As retailers shift their focus towards creating unique experiences, stores are enjoying a renaissance. Not so long ago, it was common practice for brands with physical stores to extend their digital presence and compete online. Now, the reverse is true and pureplay digital brands are opening shops, pop-ups and showrooms: 850 are forecast to open in the US over the next five years.
A physical store presence is a continuation of the consumer’s digital journey, an extension of an on-screen, one-way relationship. The store has become a multi-dimensional, multi-sensory immersive brand experience: 33% of consumers have lingered in a store to finish listening to music they particularly liked. 84% of shoppers would pay $10 more for a pair of Nike trainers if they were in a scented room. Apple makes sure its laptops are angled at 76 degrees, which makes shoppers want to touch them.
The success of these experiential stores is hugely dependent on one factor: location. ‘Place’ has become more powerful than ever. I spend a lot of time listening to retailers share their experience in physical and digital retail, most recently at eTail Europe in London. Here are three ways retailers are generating successful store performance:
Customer journeys are hugely complex. For some retailers, especially those selling higher-value goods, buyers will look online then find a store. “We believe 25% of all in-store sales are influenced by digital journeys,” said Marc Dench, CFO for iconic British brand Joules, speaking at eTail Europe. Neil Langdon, from FeelUnique.com says, “We recognise our customers still enjoy the beauty counter experience so we do our best to replicate as much as we can in the digital channel”.
But the reverse is also true: physical stores in strong locations can drive an increase in ecommerce sales. Our own research found that 87% of ecommerce sales fall within 20 miles of a physical store. “Stores remain critical,” said Marc. “Now is the time to invest in physical locations. 50% of our business is online but we are digital-first. Everything we do in stores is with a digital mindset. When we look for new retail locations we look where local authorities are working to bring people into the town centre. We also look to see where we have a good ecommerce customer base. When we open a store, we often see a 5%-10% uplift on the ecommerce sales from that area”.
The industry talks a lot about data-driven retail, usually in the context of retailers extracting value from customer data. “Cash is king, but today, data is gold,” said Martin Preen from home fashion brand Buster & Punch at eTail Europe. But before you reach the ‘how do I collect it and what do I do with it?’ customer data stage, it’s highly likely that your use of data has already determined the outcome of your brand’s store success. In an ideal world, you’d have a team of planners, strategists and consultants, working with developers and local authorities to uncover your most promising locations. However, we all know this is a luxury not every retailer can afford. Successful retailers use data to provide them with the answers to questions they haven’t even thought of yet, while predictive analytics are as close as they can get to the ability to see into the future. This is the kind of data smart retailers have access to:
- Population demographics and data on income: where do customers and prospects live? Where do their highest-spending customers spend most of their time? Where are those customers most likely to spend with them in the future? What about those with highest disposable income?
- Data on issues which will impact their customer experience: Is it easy and affordable to park, or near public transport? How high is footfall, and at what times of the day – is the site located on popular commuter routes to and from a station, for example?
- Data on costs associated with their site’s location that could impact profitability: What are the current and projected rates, utility bills and estate costs?
- Data on risk: not just structural risk but, for example, is the property in an area prone to flooding? What about historic data: has there previously been any damage to the property? What are the local crime figures?
- Data on employment opportunities in the surrounding area: how are they going to staff the store? Will they have the right level of talent available to them locally to deliver against their customer experience goals?
- Data on their competition: how close is their site to a competitor’s? Is it too near another of their own sites?
- Historic data: details of the building’s previous commercial use, and why it’s no longer trading, could impact the likely success of their business. Knowing this could mitigate risk
- Data on the local area: are there any annual events which could impact their revenue - closing streets due to festivals or roadworks, for example? Are there new development plans which would increase the population in the area surrounding their store?
Simon Calvert from Bon Marché says, “You must have empathy with the customer. Empathy builds trust. Trust builds loyalty”. A physical store gives brands the opportunity to express their personality, their purpose, their culture and values. It also gives them the chance to interact with their customers, gain invaluable intelligence, build trust and generate an emotional connection. According to the Harvard Business Review, “Emotionally connected customers are more than twice as valuable as highly satisfied customers. These emotionally connected customers buy more of your products and services, visit you more often, exhibit less price sensitivity, pay more attention to your communications, follow your advice, and recommend you more”.
For retailers looking to deliver an amazing customer experience, whether online or offline or a mix of both, the ability to generate an emotional connection with consumers is critical- profitable, too. In fact, 68% of UK consumers in a study said they would be willing to spend more on a product if it was from a brand they love.
In a survey of 1,000 U.S. consumers, 65% said they had formed an emotional brand connection. Of these, 65% said this was because they felt like the brand cared about them; 55% because they felt as though the brand were making a positive difference in the world; and 45% felt like the brand understood them. Successful retailers are using their physical stores to say to their customers, “We know you, we understand you and we’re grateful to you.”