Malls are lumbering, claustrophobic dinosaurs, while anchor stores like Macy's and Kohl's are shuttering hundreds of locations. Fresh Direct and Peapod make it easier and quicker to stock a cupboard than wading through the jam-packed neighborhood Kroger, and Amazon and eBay and Overstock sell, well, everything.
Who needs retail anymore?
In fact, 71 percent of U.S. consumers say they still prefer to buy from physical stores even if the same products are available online, according to a recent TimeTrade survey, which also found that 85 percent like to shop in stores because they say they want to "touch and feel" items before buying them.
Online shopping accounts for only about 9 percent of total consumer retail spending, according to the most recent quarterly figures from the U.S. Census Bureau. But make no mistake—everyone from retail behemoths to specialty boutiques is feeling the pressure to adapt more seamlessly to the digital world, to bring in that all-important foot traffic and to deliver an experience that consumers can get nowhere else.
That's a tall order at a time when the average head of household in the U.S. has cut his or her number of shopping destinations by 30 percent since 2010, WPP CEO Martin Sorrell said at the recent Shopper Marketing Summit in New York. The power is squarely in the hands of the consumer, and building brands has never been tougher, he noted.
High-tech bells and whistles (get ready for humanoid robots as sales associates) are only part of the equation, analysts say, and if retailers have their eye only on a consumer's wallet, they're more likely to falter. "Shoppers' most valuable asset isn't their dollars, it's their attention," says Christopher Brace, CEO at Syntegrate Consulting in New York. "Every move should be vetted against its ability to capture the shopper's attention. If it can't, then its relevancy significantly lessens."
Here, a look at the tactics, programs and concepts that retailers hope will do just that: endear them to mercurial, demanding shoppers who use their five senses as often as their smartphones when it comes to buying stuff.
Grocers go BOHO
There's no tattoo parlor, as had been rumored before the first 365 by Whole Foods Market opened recently in the Los Angeles hipster haven of Silver Lake. But there is a self-serve teaBOT that will brew a customized cup in 30 seconds, iPads for ordering to-go, a dog-hitching station out front, a coffee shop with beer and wine, organic fruit, responsibly harvested seafood and antibiotic-free meat.
The concept launched as a lower-priced, no-frills version of the chain and as an alternative shopping experience for millennials, looking like a sleek cross between Costco, Trader Joe's and an Apple store. It's an attempt by the parent company to reverse its sagging sales with a smaller, more streamlined, warehouse-like footprint. The Silver Lake store is one of more than a dozen West Coast locations in the works.
It comes as little surprise that Whole Foods—derisively nicknamed "Whole Paycheck"—would attempt to capture this coveted younger demo. Nearly every change in-store—from food to fashion to home goods—is going after millennials, a group that's 80 million cost-conscious digital natives strong. They are projected to spend $65 billion on consumer packaged goods over the next decade, according to a recent study by FutureCast and Barkley, which also revealed that less than half (about 42 percent) of millennials shop at local and chain grocery stores, spelling opportunity for retailers.
Enter 365, with its attached vegan restaurant (New York's by Chloe), curated selection of brands and speedy Apple Pay-equipped checkout. The outposts could eventually house bike shops and music stores.
Analysts have questioned whether 365 threatens to cannibalize the larger Whole Foods stores, but others think the offshoot is a smart strategy. "If it's a less expensive, more elevated shopping experience, why on Earth would millennials be the only ones who'd want that?" says Brace. "If they can make it a success, it won't be for the reasons they think; it'll be because it has broader appeal."
Picture this: the rise of VR
Not only does it seem like a Herculean task to remodel that crummy kitchen, it's tough for most people to visualize how the re-do, if successful, will even turn out.
Home improvement chain Lowe's identified the problem and discovered that consumers were saying "Oh, just forget it" to the tune of some $4 billion in lost revenue per year. That's where virtual reality comes in, with a program called Holoroom that lets customers become DIY masters without ever knocking down a wall.
"We wanted to give people a visceral view of what their project could look like," says Scott Susskind, partner and CTO of SciFutures, which developed the concept for Lowe's Innovation Labs. "The goal was to reduce the barrier and the fear for the consumer."
Holoroom, which has been dubbed "Minecraft for Moms," uses a tablet app to start the process of building that dream room—with Lowe's products, of course. The next step equips consumers in-store with an Oculus Rift headset so he or she can see the results as if they were standing in the middle of their reconstructed space. They can tweak the design and export everything to YouTube 360 and view anytime via Google Cardboard.
The technology, which has been a hit in the 30 Lowe's locations that have installed it, underscores why analysts have dubbed VR the future of retail. Brands that have embraced the technology include The North Face, Toms and Verizon. Also, Samsung and AT&T recently partnered on an activation that had consumers taking a virtual Carnival Cruise via Samsung Gear VR headsets. VR is a feature of the new Samsung flagship store in New York.
Next up: Mobile-enhanced VR experiences and v-commerce (Ikea and luxury retailer The Line have already experimented) once more consumers have their own VR headsets.
In an Orchard Supply Hardware store in Palo Alto, Calif., an OSHbot will find you some nails or check the sale price of a hammock. Touchscreen mirrors at a Bay Area Neiman Marcus give you a 360-degree view of the outfit you're trying on and let you share your new look with friends. Smart dressing rooms at Rebecca Minkoff's fashion-forward SoHo boutique in New York can take care of everything from your Champagne order to your vacation wardrobe.
Those are just some examples of what's known as mixed reality, a trend in retail that's blurring the line between ecommerce, augmented reality and brick-and-mortar stores. Some of the executions have merely been tests—among them, shoppable windows at Kate Spade and smart mirrors at Bloomingdale's and Ralph Lauren—but many experts see them as the wave of the future.
"We want to create experiences where we all look back and say, 'How did we ever get along without these?'" says Scott Clear, chief design and innovation officer at RKS in Los Angeles, which worked on the Neiman Marcus mirrors for client Corning. "We'll think that 2015 was the Dark Ages."
Out of necessity, retailers are focusing on solving problems for consumers, often by using the latest technology and the customization and personalization it allows. Cognitive computing will mean that stores recognize a customer much as a shopping site does and make suggestions accordingly.
"Shoppers are looking for ways to make their lives substantially simpler," notes Wendy Liebmann, CEO and chief shopper at WSL Strategic Retail. "Retail is trying to meet specific needs with a mix of both digital and physical solutions."
That will involve what SciFutures refers to as "lower-friction" shopping, meaning that nobody will have to stand in line to pay. Programs are in the works for client Visa, for example, that will enable customers to make their purchases in-store by simply walking under or past designated hot spots.
"The goal is to make the tech as invisible as possible and not distract consumers with the gadgetry," Clear said. "They say what they want, and the tech makes it happen."
I spy with my little I (beacon)
Over the next four years, nearly 1.6 billion coupons will be delivered annually to consumers via beacon technology, whether it's Apple's branded iBeacon or other Bluetooth-enabled trackers, according to Juniper Research. That's up from about 11 million last year, when the proximity-based marketing tactic just started to catch fire.
Such promotions, akin to personal flash sales, mean that shoppers at Target, Lord & Taylor, Macy's, H&M or other beacon-equipped retailers could get an offer on their smartphones customized to their interests, shopping history and physical location. Once they opt-in, that is. And that could be a problem for the technology considering that a recent study by Horizon Media found 72 percent of those interviewed signaled they were "alarmed" by how much of their information is already available to retailers. (At the same time, 61 percent said they were "more than willing" to share their real-time whereabouts in exchange for personalized rewards.)
"The upshot from consumers was: If I get a deal or some exclusive access to a sale that someone else isn't getting, maybe it's worth it to me," says Kirk Olson, vp of Horizon Media's Trendsights. "Plenty of companies are tracking me and not offering me anything."
Two-thirds of those in the study said beacons offering special discounts would "definitely influence my buying decisions," and retailers have reported significantly higher redemption rates with beacons than coupons delivered by other means.
For consumers accustomed to online recommendation engines, beacons are "a way to help navigate choice and find the most relevant items," Olson adds, begetting time-sensitive offers that can spur impulse purchases.
About one-third of the top 100 retailers have already used beacons, with Business Insider projecting that 85 percent will deploy them by year's end, potentially causing digital gridlock, says Syntegrate Consulting's Brace. "This is one-way, data-pushing technology. At some point, the shopper could be so overwhelmed by information that it'll all end up being noise."
Throwbacks and crossovers
High-tech may be all the rage in shopper marketing, but so is high-touch, with retailers emphasizing one-on-one service, community building and unique products. One might think of it as the retail version of farm to table. They'll never be big-box chains, in size or spirit—and that's the point.
Good Beer in New York's East Village features domestic microbrews and imports along with gathering spots where customers can chat with knowledgeable employees and brewmasters. The old-school Stanley's Pharmacy and juice bar, also in New York, prides itself on the personal approach as well, while Gratus in Beverly Hills, Calif., will order your lunch and stock your favorite drink, even if you're not a celebrity.
"It seems counter to every tech trend where you order online and it's delivered to your door in an hour," says Horizon Media's Olson. "But we as consumers continue to crave that human connection."
People also want an environment, something they can't get online, giving rise to a growing number of switch-hitters, brands moving from strictly digital to traditional, physical retail locations. Warby Parker, Fabletics, Bonobos, Athleta, Birchbox and other digital companies have opened a smattering of brick-and-mortar locations in high-traffic areas "geared toward marketing and messaging as much as sales," notes Mary Brett Whitfield, svp at Kantar Retail. "They're meant to be physical touch points."
Amazon caused a stir with its first bookstore, opened late last year in Seattle, and the online retail behemoth's still-unconfirmed plans for a national rollout may be as much about showcasing electronics as current best-sellers. (A second store opens in San Diego this summer.) It comes at a time when big retailers like Kohl's, Sears and JCPenney are beefing up their online presence and so-called "borderless shopping" as they shutter money-losing physical locations.
The shopping site Tictail Market, which has opened pop-up shops around the holidays, now has a permanent store on New York's Lower East Side that showcases the work of fashion, jewelry and home decor designers from around the world. Its point of difference: descriptions of the work and artist with every item.
"Retailers that can figure this out—telling the brand stories—will be filling a big white space," says Brace. "Millennials are especially influencing this area because they don't buy things, they buy stories."
This story first appeared in the June 20, 2016 issue of Adweek magazine.
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