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The Challenges of the New Retail Model

How to encourage retailers to overcome their own internal structures

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Lately, I’ve found myself repeating the same argument over and over with each new retail project, regardless of whether or not the client is a new or existing relationship. The argument has to do with project financing and budgets, as well as the development and management of certain aspects of the project. Or, dare I say, the most important aspects of a retail project. I’m talking about the experiential components.

Time and time again, it has baffled me why retailers can’t manage to get past themselves in this seemingly unending internal struggle against old and new – be it a way of thinking, the way things get done or how things are handled; the list goes on. My impression is that no one is bold enough to say, “Yes, we should rethink how we handle these things.”

I am referring specifically to digital integration, the one thing everyone wants yet no one wants to pay for, and the accompanying content, which everyone acknowledges is vital to  connect with customers, but no one wants to manage and curate.

As I already said, baffling. So here are my observations and, perhaps, naïve recommendations that may be used to spark internal conversations, hopefully to help propel things forward:

1. There needs to be some budget accommodation to allow for the desire to add in-store experiences. Why are construction budgets alone bearing the cost of experiential components? While it seems appropriate that costs of specifying and installing hardware and equipment should come from the construction budget, the actual conceptualization and design of experiential components really should be financed through a retailer’s marketing group.

I’ll share with you my rationale: A company’s marketing department is the group that sets the tone of voice for the brand. They typically control social media, and they engage and collaborate with the agencies that develop the brand’s ad campaigns. These are all vital touchpoints that speak directly to the consumer. Why wouldn’t marketing finance and manage the creation and development of such deep customer touchpoints that, through interaction, the customer can directly engage with the brand? If you can’t answer that question, try this one: Who creates and installs your in-store messaging and signage? And who is responsible for developing the signage program and in-store graphics to promote current ad campaigns? I’m hoping you see the parallel.

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2. Who should be responsible for financing content development and managing its cycle of renewal? If I were to ask who is responsible for ad campaigns, you wouldn’t need to re-read number one for this answer. Enough said. Why aren’t store development teams working more closely with the marketing teams? It defies logic.

3. There should only be one version of you. What do I mean by that? I mean that if I buy something from a retailer online, I can either ship it back to them or return it in store. No questions asked, absolutely channel agnostic. And the prices better be the same. Is this a supply chain and operations issue? Sure. But if you can’t do this now, you better figure out how  and fast. If that means retooling your infrastructure, how profits are allocated, or whatever other logistics impede this evolution, it must be done. This is probably one of the biggest challenges legacy retailers have to overcome.

4. New KPI metrics must be developed for measuring the ROI of stores. Should it be a store plus 25 miles of catchment area from online sales? Some smart mall operators are looking at this as lease terms. We continue to witness the consumer-shopping conundrum: store visits are up, yet in-store sales are down. Peoples’ shopping habits are radically different and vary by generation.

Store construction budgets are developed in direct relationship with the ROI expectation. Can data analytics be tied into unique customer profiles that track loyalty? What is the value of customer love? How can social media play into ROI, and how can a consumers’ personal social networks create value for the store based on Instagram posts, Facebook likes, Pinterest pins, tweets, etc.? Maybe once retailers redefine ROI metrics, the merchants may no longer win the in-store space allocation war, and experience zones will be allowed ample space within stores to truly host an experience without the eternal struggle between product capacity and the customer journey.

5. Be bold. I know I’ve preached this before, but it definitely bears repeating. Don’t be afraid to fail. To fail is human; just be sure to apologize if someone gets hurt. Fail faster (love that expression). Experiment all the time. Use your stores as labs; maybe not all of them, but definitely ones in key markets. People love (and sometimes expect) to be part of the show – just look at what’s happened because of social media. Involve your customers in the experiments. Acknowledge their opinions, which are out there awaiting response, by incorporating the feedback in store, whether through product buys, the design of the environment itself or the in-store programming offered. Let it make a difference. It’s about engagement, after all.

Let us designers help guide you, Mr./Ms. Retailer, to become the next best version of you, because without our guidance you may cease to exist. Scary? You bet. But sometimes taking chances is the only way to innovate.

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Kathleen Jordan, AIA, CID, LEED AP, is a principal in Gensler’s New York office, and a leader of its retail practice with over 24 years of experience across the United States and internationally. Jordan has led a broad range of retail design projects as both an outside consultant and as an in-house designer. She has led projects from merchandising and design development all the way through construction documentation and administration, and many of her projects have earned national and international design awards. Contact her at kathleen_jordan@gensler.com.

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