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Brick-and-mortar retailers are moving to smaller store formats

By Stuart Armstrong – ComQi

There’s no doubt that traditional retailing is facing many challenges these days, including e-commerce pressures, underperforming stores, and unwanted tenant leases.

To a certain extent, these are all tangible issues that retailers can wrestle to the mat and come up with workable strategies and tactics. But the most elusive issue, and you could argue the root cause to all those other maladies, is quickly changing consumer behaviors. Today’s consumers are just plain different from yesterday’s shoppers.

The convenience and growing sophistication of on-line has not only diverted sales to Amazon and others, but has seeped into the mindset of the shopper on what they expect in a physical store.

To address that, nimble, resourceful retailers are behaving like entrepreneurs and coming up with in-store designs and experiences that align with the expectations of today’s shopper. To them, it’s not a process guided by some notion of the “store of the future.” It’s led by the “shopper of the future” or, more accurately, today’s shopper.

One of the big outcomes of this mind-shift is a movement to smaller format stores.

The Proverbial Pendulum

Following the end of World War II and well into the 70’s, urban areas in the US, UK and Western Europe experienced a population migration from the cities into the suburbs.

A victim of this was the intercity retail storefront, which gave way to the suburban shopping mall. There were strip malls, and then large, enclosed malls, some of which were in excess of 800,000 sq ft.  Several mega malls encompassed well over 2,000,000 sq. ft.

A mall shopping culture prevailed, where kids hung out after school and families made a day of it on the weekends … dad and mom toting shopping bags, happy kids with balloons and an Orange Julius, food courts and movie theaters. THIS seemed like the future, a way of life that last forever.

Turns out it lasted for maybe a decade before the broad concept started to decay. There are exceptions, but many of these malls are now dead or dying – dinosaur concepts in the age of online shopping and same-day delivery.

Ironically, the malls that all but killed urban retail now have to compete with an urban shopping revival that is taking mall retailing back to the inner city, but still working out the right formula.

Smart Stores Paving the Way for Small

Can you image living in the suburbs in a 3,000 sq ft 3-bedroom home with a garage and then moving into a 900 sq ft city apartment with the plan to fit everything you had in your house into the apartment, and still have a happy existence?

Well, that is what a lot of retailers did as they moved into urban stores – trying to maintain the same level of inventory and sales process, hoping their shoppers would be happy.

But they were not, and shoppers started voting with their feet and their wallets.

The concept needed a fix, and what is underway now is a strong move toward the small but smart store.

A handful of iconic brands have really paved the way:

  • Apple (2001) stimulated ideas around community tables, interactive product information and mobile checkout.
  • Burberry (2012) with their use of RFID and data to trigger in-store content and social media.
  • Argos (2013) replacing shelved inventory with a digital-centric showcase store.
  • Rebecca Minkoff (2014) bringing interactive mirrors, RFID-triggered smart fitting rooms and digital alerts to sales associates.
  • And recently Amazon Go (2016) with “just walk out shopping.”

Not all of these examples focus on reducing the store footprint, but the technologies that are being proven out form the digital infrastructure for the small store to be smart.

Today’s Shopper Demands Convenience and Personal Relevance 

When we shop online, the site knows who we are, what we have bought in the past, what to recommend, how we have navigated through the site and how long it takes it takes us to make a decision.  It also serves up product information and reviews on demand.  If you trust the brand, then you are willing to exchange some of your privacy for the convenience and personal assistance you receive.

The in-store experience can deliver all that plus the ability to engage all your physical senses, in other words experience the physical product.

The shopper journey begins …

A contemporary retailer’s storefront is both virtual and physical.  Many shoppers start their journey on the web considering, researching and “Buy Online Pick Up in Store” (BOPIS) programs.  With the right technology underpinnings, the store (and its sales associates) can know when you walk into the store and link your online presence with your in-store experience.

Connecting those channels is a powerful way to significantly move toward a more convenient and personalized shopping experience.  ComQi works with many “Omnichannel” solutions.  One worth noting is from our partner, Velocity Worldwide and their product Darius.

Real-time data and physical integration …

Imagine a world where you walk into the store the sales associate receives a notice that you have arrived.  They are ready with the products you are interested in and recommendations that may result in up-selling or increasing your purchase.

Furthermore, using in-store sensors such as beacons, a shopper can have a personalized curated journey through the store and get pushed promotions and coupons based on their preferences and rewarding them for their loyalty.

Additionally you are met with in-store media displayed on digital signs.  Because the content management system (CMS) is integrated with real-time pricing (ePOS integration), inventory and other applicable data the messages are localized to that store and even down to the specific screen.  ComQi’s EnGage CMS has a library of APIs that allow for easy integration to a variety of data sets, this is a key requirement.

Two of the major innovators in this area are companies we work with closely.  Intel, with Intel Responsive Retail Sensor (Intel® RRS) to collect always-on inventory information in near-real time and  Quividi, a global leader in Video and Attention Analytics.

Touchscreen and Interactive Mirrors …

Product information served up on demand by your shoppers using touchscreen technology in a variety of sizes from tablet-sized screens worked into the merchandising display or shelf edge units.  Some of the most innovative use cases are where the screen is integrated into the fixture.

June20, another ComQi partner, has come up with an amazing “product builder” that shows how effective and cool this can be, check out the video.

Additionally, interactive technologies can greatly enhance key opportunity areas such as the fitting room or try-on stations such as eyeglasses, experiences that can only be gained by the shopper in store, so why not make the best of it.  It stands to reason that your opportunity to sell a product is greatly improved if you can get the customer to try it on.

Turn that mirror into an interactive smart surface that knows what garments you brought in, offers recommendations for similar products, allows you to change the lighting in the room, view different sizes and colors that are in stock, view items that our not in stock at that store, alert a sales associates to bring you over a different size, and perhaps to even transact and close out the sale.

Some retailers, are also finding playful ways to engage shoppers with their brand.  ComQi has been deploying customized designs of its Tap N’ Snap application that not only engages but feeds social media as well.

It is All Coming Together … and Just in Time

Call it Big Data or AI, the data and the machine intelligence algorithms is the fuel that will drive the future of retailing both on and off line.  PSFK in their recent The Future of Retail 2018 report calls it a “Living Database” or “Ambient Assistance” brought onto the retail sales floor and states it can be accomplished on a large scale in the very near future.

As many have stated, if a retailer does not have an implementation plan in this area and beginning to rethink the in-store shopper experience within the next couple of years, they’ll be on the path to failure.

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