The rebirth of the shop floor

Alongside the boom in e-commerce, there has been a return to the shop floor, replete with scan and buy and augmented reality changing rooms. Georgina Lavers reports

When Angela Ahrendts, the former CEO of Burberry, was poached by Apple to become Senior Vice President of its retail and online stores, there was a murmur of confusion from retail analysts.

With a background in women’s fashion, Ahrendts was primarily known for her savvy in redefining luxury for a modern-day audience. Responsible for the aesthetic behind Burberry’s stores, she helped to limit the counterfeiting so commonly associated with Burberry, seeking to position it as a strong heritage brand. During her tenure, Ahrendts helped the company grow from £2bn to £5bn, but still remained a surprising choice as one of Apple’s key management team, historically considered the domain of computer whizzes.

But her hiring was indicative of a renewed appreciation for the physical retail store, which had been predicted to die with the onslaught of online shopping. It was 2013 when venture capitalist Marc Andreessen famously proclaimed: “Retail guys are going to go out of business and ecommerce will become the place everyone buys.”

For a while, it seemed as though the Silicon Valley entrepreneur was right. A Morgan Stanley report from that same year claimed that retail sales disruption was a global trend that would accelerate over the following four years, predicting global ecommerce sales would top US$1tn by 2016. Online sales of books and consumer electronics proliferated, but even the lowest-achieving categories of groceries and grooming products still recorded significant penetration, with their online purchase recorded at 22 per cent and 28 per cent, respectively.

Globally, high streets and malls suffered. The malls thrown up so furiously in the US shouldered the worst of the decline, with Green Street Advisors, a property and real estate investment trust analytics firm, estimating that 15 per cent of US malls will fail or be converted into non-retail space within the next decade.

Almost inevitably a physical presence is required to help build a brand

Lee Manning, Restructuring services partner, Deloitte

More unwelcome statistics followed. Sears is a chain of US department stores founded in 1886, which used to be known as the place “Where America Shops”. The retail giant has closed 300 of its stores in the last five years. HMV, the UK purveyor of CDs and DVDs, went into administration in January 2013, with Neil Saunders, Managing Director of the research house Conlumino telling the Guardian at the time, “HMV’s business model has simply become increasingly irrelevant and unsustainable… it did not react early enough to the digital trend; it did not give shoppers a reason to keep buying from it.”

For a time, it seemed as if bricks-and-mortar stores would become a memorial of a generation past, like the fax or the Walkman, a relic romanticised by some, derided by most. But there has been a renewed spark in the communal shopping experience. Burberry was one of the first brands to nimbly integrate its online presence into its stores; items of clothing in its flagship store in London contained radio-frequency identification (RFID) microchips enabling customers to wear the microchipped clothing, while at the same time looking into a mirror that transforms into a screen showing how the garment would look on a catwalk.

“Burberry Regent Street brings our digital world to life in a physical space for the first time, where customers can experience every facet of the brand through immersive multimedia content, exactly as they do online,” Ahrendts said at the time. “Walking through the doors is just like walking into our website.”

Burberry was the first of many retailers to realise that consumers do not exist in neat demographics and neither do their purchasing decisions. The advent of smartphones and improved technologies means that customers can do their shopping on a bus, at the airport or in the comfort of their own homes. Habits have splintered; there is no one ideal time and place to shop, and customers can exist in both physical and digital worlds simultaneously.

“What is key for most retailers (certainly in the UK and most likely worldwide) is to achieve the right balance between physical stores and an online offering,” says Lee Manning, a restructuring services partner at Deloitte.

Combining them in a manner that meets the changing shopping habits of customers, he adds, is critical, and hence there is a keen focus on building the appropriate ‘omnichannel’ offering, uniting the two methods of product access to customers.

dubai boutique
Dubai has seen a flurry of independent boutiques spring up in recent years, with stores selling a curated lifestyle to the discerning customer

“This could be a combination of order online and collect in store or even using mobile devices to find products while shopping in store. Almost inevitably a physical presence is required to help build a brand, and while many retailers can operate with fewer but larger physical stores in key locations, others will always be seeking to expand their physical footprint and grow their business.”

Internet retailers are increasingly viewing an omnichannel offering with interest. One of the world’s biggest, China’s Alibaba Group, recently invested US$692m into Intime Retail, which operates 36 luxury department stores throughout mainland China.

Amazon, too, has jumped feetfirst into the physical aspect of its sales with the launch of Amazon Lockers – the company recently announced that UK customers would be able to collect packages from lockers placed in tube stations on their commute home.

Retailers are savvy to the fact that lag periods during transportation provide ideal windows of time in which to shop. In South Korea, the supermarket chain Tesco erected billboards designed to resemble supermarket shelves. Commuters could scan the QR codes that appear on each product from their phone and simply await the item’s delivery.

Worldwide, there is a similar interest in bricks-and-mortar that is increasingly focused around experiences, unique environments and customer service. Alia Korayem is the founder of the boutique WEST L.A., a Dubai-based clothing store. She says that she wanted WEST L.A. to reflect the laid-back style of Los Angeles, and to provide an environment where people could socialise rather than just shop.

Retail guys are going to go out of business and ecommerce will become the place everyone buys

Marc Andreessen in 2013

In her eyes, physical presence is vital, whether it be with a store, pop-ups or trunk shows. “Customers want to get the overall experience that at times is harder to translate online, particularly in this region. With physical presence, you offer customers the chance to interact, engage and really connect with your brand. They feel the product and really get the chance to understand your brand’s authenticity on another level.”

Trendspotting firm JWTIntelligence has predicted that bricks-and-mortar retail will increasingly serve as a ‘third space’ that is only partly about transactions, noting: “[It’s] just as much about experiences, unique environments and customer service. The hard sell is becoming less important than providing something more fun, helpful, satisfying or distinctive than ecommerce can offer.”

As tastes evolve, so too must shop floors. In a new era of data capture, where customers’ shopping activities can be gathered, analysed and rewarded in real-time, retailers can attract shopper attention through in-store augmentations.

The Audi dealership in London is one such example. Customers can customise their own Audi on digital displays that are then projected on to the large display wall, where Microsoft Kinect motion sensors allow angles to be changed just by hand gestures. And it is not just physical stores that are venturing into the digital domain. Fashion etailers such as Warby Parker, Bonobos and Frank & Oak have all opened up physical spaces in the last year.

Whether it be institutions implementing novel smartphone technology or etailers investigating trunk shows, the worlds of physical and digital are becoming increasingly blurred. In the coming years, retailers may find that it does not have to be an either-or situation: physical can sit with online as agreeable partners, each comple-menting each other and spurring on one another’s success in this new connected world.