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Beyond ‘bricks versus clicks’: Makings of a new retail model

The traditional brick-and-mortar "prototype" model, in which a retailer builds a flagship store to be replicated in other locations, no longer works for companies looking to scale. Instead, stores need to use flexible configurations that contain modular elements of experience, product, services, a local point of view and technology.

March 14, 2019 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Now that the retail industry has largely acknowledged the one-time conflict between "bricks" and "clicks" has ended, players face the daunting task of organizing their resources to manage and influence customer behavior. A session, titled "Creating the Next Generation Store," at the recent ShopTalk conference in Las Vegas addressed this challenge.

Session moderator Elaine Kleinschmidt, executive vice president of strategy and experience design at WD Partners, a retail and customer experience consultancy, began the session by listing six key elements of the customer experience ecosystem that retailers and brands have to consider: product innovation, experiential retail, distribution logistics, localization, omnichannel technology and value added services.

Melissa Gonzalez of The Lion'esque Group, Brett Anderson of Soma Intimates, Matt Alexander of Neighborhood Goods and Elaine Kleinschmidt of WD Partners discuss the future of retail.

Before delving into these specific areas, Kleinschmidt reviewed the market forces that have challenged brands and retailers in recent years. The overriding challenge is managing and influencing the increasingly omnichannel customer. 

On the brick-and-mortar side of the ecosystem, one factor that has gotten far less attention than other factors is the highly volatile commercial real estate market, which Kleinschmidt said has put some brands out of business.

The challenges are further complicated by the fact that heads of most retail companies today do not have a complete view of the retail ecosystem, Kleinschmidt said.

An audience text poll verified her position on the state of retail leadership.

Asked if their head of retail maintains a broad purview across all direct-to-consumer channels, less than half (48 percent) said some of the time, 9 percent said never, 22 percent said most of the time, 5 percent said they did not know the company is supposed to create integrated brand experiences, while 15 percent said they were not sure.

Flagship prototype store model no longer works

The traditional brick-and-mortar "prototype" model, in which a retailer builds a flagship store to be replicated in other locations, no longer works, Kleinschmidt said. This is because the flagship prototype does not allow the company to scale. Instead, stores need to use flexible configurations that contain modular elements of experience, product, services, a local point of view and technology.

Kleinschmidt then cited companies that have demonstrated success in each one of the key areas. The retailers cited include both household names as well as newcomers.

Soma Intimtates, which provides a wearable device that helps fit women with individually fitted bras, has distinguished itself in the area of product innovation by using customer insight to drive product design and personalization.

The Lion'esque Group, which provides temporary pop-up shops, has distinguished itself in the realm of experiential retail.

Panera Bread has distinguished itself in distribution logistics to drive repeat visits and loyalty by offering six different ways for customers to get food on demand. The store has generated 1.4 million digital orders per week.

Neighborhood Goods, a department store with both a physical and virtual presence featuring a continuously changing selection of brands and products on a local level, has distinguished itself in the area of localization.

Starbucks, a retailer that pioneered the personalized app, exemplifies leadership in omnichannel technology by delivering a seamless brand experience to a loyal following. While the app was initially problematic, it now drives serious repeat business, Kleinschmidt said.

RH Gallery, which gives independent designers a place to consult with customers to create home furnishings as well as child products, distinguishes itself in value added services.

Achieving localization

Kleinschmidt then turned to panelist Matt Alexander, co-founder and CEO at Neighborhood Goods, to explain what his company's goals were in building its first physical store in Plano, Texas. Alexander said the company wanted to offer a venue that created a personal relationship with the shopper as way to build trust.

One of the biggest challenges Neighborhood Stores faced in creating its first store was fielding a large number of requests from brands that wanted to be part of the new store. The company ended up taking a total of 30 brands, which was double the number it expected, he said, and had to determine which of their products would be most relevant to store customers.

The positive customer response has pushed the company into expansion mode sooner than expected, he said, as it plans to add seven or eight more stores. 

Achieving experiential retail

Kleinschmidt then turned to Melissa Gonzalez, founder and CEO of The Lion'esque Group, to explain the success of by pop-up shops. Gonzalez cited three benefits pop-up shops offer: the ability to provide a proof of concept quickly, the ability for a brand to tell its story in a large number of locations in an immersive manner, and easy access to real estate. 

The Lion'esque Group gathers information about customers that helps a brand understand customer shopping habits and how they hear about the brand, Gonzalez said. Pop-ups require training store staff about the products being presented, she said.

One sign of pop-ups' success, Gonzalez said, is the fact that durations are now as long as six months as opposed to a few weeks.

Delivering product innovation

Switching to the importance of product innovation, Kleinshmidt turned to Brett Anderson, vice president of omnichannel sales at Soma Intimates, which provides a bra and a downloadable app that measures the woman's size to create a custom fitting bra. Anderson said as many as 80 percent of women are wearing the wrong size bra because they don't get fitted frequently enough. The Soma technology provides more accurate measurements than tape measures, he said.

"It truly unlocks omnichannel capability," Anderson said for the company's product.

Most customer queries begin online, Andrson said, but the online experience lacks the personal interaction that many customers want. "You're largely lacking in that online service element," Anderson said.

To address this challenge, Soma Intimates has introduced a chatbox that can put the customer in touch with a product expert.

"You'll never replicate the human element," Anderson said.

Audience acknowledges retail challenges

Kleinschmidt conducted an audience text poll that quantified retailers' and brands' need for customer insights.

Asked if their brand intimately understands its shoppers at a local level, 38 percent said they have insights but no one has stitched them together, 26 percent have no insights but are trying, 14 percent have insights but don't know how to apply them, 1 percent have insights and are great at applying them, and 4 percent said they don't need insights.

Asked if they trying to scale unscalable experiences, 16 percent said the problem is pervasive and ongoing, 15 percent said they have faced the challenge and have made adjustments, 12 percent said they don't face the task since they don't have the budget, 18 percent have not attempted to provide customer experiences, while 38 percent said the question doesn't apply to them. 

Asked to define "experiential" retail, 9 percent said it means making it Instragrammable, 19 percent said it means technology integration; 1 percent see it s creating a beautiful interior design, 65 percent said all of the above, while 6 percent said none of the above.

About Elliot Maras

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Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.