Retail evolving

Changing world mandates changes in strategies, environments, experiences

The following retail forecasts are excerpted from Retail Environments magazine with permission from Shop Environments Association.

SITES
Malls will reposition to boost brick-and-mortar traffic

By David Margolius, VP of retail, Shawmut Design and Construction

As the retail landscape adapts to changing consumer needs, brands are changing their brick-and-mortar strategy to reach a new equilibrium. The foundation of this process is understanding and accounting for Gen Z shopping habits, a generation that currently comprises 40% of the population and is beginning to have purchasing power. Not only did this demographic grow up with technology and product delivery just a finger tap away, but they also are keenly interested in a brand’s story, appreciate transparency, and conduct thorough research before making purchasing decisions.

Retailers must capture the attention of this next generation of shoppers through emotional and engaging experiences that bolster brand loyalty, create community, and ultimately lead to purchase. Brands can’t grow without an innovative approach to their brick-and-mortar presence. Similarly, shopping center owners can’t increase foot traffic and dwell time at their properties without a strategic approach to tenants and offerings. So mall repositioning will continue at a strong pace. As 43% of malls in the U.S. add non-retail uses to their shopping centers and 20% dedicate space to the community, the mall will once again become an appealing destination to current and upcoming generations of consumers.

From transforming a closed mall to a live-work-play destination, to revitalizing a failed anchor store by slicing it up or finding a new use, to repositioning a mall’s entire layout to generate and capitalize on foot traffic, the overall trend is about catering to both tenants and shoppers. Tenants are becoming a focus for mall owners as they pivot their strategy, taking a broader approach that meets a wide variety of consumer needs. Owners want to provide a breadth of experiences to make their property a destination, rather than a quick pit stop.

Owners are expanding their property uses from just retail, approaching businesses such as health and medical centers, virtual reality attractions, and even fitness centers to make their shopping centers one-stop lifestyle destinations. One mall that’s doing it right is Westfield Century City in Los Angeles. An extensive renovation revamped its format to offer expansive dining options, fitness and wellness purveyors, and medical services, in addition to a portfolio of exclusive boutique and bespoke retail stores. And projects at the World Trade Center and Hudson Yards in New York, Palisades Village in Los Angeles, Aventura Mall in Miami, and Cambridge Crossing in Greater Boston are bringing to life carefully curated experiences that drive foot traffic while providing unique brand interactions.

A successful shopping center incorporates outdoor components, central gathering places, and a diverse variety of tenants such as theaters, gyms, and new, local, or formerly online-only brands to add an exclusive appeal. We are excited by properties adopting these changes to become truly mixed-use destinations that forge synergies between landlord, tenant, and shopper.

POINT-OF-PURCHASE
4 big trends will influence POP strategies

By Leon Nicholas, VP of retail insights and solutions, WestRock

Point-of-purchase will continue to be impacted by advancements in retail technology, the continued growth of e-commerce, and an increasing demand for experiential and convenient shopping environments. We expect to see progress against a wide array of challenges over the next few years, but four trends stand out as leading retail movements to watch:

• Reimagined Center Store: Expect accelerated efforts to reinvent the center store and the selling of fast-moving consumer goods (FMCG) generally. Despite pressure on commoditized products that are traditionally vulnerable to online shopping, retailers won’t let center aisles languish. They will place more importance on the shopper experience with enhanced fixtures and lighting. Efforts will be made to transition the aisle into a place of engagement as shelves take on a more promotional role. Expect an increase in the comingling of perimeter products with those found in-line as retailers attempt to drive more traffic down center store aisles with cross-box merchandising.

• Increased In-Store Digitization: Technology is playing an increasingly important role in the path to purchase, and retailers are leveraging this through enhanced digital customer experiences. Expect growth in the presence of digital-in-place kiosks and screens to help shoppers locate products, educate themselves about products, and even purchase products not carried in store. Technology designed to encourage shopper engagement, such as smart mirrors and facial recognition, will enable personalized messaging and product recommendations. Mobile interactivity will continue to expand in store as active, shopper-driven scanning and connected packaging engagement begins to align with passive, mobile programs such as personalized in-store messaging and digital coupon redemption. The capacity to measure the impact of such technology will provide a needed boost to efforts to drive trade promotion ROI. Think of it as a technology-enabled "insights productivity loop."

• Bigger Role for Small: Even more than in the past, most brick-and-mortar growth is expected to be in stores with smaller footprints: dollar stores, drugstores, discounters, and specialty stores. Smaller stores require brands and retailers to provide more compelling shopper experiences as the requirements for executional ROI are higher—with less real estate, there is little room for error. Every display will need to work harder to make an impact. Expect increased personalization, customization, and promotional intensity to extend into the aisle as shelves take on the role of displays in a limited display environment.

• Store-Within-A-Store: Shopper demand for more experiential retail environments will increase the presence of store-within-a-store destinations aimed at elevating categories and enabling the discovery of new products. Environments focused on categories such as pet care, coffee, alcoholic beverages, wellness, organics, food services, and beauty will grow more popular as retailers seek ways to distinguish themselves from their competition through personalized services and expanded product assortments.

The store productivity mandate will be at the top of brick-and-mortar agenda. The need for efficient and effective in-store promotions is paramount as shoppers demand a more engaging shopping experience that seamlessly fits into their increasingly busy schedules. These and other trends will be the pillars that make stores—and shopper trips—more productive.

VISUAL MERCHANDISING
3 technologies will be integrated into displays

By Jon Harari, CEO and co-founder, WindowsWear

The future presents an exciting and dynamic opportunity for visual merchandising. Technology is exponentially increasing the ways retailers and brands can visually merchandise their products. Visual merchandisers will need to combine visual creativity with digital connectivity. The world will be a 24-7 global, technologically driven marketplace where everything can engage with consumers, collect data, and sell products and services. Over the next few years, visual merchandisers can expect to engage with, and create solutions for, augmented reality, virtual reality, and voice technologies.

Augmented reality will significantly improve the experience of every physical retail environment, as every smartphone will be equipped with the latest AR tools that retailers and brands can use to engage shoppers. It will also enable every previously non-retail environment to be a new potential selling channel. This will provide visual merchandisers with endless creativity for how to merchandise, how to create exciting experiences, and more. It will allow anyone to discover, engage with, and shop for products and services everywhere they are physically present.

Social media companies will integrate AR into their networks, as all are already working on sophisticated AR features. Michael Kors recently launched a feature enabling consumers to purchase sunglasses through Facebook’s facial recognition software. Such technology will continue to improve to cover all types of products and services.

E-commerce will improve for both the retailer and consumers. Apparel brands can use body recognition software through their e-commerce portals to provide personal renditions of how their products will look. This digital try-on solution will personalize the online shopping experience while helping to reduce returns. Home furnishing brands are using similar technologies to show consumers how products being displayed online will look in their homes.

Virtual reality will not be just limited to gamers, where it is taking off. Anyone who likes to watch sports, concerts, television, movies, live events, and more will do so in the future with VR. That will all be broadcast through live VR experiences that will be even more engaging and immersive than 2D television screens. Consumers will wear VR headsets that can track what they are watching and show products and services customized to them.

Visual merchandisers of the future will have exciting opportunities to work with VR in creating shoppable moments with everything we enjoy watching and playing with.

Voice technologies are also affecting visual merchandising. Products like Amazon Alexa and Google Home are being connected in the consumers’ homes. Retailers can use these voice-activated technologies for their physical retail environments and collect voice data to enhance their visual merchandising strategies. These technologies will provide for new and exciting ways for visual merchandisers to engage.

Visual merchandisers will have many exciting digitally connected tools. Every consumer product is becoming more technologically advanced. Apps are being created to enhance the utility of devices. What started with things like our credit cards, our phones, and our watches will be in our home appliances and electronics. Even human beings are already surgically inserting computer chips into their bodies. It will to be up to brands and retailers to create engaging content to connect with consumers with these new technologies.

EXPERIENCE
Lines between hospitality and retail will continue to blur

By Jeffery Jones, director of operations, 555 International

"The retail apocalypse is upon us, run!" The only thing scary about that statement is that people believe it. Imagine a time when the only way to purchase a shirt is to click on a picture online. Hard to fathom, because online cannot overcome one simple factor—consumers are human. No matter how advanced technology becomes, it is a long way from replacing touch, smell, and feel. As quickly as the phrase "retail apocalypse" paralyzed our industry, in comes the saving philosophy known as the "retail experience." To acknowledge that there is more value in the experience of retail is one thing, but to know how to execute it is an entirely different feat.

The experience behind the new retail landscape is birthed from the blurred lines of hospitality and retail. From a five-star gourmet establishment to a hole-in-the-wall joint, we all judge places by three categories: food, service, and ambience. Hitting two of three may be enough to persuade most in trying your recommendation. Odd how you don’t simply judge a restaurant solely by its top reason for existence—the food itself. In retail, replace the notion of food with product and hold the space to the same review criteria: product, service, and ambience. Execute successfully on two of three and can you generate more traffic?

The retail environment is changing from the old school "sea of fixtures" loaded with product ("stack ‘em high, let ‘em fly") to spaces that allow for less product, but more experience-based moments. Now more than ever, the physical environment can influence consumers’ senses/experience in a unique way. Sure, you may be able to find that shirt for less online, but wasn’t it more fun buying it from a store with a chopped micro VW bus that was the perfect backdrop to the Instagram post of you wearing your new shirt?

People often assume that experience is achieved through implementing tech; in most cases, that will only get you halfway there. "Let’s add a green screen to elevate our experience and boost sales," they’ll say. Again, understanding and executing are two different worlds. If the budget allows, instead add a green screen inside a modified Chicago CTA train car. Now, having your picture taken is almost as fun as taking a picture of an actual chopped train car sitting right in front of you.

The budget may dictate a more low-tech feature. Experience does not necessarily equate to technology. Giving consumers a moment to appreciate great work that borders art like a ceiling cloud made of various sports equipment painted white can be just as effective.

To be successful in the future, retail must allow the landscape to evolve and assimilate itself like hospitality has done for ages. As important as the product and service are that retail has to offer, we need to emphasize creating a unique client experience through the environment. Retail is not passing, it is evolving.

RSR unveils role of the store in the future

Retailers see stores in the future serving as one of several ways for consumers to shop their brands. Retail Systems Research (RSR)’s recent benchmark report, The Retail Store 2018: From Apocalypse to Renaissance, notes that 63% of retail "winners"— those with sales growth higher than 4.5%—hold that viewpoint, as do nearly half of all other retailers.

"The retail store is not experiencing an apocalypse. On the contrary, it is on the cusp of a renaissance," the report concludes.

More than half of retail winners and about a third of other retailers also perceive the future store as their primary face to the customer, according to the report. They believe it will continue to serve the role of primary point of customer order fulfillment. And 41% of winners and 28% of others see the future store as a place for the community to aggregate around a value proposition. Less than 20% of retailers expect stores to be relegated to the role of showroom only.

The report is promising for companies engaged in the design and fitout of stores:

• 46% of winners and 34% of others anticipate major redesigns.
• Two-thirds of winners and nearly half of others expect to open more stores in existing markets.
• Anticipating expanding into new markets are 55% of winners and 41% of others.
• Nearly half of winners and nearly a third of others expect to replace existing stores with new formats.