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

How brands are digitizing retail

Headshot of Christopher Heine

Eighty-five-year-old Chicagoan Martin Shafron, a self-described “computer illiterate,” steps into the rotunda-like entrance of AT&T’s flagship store in the city’s high-end retail district known as the Magnificent Mile. Though Shafron doesn’t realize it, he is also smack in the middle of a retail revolution showing off its gadgetry and pageantry from here to Beijing.

As he waits for one of the iPad-wielding sales associates to assist him with his first iPhone, which he’d bought there the day before, Shafron is sprinkled with what AT&T calls “innovation sounds”—perhaps best described as raindrops going pitter-patter on a digital rooftop interspersed with wind chimes producing cyber inharmonic spectra.

The highly stylized space, which opened last fall, looks more like a staid museum lobby than a store, but it’s hardly a bore—there’s plenty of digital eye candy competing for Shafron’s attention as he waits, including an 18-foot video wall equipped with motion-sensory software on which a couple of kids are playing a game.

He, like most who walk through these doors, is seriously wowed by the space, but, he says, “More than anything, I appreciate the hands-on help.”

Call it the Appleization of brick and mortar, where retailers from Michael Kors to Staples to Pep Boys are dazzling consumers with the futuristic in-store shopping experience the House That Jobs Built gave rise to. In fact, a decade ago and just a few blocks from the AT&T flagship, Apple opened its own gleaming, digitized space on the Magnificent Mile—but Apple is no longer the coolest kid on the block. Today, that distinction belongs to AT&T—though there’s plenty of competition from the likes of Nike and Burberry, which have unveiled souped-up stores here in recent months, as well as Apple, which, buzz has it, is prepping its own overhaul.

Employing the latest technology at point of sale is nothing new—for years businesses from car rental companies to Nordstrom department stores have unhooked from the wires. But the trend has gone from merely ringing up sales via mobile devices to a deeply immersive in-store experience—fully digitized but crucially featuring that face-to-face element customers like Shafron demand.

“We want to transform the traditional website experience into the physical experience,” explains Paul Roth, president, retail at AT&T. “It’s all about creating interactions rather than just transactions.”

And interacting they are. The AT&T flagship attracts an estimated 30,000 customers per month, many drawn in by bells and whistles like that giant interactive screen, which lights up the cityscape as it also manages to circumvent a zoning restriction banning exterior signage on the Magnificent Mile. The store has only one traditional retail counter, and the cash registers are tucked away in stylish wood cabinets. Sales associates access the registers not with a key but via biometric fingerprinting software and not while standing behind the tills but, rather, while sitting on a couch face to face with the customer.

The space also features a section devoted to using music apps not only for listening to but also writing tunes. To show how Square, an AT&T partner, can be used by small businesses, there’s a display with real cupcakes and a handmade sign reading “Bake Sale.”

As if that weren’t enough to command one’s notice, a Nissan Leaf is parked in front of a huge picture window, set up to interactively demonstrate how assorted auto-based apps can be used to monitor how fast their teenagers are driving. A few feet away, another area features apps that let users track who comes and goes from their homes.

The store hosts cool events with partners as well. Chicago Blackhawks legends Bobby Hull and Eddie Olczyk showed up to take a whack—with a hockey stick, duh—at Otter’s new smartphone cases to demonstrate their durability.

“Humans remember stories,” says Christina Cheng, area manager of the AT&T store. “So explaining things with stories instead of specs is a much easier way for people to understand how technology can help them.”

The space and its collection of shiny things serve as a lab for what might be deployed elsewhere at AT&T’s 2,300 locations. “You will see six or seven elements of the Michigan Avenue design incorporated to scale with the rest of our portfolio,” says Roth.

More than merely influencing what’s to come at AT&T, the store has become an incubator for what consumers will come to expect from retailers across the board—and it’s not just tech companies that are dotting their blueprints with digital tools.

Claire Huang, CMO of JPMorgan Chase, says many more tech features are in the offing. “We’ve developed a new branch concept with an open format that gives customers options. From the traditional teller window to the advice zone and tablets to self-serve kiosks and the instant-issue credit card machines, our approach is centered around choice and making the experience better for the customer,” she says.

Even a simple lube job is getting the digital redo. Auto service chain Pep Boys recently gave a deteriorating Tampa, Fla., location a techie overhaul, including iPads for associates and a digital lounge for customers to charge their smartphones and tablets and free WiFi. “When it reopened, we had people walking in there asking, ‘Is this still a Pep Boys?’ ” says Ron Stoupa, CMO of the Philadelphia-based chain. “You want people to think of your brand as being at the forefront rather than falling behind the times.”

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.

@Chris_Heine Christopher Heine is a New York-based editor and writer.