store, but that future store will look only in some ways like it does today.

DISCUSSION QUESTIONS: Do you see that retailers are recognizing the degree of change and investment necessary to support shifts in the shopper journey? Do you largely agree that incremental investments won’t be enough to keep stores relevant in coming years?

Braintrust
"The shopper experience is completely changing and the retailers who don’t keep up with consumer expectations will have tough times ahead."
"Armed with cool and useful technology, the consumer is demanding the ease, transparency and immediacy..."
"Retail relevancy starts and ends with brand leaders understanding the role physical stores now play within the entire omnichannel shopper journey."

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30 Comments on "Will 2017 be the year retailers start making their stores relevant again?"

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Ken Lonyai
BrainTrust

It would be nice to think retailers are finally awake and focused on store transformations but, as an industry, I don’t see it. There’s always the normal distribution of those way ahead of the curve and those seriously behind. In retail the curve is bloated in the middle, where most just go with the flow. Going with the flow is a dangerous place to be now more than ever, but I do not believe a majority of retailers recognize that enough to change. Unfortunately, it will probably take more rude awakenings in the form of retail failures and e-commerce advances before those that can make a change will finally do so.

Sterling Hawkins
BrainTrust

There’s a difference between knowing there needs to be a change and knowing how to accomplish it. I’m seeing something similar to Nikki: retailers are really starting to understand that fundamental changes are necessary for their business. The sticking point shifts to a decision-making paralysis about what that change actually is.

Dick Seesel
BrainTrust
There are two key “relevance” issues, especially pertaining to traditional department stores: First, are retailers using all of the technological tools at their disposal to enhance their brands? Are they leveraging today’s tools (mobile payment, RFID and so forth) to improve customer service or simply to cut costs? And how has omnichannel (especially BOPIS) actually eroded the shopping experience? There is very little difference between shopping at Macy’s or Dillard’s today compared to 30 years ago other than UPC scanning and more sophisticated POS terminals. Second — and it always comes down to this — is merchandise content. I’ve shopped a lot of traditional department stores over the last few weeks, and I’m struck by how much inventory and square footage continues to be devoted to dressy career apparel for men and women. This may be the retailers’ sweet spot (as they see it), but the lack of adaptation to change is concerning. Do these stores not recognize that Boomers are retiring — and leaving the workforce — in droves? Do they not see that most Millennials are working in more casual environments and are shopping elsewhere for their wardrobe needs? (Add to this the slow reaction to the movement… Read more »
Dave Wendland
BrainTrust

During 2016 I found myself referring to tired retail formats as “establishment operations.” And although some are beginning to transform the shopper experience and their environments to meet demands of the new market, there are many that are stymied and face a serious decline in relevance.

It is my belief that incremental or iterative change will not boost a traditional retailer’s market position. Instead, transformative and breakthrough innovation is necessary. Some retailers are searching for the one silver bullet that will bolster their operation. Simply put, it doesn’t exist. An outside-in perspective needs to be brought to these tired operations (many cannot see the necessary changes while viewing the operation inside-out) and a willingness to embrace the required changes is mandatory. Investments will be hefty … but the alternative is most likely unsustainable.

Ben Zifkin
BrainTrust
5 months 15 days ago

You can generally break retailers down into three categories. There are those that change to be innovative and opportunistic. There are those that change because they are scared. Then there are those that have no clue that they need to be opportunistic or scared. The first group is usually a small percentage. A little more for the second group but the third is usually the majority. As we head into 2017, I am optimistic that more retailers will acknowledge the new world and are willing to embrace change.

There has been a lot of investment into the retail experience over the last few years but, historically, they have been “innovation projects.” I expect retailers to take the lessons learned from these projects and operationlize them as part of core business this year.

Jasmine Glasheen
Guest
Jasmine Glasheen
5 months 15 days ago

Retailers that can afford it are already utilizing the key components of future retail:

  • Information Sharing: Information is a commodity, and offering consumers the opportunity to educate themselves is the quickest way to get people in store.
  • Transience: Pop-up shops are popular because their impermanence generates excitement.
  • Specialty: Consumers would rather make a purchase from a retailer whose main focus is a specific item. It’s insurance against the ambivalence of the modern sales associate. Who wouldn’t rather work with an expert?
  • Entertainment: A store may offer anything from a glimpse into the future with new technology to a must-see in-store display. Customers will leave their homes for the experience.
Lyle Bunn (Ph.D. Hon)
BrainTrust

Absolutely. The discovery and gratification provided by physical stores has a fundamental appeal to the brain, and the feet follow. But for the wallet to follow, the experience must provide value as an element of product price. Integrating the offline (i.e., store) and online interactions toward a growing relationship is the critical success factor in 2017. Where online information entices, the tactile, physical dimensions of in-store are influential. Each step in the path to purchase must provide assurance and motivation as clarity in the benefits of product use result in transactions upon which a growing relationship develops.

Meaghan Brophy
BrainTrust

Yes, I agree that incremental investments are not enough to keep up. The retailers that realize the importance of embracing change and that you need to spend money to make money are the ones that will be successful in the coming years. The shopper experience is completely changing and the retailers who don’t keep up with consumer expectations will have tough times ahead.

Mark Ryski
BrainTrust

I completely agree with Nikki’s assessment. I have had many retail executives tell me that they’re interested in building the “store of the future” or want to “future proof” their stores, but when I press them on what that actually means, most can’t articulate it. There seems to be a misconception among some retailers that technology is a panacea or that they can algorithm their way to success, but I don’t think that’s a realistic expectation. Technology is a powerful enabler, but it’s value is only fully realized if it’s executed on a solid retail business foundation. That’s the problem. Lots of retailers are struggling with creating a solid foundation — if you can’t deliver the basics, technology won’t save you.

Cathy Hotka
BrainTrust

Amen, sister. If retailers keep rearranging the deck chairs, they’ll miss the obvious opportunities to gut the status quo and transform to meet customer expectations. And while they’re at it, they need to boost IT spend by more than the 2 percent they’re planning on.

Tom Dougherty
BrainTrust

No. Retailers are the blind leading the blind. They are not interested in new ideas and new approaches. They want experts to tell them how to salvage the sinking ship. Well, they are about to go down with the ship.

Woody Allen once described his experience being robbed:

“Your money or your life,” the thief said. Woody answered … “Take my life. I NEED my money.”

Lyle Bunn (Ph.D. Hon)
BrainTrust

Budget realignments including purging and investment at the strategic, tactical and operational levels have proven difficult for retailers. The inertia for change against a status quo has been slow to emerge. But survival instincts will make retailers courageous and their marshaling of data assets, along with the realization that the needed tools and services exist to fuel their success through improved customer experiences, will prevail. Call me an optimist, but putting resources behind priorities is the only path to success.

Tom Redd
Guest

Investments help, but marketing can be a more powerful way to control the minds of the Millennials and Generation Zers and Boomers — us Boomers like good marketing. This store/online/closings set of topics has almost reached the end of its life — so a few last “totally amazing” pushes are coming — like VR/AR/robots and then it will drift off to dust like big data scanners did in the past.

Incremental tech moves and marketing are a mix of tools that can drive store awareness and loyalty. Our favorite furniture store has no amazing technology, but they are heavy on brand and make a super product. There’s not much technology they need in their stores to attract more shoppers — they are swamped across the .U.S. So keep in mind that marketing is still a huge tool that if used right — with select technology — can totally change the performance of any business. It is just that it only gained respect a few years ago — marketers used to be just the people that did ads and junk … Marketers OWN THE MIND! See you at NRF, with us marketers trying to OWN YOUR MIND.

Bob Phibbs
BrainTrust

The killer app of 2017 is still going to be service. If you want to make stores into warehouses where bots deliver up “personalized” recommendations, you’re going to be in worse trouble. People are still out there shopping — they just aren’t interested in dealing with Bitter Betty or self-service.

Ken Lonyai
BrainTrust

Not that I disagree with your point on service, but, if you go by the Astound Commerce survey cited in Bloomberg, 55 percent of consumers would rather interact with technology in-store than a sales associate and 41 percent don’t want to interact at all. The overlap is that they say 69 percent believe positive associate interactions are important.

Bob Phibbs
BrainTrust

Astound is “an e-commerce solutions provider,” I’m not surprised by their findings. In the end a retailer — any retailer — cannot survive being a pickup place for things customers already know they want. It takes displays and stores and trained people.

Brian Kelly
Guest
5 months 15 days ago

I’d like to see the questionnaire that drove that data. Hiring, compensation and training associates remain the hurdles to delivering service that exceeds expectations. When service is at that level, technology becomes less important. Of course, the balance of the selling model requires updating to ensure shopper relevance.

Jeff Sward
Guest

I’d like to build on Mark Ryski’s comment. As I walk the mall, how many “solid retail business foundations” do I see? Not many. The answer for many retailers is not “buying technology.” In fact, thinking that they are executing a solution might only exacerbate their problems. Technology and omnichannel do not in and of themselves bestow focus and discipline on the business. The clarity of the brand promise has to come before technology and omnichannel, not as a result of technology and omnichannel. Stores absolutely have to change and evolve to meet the consumer’s changing shopping habits. But problems, solutions and opportunities need to be succinctly identified and prioritized to avoid creating an even more confusing and frustrating shopping experience.

Mohamed Amer
BrainTrust
There’s a definite realization emerging by many retail C-suites that what had worked in the past is not working as well now and may not work at all in the future. How does one break out of the existing paradigm? The real problem is the old herd mentality. A false sense of comfort and security permeates the herd as long as everyone is doing similar things and moving along in the same general direction and at the same pace. There’s perceived safety in numbers but with danger (change) lurking behind each tree and over the hill, such safety is illusory. The fly in the ointment is the new consumer. Armed with cool and useful technology, the consumer is demanding the ease, transparency and immediacy that they enjoy on their smartphones to spread to how they buy, explore, discover, compare, shop for, share and use products and services. Amazon — by sheer luck or design — has timed their investments and offerings well for this new consumer. Stalwarts such as Walmart are adjusting to the tectonic shift in consumer behavior. Viewed by size or impact, we have two players — Amazon and Walmart — that are defining the future of retailing… Read more »
Ori Marom
Guest

The real tragedy in the story of the decline of physical retail is that it is highly avoidable. Easily avoidable.

Let me break the problem down here. Online retailers have brought about a situation in which no money can be made by making sales, be it either online of offline sales. Physical stores have insisted on making sales for a living. Thus they are actively bringing about their demise.

Do physical stores HAVE to make sales for a living? No. They do not. Their competitive advantage lies in selling SERVICES. Do physical stores charge substantial fees for providing services to brands, online competitors and consumers? No. They do not.

It is time for retailers to perfect the marketplace model and create a new type of coalition with their suppliers, who suffer greatly along with them. The solution is simple and unique. There is no other. Yet retailers must show both courage and an open mind.

Adrien Nussenbaum
BrainTrust

Stores are still a massive channel in retail. One of the keys will be to meet customer expectations across channels, both off-line and online. What customers will want — at heart — is the right array of choice, delivered conveniently and at a fair price. The shopping experience needs to be smooth and without frustration. If a customer wants to buy online and pickup in-store, that needs to be possible. The same goes for the customer who wants to buy in the store from a kiosk should the item not be in-stock at the store. Retailers need to think beyond just a one-channel experience and think about the whole shopping experience, in whatever permutation that may exist.

Ralph Jacobson
BrainTrust

Good perspective, Nikki. I agree that the vast majority of stores aren’t all that different looking than those of many decades ago. The innovators in store design are a small portion of the total sum of stores, so few shoppers actually see any innovations — with very few exceptions.

Investments, however, should also be made behind the scenes, invisible to shoppers. If you look at some new machine learning/cognitive capabilities available today, you will see how to better merchandise your stores and remain in-stock without being overstocked. And that can definitely be done with only a couple technology investments and not having to “rip and replace” all of your systems.

Jeff Hall
BrainTrust

Retail relevancy starts and ends with brand leaders understanding the role physical stores now play within the entire omnichannel shopper journey. Relevancy today requires an absolute focus having a clearly defined and articulated brand promise, having an intimate understanding of who your customers are (including how they prefer to shop and what is important to them) and effectively aligning the entire organization around delivering a consistent, intentional and seamless shopping experience across every channel and touchpoint. The physical store has an important role to fulfill, so long as it is viewed within the context of the entire journey and related brand channels.

Lauri Chertok
Guest
5 months 15 days ago

Where have all the knowledgable, well trained sales people gone? Are there any sales people left who do more than ring in the sales at the register?

Training them on how to fit the garments to the correct size is no longer an option for the customer experience. Stores need to train their sales people so that they can seal the perfect deal and leave the customer wanting to return over and over again!

Lee Peterson
BrainTrust

I’d say the stores of the ’80s and ’90s are over, but not smaller, curated stores with great service. That’s a comeback story for the ages. It’s the idea of “stack it high and let it fly” out of big warehouses that no longer resonates. After all, that’s what Amazon is, only you don’t have to go anywhere.

Many retailers understand all of the above, but with existing conditions what they are, that’s almost an impossible transition. And therein lies the challenge before us: what to do with all that retail space that customers are increasingly not going to.

We think there’s a need to evolve existing retail to become two things: 1) a fulfillment center — where you pick up your orders or they get shipped to your house within hours and 2) a playground — where you interact with product, knowledgeable associates and a cup of coffee in a great environment.

But boy, as the article points out, do we have a long way to go.

Martin Mehalchin
BrainTrust

I’m still seeing a lot of incrementalism and in the worst cases complete inability to make decisions. The key to reinventing your store experience is to really understand your consumer and be honest about your brand. A few brands have the assets and consumer love that allows them to pull off a “surprise and delight,” flagship store as entertainment destination strategy. The rest should focus on making stores a relevant component of a near effortless overall shopping experience.

There are a few lighthouse examples (Nike Soho, Amazon Go, Rent the Runway, Kit and Ace) pointing the way toward what the future role of the store could be. It’s past time for the rest of retail to figure out the formula that’s uniquely suited for each brand and it’s consumers.

Thomas Becker
Guest
5 months 15 days ago

It occurs to me that retailers on the high and low end of the price/experience spectrum are doing well in several channels. For example, Whole Foods, several small regional natural food chains, & Wegman’s on the high end of grocery with Aldi and Walmart on the lower end. Similarly there are several upstart high-end pet stores that are doing well.

It seems like the traditional mid-tier retailers (A&P, Supervalue, for example) are having customers siphoned off on both fronts. As consumers find alternatives, some of the traditional stores may benefit from redefining themselves to give their consumers a reason to stay with them.

Vahe Katros
BrainTrust
“Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.” Samuel Johnson Retailing does not promise immortality, far from it, but for many of our friends who’ve helped us advisors pay the rent for so long, what can we do to help them survive to fight another day/cycle? Here’s an idea. I propose that RetailWire organize the Great Debate of 2017. We may not come up with the answers, but it will focus the discussions around RSR’s/Nikki’s prescient point, namely: How do we survive. So what are we debating? a. The status quo doesn’t need structural change, it just needs to refocus its approach. (We need to make marketing job one.) b. The status quo is broken, but it can be fixed incrementally (New tech, new services, etc.) c. The status quo has flaws that cannot be addressed, without altering inherent defects that can only be changed by revolutionary thinking. (Retailers need to be showrooms leasing space and facilitating stores within the store — VMI taken to the extreme … I don’t know.) Each debate group, in presenting their arguments must also provide a roadmap which will inevitably lead… Read more »
Kenneth Leung
BrainTrust

I think 2017 is where retailers have to reboot their store design or keep having to reduce store footprint. Adding tech into the store will not solve the problem until retailers figure out for their target audience to use the store and redesign the people flow, merchandising, and assortment properly. Whether it is dedicated area for web pickup or just having the right things at the right time, it is possible to crack the code.

The issue is retailers have to reset the traditional metrics that drive store design, like amount of merchandise per square foot, how the checkout works, and how the staff is positioned with the shoppers to make it work.

William Passodelis
Guest
4 months 30 days ago
I agree with Mr. Phibbs — service and in-store experience will do more than anything else at improving the bottom line. People don’t want to interact with store associates because generally, service is awful. I am sorry, but I usually know more about the merchandise than the person working on the floor and often, that person does not care! There is nothing you can do about that because we have devalued sales associates to simply be cashiers and we don’t pay them anything near enough to make them give a darn, and we don’t train them, because price is king and everyone is trying to maintain a profit to keep the store open! This environment is the result of the last 25 years. I do not know if you can fix that. I don’t think so, not easily. That is why people would prefer to have no interaction, or interaction with technology instead of a salesperson. And if there is not going to be any service –which MAY be the answer for some retailers — then it has to be easy. I think the problem is, we are getting to the point where we are going to have “price” and… Read more »
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Braintrust
"The shopper experience is completely changing and the retailers who don’t keep up with consumer expectations will have tough times ahead."
"Armed with cool and useful technology, the consumer is demanding the ease, transparency and immediacy..."
"Retail relevancy starts and ends with brand leaders understanding the role physical stores now play within the entire omnichannel shopper journey."

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