Can in-store experiences save retail?

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Jul 26, 2017
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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?

Please practice The RetailWire Golden Rule when submitting your comments.
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
Guest

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
Guest

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
Guest

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… Read more »
Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
3 years 7 months ago

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… Read more »
Bob Phibbs
BrainTrust

As always Ian, you are spot on!

Tony Orlando
Guest

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)
Guest

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
Doug Garnett
President, Protonik
3 years 7 months ago

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).