The Rebirth of Physical Retail

An explorative guide on brands and retailers adaptation to the post-pandemic next normal.

Our definition of shopping is changing rapidly. Almost everything is available online. Fast, cheap and easy. We see more and more empty square meters in shopping areas where traditional retailers failed to compete with their digital counterparts. The shops that we grew up with are now being replaced by brandless outlets and temporary pop-ups. The coronavirus pandemic has speeded up this retail apocalypse and the change we expected to see happening over the next years, has hit over a period of a few months.

But just like television hasn’t disappeared like many predicted 15 years ago we believe that if we use our creative problem solving skills, physical retail will evolve to be something we can fall in love with all over again. 

In this article we explore different trends that we see rising around the world that inspire us to think differently about something we passionately enjoy. We believe the thrill of venturing out to let yourself be seduced by brands and products is just as alive as it was 50 years ago. The only thing that has fundamentally changed is the role the ‘shop’ plays in the customer journey. 

Shopping holds more emotional value to us than direct consumption. We’ve spent hours in malls as teenagers, shopping with our parents for Christmas as kids and then taking our own kids out to buy that special toy they’ve been longing for. We hold many memories to shopping, simply because we attach and engage emotionally with not only objects but more so experiences. Shopping in stores holds a sentimental value to us, something that online shopping will always have a hard time competing with.

The pandemic fast-forwarded the mass adoption of e-commerce, forcing retail to think from new perspectives on how to use space 

Even before the pandemic, the retail industry was in a state of disruption as consumers were increasingly buying online. Overnight, demand patterns shifted. In China the overall penetration increased by 15-20 percent (McKinsey), and in U.S. e-commerce jumped 49% in April, compared to the baseline period in early March before lockdown restrictions went into effect (Adobe, 2020 Digital Economy Index). Retailers which only rely on customer footfall, are the ones most affected.

In the future, people will no longer visit stores unless they really want to. Brands must, therefore, find new ways to repurpose retail to what their customers are looking for. 

The fact that our need for a larger scale of choice is offered online, has made that we’ve adapted to more personalized experiences in physical space. As retail stores will no longer drive the same scale of conversion, they must find a new purpose to why they exist. Those brands that are able to evolve to fit these new paradigms will not only thrive but also come out as leaders.
Forward-thinking retail stores must redefine the role of their spaces and prepare for the post-pandemic as the next normal. If online penetration increases as expected, stores won’t serve the same meaning to their customer’s life as they did at the beginning of 2020.

The movement is reversed - as online is our framework, stores will act as supporters

Instead of serving as transactional venues, physical stores can add dimensions to a brand that online simply cannot. Omnichannel retail, where brands have both physical and digital presence, is predicted to be what we’ll see more of in the near future. It makes the customer experience seamless and creates opportunities to build long-term relationships.

With e-commerce making it possible to buy anything at any time, at any location, physical stores should act as touchpoints weaved together with the online framework creating a customer experience where digital and physical live in symbioses. In-store experiments make it possible to marry physical and digital in a way that makes stores more powerful. In times when everyone is online, a brand’s physical presence will not only play a vital role in driving digital sales but also add meaningful value in customer’s lives. 
Physical stores as touchpoints

For online purchases, a frictionless customer experience is simply key. This however, doesn't mean that digital and physical experiences should be separated and act in isolation from one another. Instead we already see brands using stores as a complementary component to online, building a more integrated customer journey. Research done before the pandemic shows that opening of a new physical store increased traffic to the retailer's website (fashionunited). New technologic solutions also create ways for brands to interact with their customers in-store and help create more seamless journeys bridging online and offline experiences.
Made.com

The London-based furniture retailer Made.com is another ecommerce platform that’s been putting more attention into physical retail stores, and their concept is proving that ecommerce and physical space can work together in harmony. In their stores you can’t walk home with a cushion, not even a bag. Instead, the stores are showrooms with innovations providing features and processing orders. The space acts as an extension of the online platform, somewhere where customers can get familiar with the brand and Made.com can build a more personalised relationship with customers.
"Every customer experience starts online these days, often through mobile devices. In our case, it also ends online. Why would you have a supply, if you can tell a story and let the transaction flow from there?"
— Philip Chainieux, CEO, Made.com
Amazon Go

For the e-giant Amazon physical stores represent an investment to build longer-term profitability. Their brick-and-mortar shops are designed to create a seamless shopping experience across the company’s physical and digital channels.

A store should be seen as a channel - a space to deliver a message to your audience

If online purchasing continues to grow, there will be less desire to pick things off shelves when we can simply get it delivered to wherever we may be. The physical store should be designed with this change in mind, and we might come to rethink concepts customised by location, possibly with a stronger focus on serving the local community. Each store should have a clear reason to exist in order to best resonate with visiting shoppers. Stores should simply be seen as a channel where they can deliver messages to a chosen audience, together with a product offering that is tailored to that. Customer data makes this practical, knowing your audience makes it easier to understand what influences purchase decisions. This also creates opportunities to tailor personalised experiences and ensure product relevancy. 

If brands look at physical stores as another medium where to communicate a narrative, this will mean that stores at different locations will serve different purposes in order to connect with their community. Brands that take the next steps and adapt to this change will thrive as they take ownership of the relationships with their customers.
Physical space helps strengthen your online community

Brands building online communities is nothing new, but the pandemic made it gain momentum. During the pandemic brands have interacted and engaged with their customers through apps and other digital channels. Meeting customers this way will continue to grow even after the pandemic. Online is and will act as the mainstream global community, but brands can use physical presence to support their community on a more local level.
Glossier

Beginning as digital-only, the beauty brand Glossier had huge success. Having built an impressive online following, Glossier’s brand identity has primarily been formed on Instagram using ambassadors to endorse their products and generate demand. More recently they have been experimenting with pop-ups and retail stores, creating showrooms as an arm length of their brand. As social sharing is at the beauty brand’s heart, the physical experience is designed to encourage customers to post on social media. Glossier is creating a relationship between the brand and the consumer, making the consumer feel like they’re a part of Glossier’s story. This ongoing interaction they have created with their community is the success that will keep Glossier growing. 
Photo credits — Veerle Evens / Glossier

Brands should look at stores as a place to interact with customers in unconventional ways 

We can’t ignore that humans are social beings that will always crave social environments. That’s why this is simply not about closing stores, instead, it’s about reworking the space so it adds value to people’s lives. This is because it is the physical space, not when buying online, where brands have the social opportunity to build meaningful relationships with their customers. Retail space is an opportunity for brands to offer a real-world connection and put their brand values upfront. 

Retailers having shops across locations offering the same range of products, to the same price - simply do not withhold the same desire any longer. If brands and retailers really want to meet the needs of their consumer they must ask themselves; what is the objective with this store at this location? And who is our customer in this specific store? Brands that are quick to realise this can turn it into a real competitive advantage.
Physical retail creates confidence in purchasing

Many brands were before the pandemic experimenting with smaller concept stores to get consumers to try out and experience their products, but not (actually) buying them. It’s been proven that customers that are visiting a physical store return fewer products (Source). The goal is not to get people to walk out of the store with a bag filled with newly purchased items, instead it’s about getting people to be more confident in their online purchases.
IKEA city center stores

Due to their consumers' changed shopping behaviour, IKEA tries to cut its dependence on selling only through giant warehouses outside cities by setting up smaller city center stores. In one of their store formats, the Planning Studio, customers can not actually buy anything, but instead have a kitchen designed and get it delivered to their home.
Heyshop

The Chinese ecommerce store HeyShop, is now opening up a second store in Shanghai to expand its online-merge-offline business model. As Heyshop product offering is driven by big data analysis, meaning they might sell cosmetics and clothing one week and books the other - no product could guarantee itself be kept in the store all the time. In the stores the customers can visit photo studios and huge fitting rooms for friends. Therefore, their idea behind the stores is not to chase transactions, instead they want to create memorable experiences and the founders strongly believe that if their customers enjoy the visit they’re more likely to make a purchase online.
Photo credits — XiaoYun / frameweb.com

Stores should act as a space where consumers can meet the brand

Stores should be less about conversion, and more about creating situations for customers to get to know the brand. It is about expanding the brand’s personality into spatial design, activities and innovation installations. This might be more expensive short term, but having three stores selling the same products in one shopping street won’t benefit long term investments. 

As we more often go online for purchasing, the physical space is where customers can learn about products concurrently with the brand values. Each sqm of the store should tell the right and coherent story about the brand’s DNA. Stores should be carefully curated, and looking at how a format can fit within the business different functions is important. As previously mentioned, stores should have a role and a purpose to serve their community - whether it’s a showroom, community events or product offerings. It’s about hyper personalisation and creating touchpoints in the consumer journey. Brands and retailers should redefine how a store can act as a brand tribute where the goal is to reinforce the brand’s positioning in the market.
Stores telling the brand narrative 

Brands are investing more than ever in creating spaces designed to tell their brand story. As new technologies open up for ways to interact and engage with consumers, brands are exploring immersive experiences to tell stories in non traditional ways. Brand values and purpose are transformed into innovation and design, where consumers get to learn about products and a brand’s narrative through installations. The days when consumers acted as passive card holders are long gone. Instead, brands are putting their consumers on the front row - making them a part of the creative process.
LEGO

LEGO has always been about creating experiences and memories for its customer at all ages. Their store in Amsterdam is filled with numerous LEGO built features, such as building your own boat and floating it around the famous Amsterdam Mint Tower built out of bricks in the store. Throughout the store LEGO encourages customers to play and have fun, just as they do with LEGO at home. It's about nostalgia, personalization, interaction and inviting their customers to a world where they are the center of the creation.
Nike House of Innovation

Nike’s retail concept House of Innovation situated in New York, Shanghai and Paris, presenting consumer focused spaces with story-telling experiences. Each location is heavy purpose-led, where the customer gets to take part in interactive installations that captures some of the key moments in Nike’s design and innovation process. Most importantly, the space is not simply about interactions with customers, it’s about conveying the brand belief and values by taking on a customer-led offense.
Photo credits — Nike

After all...

The pandemic affected us on a deeper level and made us think about how we position ourselves in the world. But it has also forced us to think in new perspectives and discover solutions we couldn't think of before. From one moment to the other our realities were put in a new context and from now on we hold the power to change the status quo. There’s no question this will somehow be reflected in our retail spaces. Maybe stores in the future will work as escapism with imaginative installations? Or it might be a more subtle, tactile environment in calm settings that gives consumers tools to calm down and higher their consciousness. Maybe creative technologists, architectural designers, sensory scientists will join forces to create new spaces of reality. Whatever the future holds for physical retail, one thing that’s certain is that brands and businesses that are agile, flexible and ready to embrace change will see that there’s endless opportunities to serve customers in new exciting ways.

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