The space age: how to maximise store value
By Louise Etherden, Head of Proposition and Chris Thompson, Head of Retail, CACI
Now more than ever, retail stores are in flux. While the harbingers of High Street doom decry bricks and mortar, the reality is more subtle than that. Yes, the role of the store is changing, but its significance to retail remains huge. Our stats show that shopping frequency declined by 13% last year, but purpose-led shops which focus on a very specific end goal are up by 10%.
The important questions for retailers now should therefore be focused on how they quantify the role of the store. How do stores contribute to incremental sales across the business? Can they add more touchpoints, through features like Click & Collect, to meet the changing demands of consumers?
As retailers get to grips with the changing role of stores as brand centres, format and layout takes on added significance. Crucially, those brands which are disappearing from our High Streets and retail parks have all failed to experiment and innovate in format and layout. The risks of ignoring these opportunities are clear for all to see.
Evolution or revolution
At first glance, stores optimised for experiencing specific brands may have the edge on functional and convenient formats and layouts designed for time-pressed shoppers. But brands throughout retail are driving margins and sustaining customer loyalty through format and layout experiments – not just those re-inventing the wheel with space age concept stores like Dyson’s demo flagships.
Since its flirtation with bankruptcy in 2012, Waterstones moved towards a localised buying and ranging model, allowing local stores to stock what they like and price it accordingly. In recent years this has seen greater and greater diversification of formats and layouts.
Some locations with coffee concessions have a distinctly mature-feel targeting older age brackets, others are optimised for children and young people to stay and play, while the brand recently launched a women’s only pop-up in Shoreditch to mark International Women’s Day. A return to profit and newly completed takeover for Waterstones demonstrates that brands that can reflect the different consumer missions out there are able to get ahead.
Supermarket concessions are an obvious but successful tactic that has evolved in recent years. While the Sainsbury’s-Argos tie-up is underpinned by joint ownership, Decathlon’s new concessions in Asda present new opportunities for convenience with their Click & Collect offerings.
This is a clear departure from the model of Decathlon’s existing stores, with their huge range and footprint, and it shows the importance of brands understanding the local mix of consumers, shopper missions, and purposes, not to mention raising the profile of the brand.
Is the store maximising its footprint? Can it do more to attract new kinds of shoppers? And how can it boost the offer available to its loyal, existing customer base? While it's clear that not every store is ripe for a concession as with Maplin and Game, brands working together allow retailers to add variety and keep interest high.
In the case of Asda and Decathlon, as online shopping increases among older shoppers, and with older shoppers registering some of the highest online sales values, Decathlon’s experiment could soon become a strong and established part of its strategy. Following the announcement of the proposed Sainsbury’s-Asda merger, there may be opportunities for more varied concessions across the Asda estate.
Clicks in the bricks
Varying store format and layout dependent on core customers is increasingly being supplemented by new features and tech. Zara’s Click & Collect only store launched in London earlier this year, while the news has just landed that the company is investing in robots to speed up order fulfilment – an exiciting prospect for the shoppers in 44 countries where it offers a Click & Collect service.
CACI is increasingly seeing the development of a “halo effect” from physical stores driving improvements in cross-channel selling – and as more cross-channel data becomes available, retailers can take better advantage.
The added convenience for consumers is a two-way street though, with retailers seeing clear benefits. Unsurprisingly, Click & Collect has increased by almost a quarter in the last three years. However, more significantly, our stats show that 12% of shoppers who use it go on to make another purchase in-store and 61% make a purchase at the same retail centre.
The key takeaway for retailers is not to diversify format and layout for the sake of it. Brands with large estates could benefit from local variation, but others may find that their formats and layouts are maximising their offer for customers, for example category-specific offerings like River Island’s childrenswear stores. Adding Click & Collect may act as a catalyst for other opportunities, but some locations may see more value in partnering with other brands through concessions.
Pureplays entering the High Street show that its demise has been greatly exaggerated. But for every Zara, Waterstones or Asda, there are strugglers like Carpetright or Mothercare. As shoppers change by making fewer trips, but converting at a higher rate, brands need to react instead of simply relying on existing habits to see them through.