C-Series 7: How Covid-19 is changing the role of physical stores, Part 2

Mar 04, 2021

GDR Managing Editor John O’Sullivan explores how the pandemic has accelerated the shift towards hybrid, flexible, experiential physical stores with less traditional retail space.

In our last C-Series article we explored how the growth of ecommerce and the proliferation of online logistics systems during the pandemic have changed our approach to physical retail. But omnichannel integrations aren’t the only innovations driving change in stores. We’re also seeing a significant shift in the way retailers are leveraging and making the most of their physical spaces.

Even as the experiential web, technologies like AR and VR, and immersive virtual worlds that merge gaming with commerce continue to mature at a rapid pace, there are still tactile, human and theatrical elements of physical retail that online simply can’t match.

In this second part of our C-Series article, How Covid-19 is changing the role of physical stores, we explore how the store of the future will go beyond retail and be a hybrid, flexible, experiential space that keeps local communities coming back for more.

 

More than a store

H&M Looop

 

With the act of buying now so easy and seamless online, retailers need to put their physical spaces to work in new ways. In the last article we discussed the role of stores as fulfilment centres and media hubs, and there’s also a big shift towards retailers using their physical spaces to merge retail with research, product development and production.

At luxury skincare brand IOPE’s Lab store in Seoul, just one of the five storeys is dedicated to displaying product, while two of the levels are off limits to customers entirely, hosting the brand’s scientific skincare research lab. Customers can have their genes and skin condition examined in the store’s skincare analysis room and receive customised skincare services throughout the store based on the results. By merging their laboratory and retail offer, IOPE puts forward a strong message about the scientific credentials of its products and its personalised services.

Other retailers are successfully bringing elements of their factories into their stores. Freitag’s ultra-transparent Sweat Yourself store in Zurich champions the brand’s sustainability credentials by inviting customers to make their own designer bags using the recycled truck tarpaulins that feature in all of its products.

H&M has also created a brilliant piece of retail theatre in its Stockholm flagship to highlight its latest sustainability efforts. Its proprietary Looop machine, which transforms old clothes into new ones, is on display behind clear glass walls so that shoppers can watch staff – in white coats evocative of a science lab – at work creating new garments. Customers can pay $17 to have their old clothes transformed into new ones as part of the local manufacture process.

The physical store of the future will not solely be built around transactions, but around all elements of the brand from research and development to the supply chain, manufacturing and development of media, including for livestreaming and delivery of concierge services. The challenge for retailers is to identify their key differentiators and to build their stores around them.

 

Hybrid-thinking

Starbucks Smart Lounge

 

Another key tactic that physical retailers should be adopting is the creation of hybrid spaces that merge their offer with their customers’ other retail and lifestyle missions.

Traditional Chinese Medicine (TCM) pharmacy Tongrentang has responded to the popularity of health and wellness amongst younger consumers by opening two fusion cafes in Beijing serving drinks with functional ingredients. The cafes on the ground floor of the locations prime customers to explore the diagnosis and treatment area upstairs where they can learn more about the brand’s diet-based, TCM consulting services.

Starbucks has responded to the rise in remote working with a new concept in Tokyo that is part cafe, part co-working space. The ground floor of the two-storey Smart Lounge space in the Circles Ginza building looks and operates like a normal Starbucks. But the second floor is run in collaboration with co-working specialists ThinkLab and includes private individual booths and larger meeting spaces that can be reserved in advance.

Elsewhere, a newly-opened mall in the Chinese city of Chongqing called The Oval also takes a multi-purpose approach. Retail is only one third of the mix at the complex, sharing the bill with digital and physical art galleries, as well as wellness-based enterprises. In this way the mission of the mall is to provide a space that serves not just commerce but a broader fulfilment of locals’ cultural and physical needs.

Another part of this same trend is the real resurgence we’re seeing in shop-in-shops. In the US, Apple and Ulta have recently entered partnerships with Target, while in the UK John Lewis is bringing its department store offer to its partner supermarket Waitrose, and Sainsbury’s is collaborating with Dobbies garden centres. Each of these hybrid innovations seems to be a win-win for all parties. As well as strengthening and diversifying the retail mix in stores that are still experiencing high footfall, they’re desirable to consumers because they allow them to tick off multiple missions in one visit.

 

Flexibility and freshness

7-Eleven Signature 3.0

 

One of the biggest difficulties facing physical retailers in the age of omnichannel is how they drive return visits to their stores, even from satisfied customers. To rise to this challenge stores must have flexibility and modularity baked into their design allowing them to serve multiple purposes and missions.

7-Eleven’s tech-enabled Signature 3.0 hybrid convenience store concept in Seoul is the best example we’ve seen to date at merging flexibility with another key element of retail’s future: automation. During the day the concept store is staffed like a normal convenience store, but between midnight and 6am it is fully automated, with customers required to follow a series of security measures to enter the space and buy products. By embracing this flexible approach driven by automation, 7-Eleven is able to better serve different needs of the local community, without drastically altering or reducing the role of its staff.

Stores of the future will also need to constantly update themselves to make their product and offer appear fresh. Koibird in London’s Marylebone is an immersive fashion boutique that takes the idea of freshness to the next level by completely reinventing itself every six months based around a new theme. The stock, the featured designers and the appearance of its physical location and website is completely overhauled to create an updated offer that gives consumers a reason to return.

While the idea of reinventing a brand twice yearly is obviously completely unworkable for most retailers, the general principles of Koibird’s approach should be applied to more scalable elements, such as specific ranges, categories, or even rotating pop-up spaces within stores. In China many brands use short-term pop-ups to create a feeling of exclusivity and desirability around their products. New digitally-led, immersive pop-up spaces like Sook and Situ Live in England suggest this thinking is now heading West.

 

Community clubhouses

Nike Unite

 

Another way to drive repeat visits is by creating a community hub that customers feel ownership over, which is one of the many things Nike does well. Its recently-launched Unite format is part store/part clubhouse for the local sporting community. Like all new Nike stores, stock is customised based on the Nike+ purchasing data of local residents, but the store is also the launchpad for two of Nike’s big community-focused initiatives: Made to Play and its Community Ambassador programmes. This makes the locations the go-to place for local athletes to find out about sports teams, facilities and coaching, or to apply for funding and sponsorship.

The brand’s Rise format, which launched in Guangzhou, China last July, takes the concept even further by positioning the store as the focal point of an extensive schedule of experiences taking place both within the 22,000 square foot space, and throughout the city of Guangzhou. The Nike Experiences section in its app claims to “turn the city into a digitally-enabled playground for Members”, all revolving around the brand and its store.

This is a great example of a brand using its customers’ digital behaviours to drive them in-store, which is something we’re starting to see more of. For example, the recent Gucci and The North Face collaboration with Pokemon Go required customers to visit physical pop-up stores for the collection in order to earn digital rewards in the game.

Burberry has gone even further with its Social Retail boutique in Shenzhen, China, which is powered by Tencent, the owners of WeChat. Customers’ social interactions with the brand on WeChat act as in-store currency to unlock exclusive content and services. In this way the store is a physical clubhouse for the brand’s online communities.

 

Flagship appeal

On NYC

 

In the last C-Series article we talked about how physical flagship stores can still play an important role in the omnichannel future as a focal point for virtual events targeting a global audience. They will also retain great value as a source of brand-relevant experiences you simply can’t get anywhere else.

Despite the retail downturn, brands like Korean eyewear specialists Gentle Monster and Chinese bookstore Zhongshuge continue to invest in sprawling experiential flagships that immerse, challenge and delight consumers. Elsewhere, Dutch lifestyle brand Rituals has launched the four storey House of Rituals in Amsterdam, which is effectively a Rituals-themed department store where every element – the fragrances, the food and the beauty treatments – represent the brand’s unique take on these categories.

Finally, there’s also still stock in simply offering great retail experiences, as seen at On NYC, the first flagship store from premium running brand On. Using cutting edge technology hidden in a motion sensing wall and digital floor tiles, the flagship claims to offer the most accurate gait analysis and foot measurements you’ll ever have. It’s fun, theatrical and the invisible technology turns the act of getting your feet measured into a magical experience. No matter how far the retail pendulum swings towards ecommerce in the future, there will always be a place for best-in-class physical retail like this.

 

If you’re interested in talking to us in more detail about any of the themes discussed in this article, or the challenges you’re facing as a business, we’re here to help. Get in touch with rachel@gdruk.com

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