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The Store of the Future Has Arrived (and No, It's Not Apple)

How brands are digitizing retail

In the lead-up to last year’s Summer Olympics in London, Audi threw open the doors on Audi City, a spectacular space in the busy Piccadilly Circus area whose centerpiece was two Audi models and touchscreen devices enabling customers to execute their own, built-to-order vehicles. The agency Razorfish helmed the concept, which has since expanded to Beijing and Dubai. “Their unit sales at Audi City are up 70 percent over mainline dealers,” reports Jonathan Hull, managing director of the Emerging Experiences Practice at the agency. “Their margin per vehicle is up 30 percent and they measured that 90 percent of people coming through the door are new to the Audi brand.”

Razorfish is but one player in this game. “It’s exploding,” says Gideon D’Arcangelo, lead strategist at ESI Design. “And it’s going to be table stakes in a couple of years.” Two weeks ago, the New York firm helped office supply chain Staples open its first “omnichannel stores” in Norwood, Mass., and Dover, Del. Visitors to those spots—at 12,000 square feet, more compact than the typical Staples—discovered end-aisle digital kiosks and other interactive features.

In putting together the Staples concept, D’Arcangelo did look to AT&T’s Chicago store for inspiration, but he ultimately sees Apple as the true pioneer. “Other retailers are using the Apple prototype as they look to do retail in a more open marketplace,” he says. (Apple reps did not respond to multiple requests for an interview for this story.)

Some may be surprised to learn that another emerging player in this space could be e-tailing monster Amazon. Even as the company has strained the bottom line for brick-and-mortar stores, reports have Amazon now eyeing a presence on the street. Amazon already has experimented with pick-up sites in markets including New York­­, and one can only imagine what a full-fledged Amazon store might look like.

“Retail is under siege,” D’Arcangelo points out. “The online retailers want some kind of physical presence, and all the brick and mortars are trying to catch up with the online space. What’s going to happen is a hybrid.” That could mean a deluge of business for agencies like six-year-old Web design company Gin Lane Media, which has done innovative in-store work for the likes of J. Crew and Michael Kors. The latter erected an LED display at Macy’s Herald Square in New York that has the customer walking through a constantly changing video arch. An accompanying 32-inch touchscreen display gets some 1,000 engagements per day, says Emmett Shine, Gin Lane’s founder.

There’s more innovation on the way. In-store marketing firm Synqera is piloting a program for a major Russian retailer starting this month involving facial-recognition software that can determine a customer’s age, gender and mood. Heat-map and dwell-time analytics—longtime darling stats for Web marketers—are also coming to stores.

D’Arcangelo advises that as retailers collect still more data on consumers, “everyone is going to have to think smart, transparent, opt-in, shared ownership of the data. Retailers must be clear communicating what value customers get from sharing that data. Case in point, people love when they get a great recommendation from Amazon.”

Digitization. Appleization. What about Amazonization?

“One of my favorite comments from a recent patron to our flagship store was that it was like walking into a website,” says AT&T’s Roth.

But at what cost to the retailers? While agreeing that brick and mortar is entering a new era, Sucharita Mulpuru, retail analyst at Forrester Research, wonders about the return on investment for all these digital playthings. “It’s still too early to tell,” she says.

Roth’s big digital experiment on the Magnificent Mile will ultimately succeed not on the technology alone but also on the human touch that brings in the likes of octogenarian Martin Shafron. AT&T is well aware of that fact, having enlisted some of its best and brightest from around the country to be the face of the Chicago outpost.

“There are 17 different states represented in that store,” says Roth. “Retail always depends on how good your people are.”

And increasingly, on how good they are at ringing up sales on the iPad.

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