For its first European retail flagship in the heart of Munich, audio electronics manufacturer Harman enlisted Gensler to design a vibrant retail experience to showcase the company’s portfolio of audio brands and technologies. The design of the space weaves together Harman’s expertise in audio technology, its rich heritage, and the local German automobile culture through a unifying visualization of sound. (© Hansi Heckmair courtesy of Gensler)
We are long past the point of discussing how technology has interrupted our lives and changed our perspective of the world. We are now in the post-disruption era, and in many sectors including retail, a new normal is emerging.
The carnage of stores closing is still around us, but at the same time we are finally at a place where we can connect the dots to understand how retail is evolving—more efficient through technology and more engagement-focused through experience. The biggest idea driving the newest and most successful retail strategies is wrapped around how we value things—especially time.
It is easy to get caught up in the numbers and media discussion around the doom and gloom of retail. You might have even read about Coresight Research’s 2019 outlook finding that store closures are up 23 percent from this same time last year, or a recent Credit Suisse report forecasting 20 to 25 percent of malls to close over the next five years. However, all retail is not going to online. In fact, JLL research reports that the 100 online retailers are moving to brick and mortar, announcing plans to open at least 850 physical stores over the next five years.
So, what is really going on? We are seeing that the most successful retailers are using both: online and offline combined. The key is the critical balance between the efficiency of online with the engagement of offline.
Technology’s convergence with consumer lifestyles has provided us with a new lens for how we elect to spend our precious time. Working, playing, and living are no longer distinct from one another and the blurring of these lines has resulted in time being stretched.
This translates to retailers needing to balance the shopping experience strategically. According to Gensler’s Experience Index for Retail, only 49 percent of shopping time is about the purchase. This is a shopper in task mode and seeking an efficient transaction process. According to our data, the other 51 percent of the time is a person’s intent to get more value for the time he or she spent shopping. This is often about experiences that are offered to the shopper in physical spaces. Design is a critical differentiator in whether a consumer has a great experience.
This concept of the post-disruption shopper continues to give shape to the following emerging trends:
1: The fast and slow of retail. Simply put, the transaction should be fast and efficient and save us time. But the engagement needs to be about entertainment, inspiration, discovery, and social experiences—and these are in real time.
Retail done fast is about consumers having the ability to visit a store and find the right size in a matter of minutes. This includes the ability to go into a physical retail store and find what you need, purchase it quickly, and move on to your next task.
At the same time, we are seeing a retail movement where people are looking at activations in a physical space and the role that the store plays in creating community. We see stores taking lessons from dynamic and thriving public open spaces that support a wide range of activities and help create memorable moments.
If you remember the early years of Starbucks, the company broke the mold by establishing its brand as being more than merely a transaction and task. Starbucks helped create a coffee culture where people went to meet friends or work when you did not want to go into your office—the third space. We now see the company opening Starbucks Reserve Roasteries in Seattle, Shanghai, Milan, New York, and Tokyo, with Chicago opening later this year. The designs of these roasteries go beyond being a third space and into the realm of inspiration, entertainment, community, and discovery. Each location brings together an interactive experience that showcases the coffee culture and roasting process.
2: Retail is human. Retail is no longer about products.
With the maturity of e-commerce and effort to bring that transaction mode into the physical store, there has been a resurgence of the critical role that sales associates play in brand engagement. PwC states that 71 percent of people believe that sales people in a retail environment have a significant impact on the customer experience.
It is about embracing the customer, and the service professional is on the frontlines of creating a relationship between the brand and people. The human contact concept was taken to a new level with the Apple Store. Since employees are not on commission, the retail’s atmosphere is free of sales pressure. Apple treats its retail stores as space for community building and providing a human touch to its products. By increasing the number of employees per store, there is more focus on listening and efficiency in helping customers.
Engagement is also about inspiration and how that transcends the online experience and into the physical stores. Fashion and beauty are now realizing the importance of having individuals on staff who contribute to that experience by bringing inspiration while removing any friction from the shopping journey.
3: Retail is back, but not the same. Retail has already been disrupted, and we are now moving into a period of transformation.
For the past decade, our digital behaviors have changed our expectations of the brands we interact with and the physical spaces they occupy. People have grown accustomed to a frictionless experience.
Catering to people’s appetites for efficiency and convenience, Amazon Go locations remove the pain from the retail journey. Through unmanned stores and “grab and go” shopping, Amazon takes task mode to another level. Moreover, with Amazon’s recent announcement to build out a physical grocery store presence that is distinct from its Whole Foods chain, one can only wonder about the possibilities with frictionless transactions.
In addition, technology in retail has made the transition one from screens everywhere, to technology in service to the customer. A new retail-as-a-service outfit, b8ta, uses sensors embedded in the ceilings and floors next to each product to collect shopping data and customer feedback, allowing product brands to track engagement.
What I find most fascinating about this new era of retail are the retail opportunities for boutique stores to have a physical presence on high street. Gabriela Hearst, a New York brand that specializes in Uruguayan luxury fashion design, is an excellent example of a boutique store that would not have been able to afford Madison Avenue rent just five years ago. However, with the emerging flexibilities in leasing even on high street, including short-term leases, retailers can test new markets, creating a rich and vibrant new look to retail.
Purpose of Place
So, what do these trends mean for our existing retail developments? One recent ICSC study surveyed generation Z shoppers—those between the ages of 13 and 19 years of age—and found that 76 percent of this up-and-coming group of consumers prefers shopping in physical stores versus online. This emerging generation of consumers are wanting to connect with other people.
Retailers are seeing a valuable purpose of place in retail, and it is the synthesis of engagement and connection. Brands are forging meaningful connections between buyers and their brands in physical world. The Gensler Research Institute has found that people who do two or more activities in a physical store rate that same store as one of their favorite places nearly twice as often as those who only engage in a transaction.
Retail success is no longer being measured through sales, but also through brand awareness and social media metrics. Companies are now overlapping their marketing and real estate portfolios to engage with their audiences in new ways. At the same time, consumers who reported the retail space they visited to be extremely well designed on average rated their experience nearly twice as high as those who said the place was poorly designed.
We see retailers experimenting with the concept of place. For Sephora’s 20th anniversary, the company held a special two-day event in Los Angeles. The party, titled Sephoria House of Beauty, offered master classes, photo ops with special guests, and product demos. This immersive experience provided people with a chance to connect with the brand in Sephora’s space.
In another scenario, with the Harman Experience Store in Munich, not only can visitors to the store demo its popular audio brands, but the space can easily be transformed to host nightly lectures, concerts, and other events. We are also seeing retailers repurpose existing structures and assets to create vibrant, engaging, and memorable places that create new connections with a brand.
The idea is for brands to go all in and fully embrace creating a holistic clicks-to-bricks experience that blends the personalized online retail experience with the in-store browsing experience. This is the opportunity for those in retail real estate.
Taken together, these three trends paint a picture for how retail is resetting itself going forward. Design, technology, and people can be brought together in unison to create high demand and high-sales-per-square-foot retail success.
As consumers, we come for the experience and stay for the retail.
DIANE HOSKINS, FAIA, is one of two Gensler Co-CEOs. As an MIT-trained architect and an MBA from the Andersen School at UCLA, Diane’s career has spanned architecture, design, real estate, and business. She has broad responsibility in running the firm, which spans over 6,000+ employees networked across 48 offices in the Americas, Europe, Asia and the Middle East. She is also Chair of Gensler’s Board of Directors. Ms. Hoskins will also be speaking at the ULI Fall Meeting, of which she is one of the co-chairs. Register here.
