Competitive pressures faced by today’s retailers have forced a reimagining of the store in order to appeal to more demanding consumers.
Working out which characteristics and approaches are likely to create winning formats is a challenge for retailers of all types as they seek the holy grail – the model that caters best for consumers as expectations and shopping habits change.
A study conducted by Retail Week’s sister business Edge by Ascential, Store of the future 2.0, has identified four key areas of focus that can make a difference – an experiential slant, a frictionless customer journey, curation and a social element.
Edge by Ascential’s Ioli Macridi, who led the research, says the four core categorisations were chosen based on analysis of the issues shoppers care about when visiting a store and the main reasons they would choose a particular shop.
French giant Carrefour came out top after innovating in all four areas.
Carrefour’s success was driven by factors such as its extensive private-label offering, its willingness to work with partners such as electricals retail giant Fnac Darty to improve the in-store experience, the development of organic produce zones, the adoption of frictionless initiatives such as mobile payment and checkout-free options, and the use of stores to fulfil online orders.
“The importance of these [four core] characteristics vary based on the channel or the market,” says Macridi. “In general one characteristic we think everyone should be becoming an expert in is curation. If you do not have the trendiest, most exclusive, healthiest or eco-friendly products then slowly you will not be as popular.”
Experiential features drive excitement and footfall, stir product discovery and provide shopper education.
Creating such experiences is probably the hardest of the four core characteristics to get right but, when done successfully, it helps retailers differentiate themselves most from competitors.
While experiential elements can boost shopper traffic and inspiration, they are not suitable for every retail format. Big-box stores were among those that generated the best results in the benchmarking, while convenience and discount stores recorded the worst results.
Retailers have often struggled to build a sustainable strategy for experiential-led initiatives, primarily due to higher costs of implementation and a limited ability to measure return on investment.
Amazon is a notable example – it has chosen to shut its 87 US pop-up stores, including in Whole Foods and Kohl’s stores, to focus on expanding Amazon Go, Books and 4-star shops.
The pop-ups had an experiential focus in that they were designed to act as spaces where customers could try Amazon products and services such as Fire tablets, Echo smart speakers, and Prime Video.
Big retailers such as Carrefour and Walgreens have successfully integrated strong experiential elements into their stores.
At a Carrefour store in Belgium, shoppers can have different types of food items prepared live in-store, and participate in wine tastings. The highlight is an in-house micro-brewery located in the centre of the store.
Meanwhile, Walgreens has hosted a ‘house party’ to showcase how its wide assortment of private-label items can fit into a shopper’s home and everyday life.
The store of tomorrow should give the customer as frictionless a shopping experience as possible. Such experiences can be provided through technologies ranging from long-established click-and-collect functionality to the checkout-free stores made famous by Amazon Go.
Digital tools can be used by retailers to speed up and remove friction from payment and collection processes, as well as to provide product information and relevant recommendations.
The report found that frictionless tech can help balance omnichannel operations as well as optimise store economics.
Out of the major international retailers evaluated, Carrefour has implemented the highest number of checkout solutions and digital tools.
“A technology or initiative may look or seem very cool and helpful, but if the shopper does not actually adopt it and find it useful then it will never be successful”
Ioli Macridi, Edge by Ascential
The retailer has established a strong test and learn culture, from piloting biometric payment in partnership with Google to unveiling a checkout-free store with start-up Zaitt.
The Zaitt partnership includes a fully autonomous store in Brazil where shoppers can download the Zaitt payment app to add items to their virtual cart and check out, while there are cameras with sensors that monitor shopper behaviour.
Retailers are scrambling to provide as frictionless a shopping experience as possible, and there has been an explosion of scan-and-go-style technology.
Walmart’s Sam’s Club has filed a patent for an innovative scan-and-go system that can recognise products from any angle, not just the barcode.
However, there have been missteps in the past. Walmart discontinued its handheld scan-and-go tech following poor feedback and low customer adoption.
“A technology or initiative may look or seem very cool and helpful, but if the shopper does not actually adopt it and find it useful then it will never be successful,” says Macridi.
“The circumstances need to be perfect. The shopper needs to understand the technology and it needs to work. A lot of times the tech won’t work, and that can be extremely frustrating and put off the shopper from ever using it again.
“Sam’s Club has already rolled out a different solution that is powered by a mobile app and it does not need the handheld scanner device.”
Curation is perhaps the lowest-hanging fruit of all characteristics identified and allows strong differentiation possibilities. The analysis found retailers focused most on curation and it was the first area they tackle in-store.
Curation can include tailoring range by location to suit the needs of specific catchments, offering exclusive products, focusing on particular food categories such as fresh, and rolling out a private-label offering encompassing appropriate tiers and niches.
Tapping into an increasingly socially conscious consumer can also be an area of rich reward through targeting environmental and sustainable concerns, such as Iceland’s dropping of palm-oil products.
As shoppers always seek new trends and tastes, stores must constantly adapt their assortment and gain first-mover advantage.
Carrefour again scored highly in curation because of its strong focus on fresh produce, along with diversifying its assortment with imported products, and having a well-built-out range of private-label products that follow the latest shopper preferences.
Retailers should also be open to creating partnerships with brands to mine existing shopper data in order to predict upcoming product and changing trends.
Amazon is once again leading the way when it comes to using data to shape store formats. Its 4-star store uses data from shoppers’ online behaviour for hyper-localised curation of products in-store.
There has been much talk about the death of the high street and the impact that will have on local communities.
It should not be forgotten how vital a role the retail store can play in the community, and therefore a store of the future should have a strong focus on social aspects that help bind a community together. Such social initiatives also drive footfall and improve dwell time.
Positioning the store as a social hub can be challenging, particularly because younger shoppers are more prone to carry out quick and frequent trips.
Amazon-owned Whole Foods encourages community participation in fundraisers that involve customer interaction, such as by hosting yoga classes for a cause.
The retailer is also known for using its restaurant and bar spaces as social venues, such as food and wine tastings and game nights. These have proven particularly popular among its shopper base.
Lululemon is a prime example of a retailer that has truly tapped into a community. It has built community zones in its stores that include an area for yoga classes, healthy cafés and abundant seating.
However, retailers must consider carefully whether such social-focused initiatives support their core product.
The foray into restaurants by book retailer Barnes & Noble has flopped. The chair of the company recently said the bottom line was “awful” for Barnes & Noble Kitchen.
“We are seeing a lot of test and learn, but a lot of these initiatives don’t necessarily tie in with the rest of the general proposition of the retailer,” says Macridi. “A lot of them are disjointed, but they do offer valuable lessons.”
But while there may be challenges, and some initiatives will flop, stores created with these four key factors in mind should stand out in a competitive environment.