HACIENDA ONLINE

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Published December 21, 2017
Volume 1, Number 12



Retailers Focus on Engaging Experiences



By Hacienda Pulse Staff Writer

Hacienda is the largest development of its kind in Northern California. In addition to residential projects, this mixed-use development of more than 11 million square feet is occupied by some 650 companies, including a variety of large and small retailers. What is interesting about this particular component of the park is that, in some ways, the incorporation of Hacienda’s retail into the overall development reflects new trends related to experience and place where goods and services are more integrated into the day-to-day life of consumers. 

This is an interesting time for the retail industry, which faces major upheaval roughly every 50 years, according to the Harvard Business Review. One such upheaval seems to be happening now, a time when a person can buy almost any type of product from nearly any location (from bathtub to vacation beach house) with nothing more than a smartphone and a credit card.
 
But the popularity of online shopping does not spell the end of retail. Contrary to rumors, the retail industry is not dying. Instead, the retail industry is doing what industries do in response to new technologies, new customer demands, and new economic situations. In short, the retail industry is adapting to those changes by changing itself.

Experiential Retail
When Apple announced new products in September 2017, it also announced a shift in the company’s approach toward its largest stores. As a company executive explained at the time, Apple’s flagship stores would now be called “town squares”; store aisles would be called “avenues”; trees would be added to shade visitors from overhead lights; and in-store classes would be expanded to include music, photography, and coding. The new terminology, decor, and classes were designed to turn Apple’s retail outlets into true “gathering places” for customers.

The following month, Nordstrom opened its first Nordstrom Local shop. At only 3,000 square feet, the Nordstrom Local shop on Melrose Place in Los Angeles is much smaller than traditional Nordstrom stores and is dramatically different in what it offers customers. The biggest difference is that there is no inventory at Nordstrom Local. Instead, customers can pick up online orders at the Melrose Place store, get the clothing purchased that they pick up there altered from onsite tailors if it does not  fit, enjoy a manicure, and get help from a personal shopper while sipping a beverage from the in-store bar. 

“There’s a new term for this, which we call ‘retail-tainment,’ ” Lisa Haddock told the Los Angeles Times. Haddock teaches marketing, brand management, and consumer behavior at San Diego State University and the San Diego campus of the Fashion Institute of Design and Merchandising. 

Others call the new emphasis on customer experience “experiential retail” and consider it the future of the industry. As one expert puts it, “retailers must use their physical stores as marketing opportunities where they can form deeper connections with consumers.” 

There is no one definition of experiential retail, nor one correct answer for retailers experimenting with this approach. In Apple’s case, it means adding more engaging classes as well as changing the interior of its largest stores; in the case of Nordstrom, it means trying out a much smaller and more specialized storefront. In other cases it may mean adding a seasonal-based experiential component to a store.

This year Google opened a holiday pop-up store on Fifth Avenue in Manhattan, for example, to promote its new smartphones. As part of that effort, the company created a human-size “snow globe” inside the store that visitors could enter to receive a photograph of themselves with one of the new phones.

“Experiential retail signals the movement toward stores as vehicles for marketing rather than just straightforward sales,” writes Kristy Stromberg, EMO of Shopkick, in Forbes. “Though e-commerce provides instant gratification through savvy search engines and easy one-click buying, there is still no replacement for the sensory touchpoint provided by a brick-and-mortar location where customers can touch, feel, and evaluate the product in person.”

In March 2017, Calvin McDonald, president and CEO of Sephora Americas, explained to attendees at a retail industry event that Sephora defined experiential retail around three core beliefs: “Be memorable, be sharable, and be repeatable,” according to TotalRetail.

“We connect clients with product, but we want it to be more than just transactional relationships,” McDonald told his audience. “We want to create demand through emotional relationships that will drive long-term loyalty.”

Sephora is developing a community of beauty enthusiasts through teaching, inspiration, and play, according to TotalRetail. The company teaches through hundreds of in-store beauty classes that draw thousands of customers. It helps inspire its customers through a 3D tool called Virtual Artist, which is part of a Sephora mobile app. Virtual Artist lets users experiment with its products digitally. Sephora also offers a monthly subscription service to its customers. Subscribers receive monthly curated product selections from Sephora merchants as well as invitations to in-store “play” dates where subscribers can meet each other to share beauty tips. 

Oliver Chen, the head of retail and luxury equity research at the investment-research firm Cowen and Company, believes retailers should based their experiential experiments on the answers to two questions: What do modern consumers enjoy doing, and how can retail become a part of that experience?

Back to the Future
Julie Bernard, chief marketing officer at marketing platform Verve Mobile, told Stores magazine that personalized and meaningful shopping experiences are “crucial to the future of bricks-and-mortar, clicks-and-mortar, and every new iteration of online-offline shopping we’ve yet to see. We know from recent data that the in-store experience is fusing with the mobile experience, and that shoppers, particularly Millennials and Generation Z consumers, consider their bricks-and-mortar engagements to be just as powerfully social and multichannel as any other part of their on-screen day-to-day lives.”

For the National Retail Federation’s 2017 Consumer View report, 3,002 Millennial and Gen Z consumers were polled about retail shopping. The data show that “in-store experiences, accompanied with fear of missing out, still drive people to branch out beyond their laptops and smartphones,” according to Digiday, which says the report found “49 percent of those surveyed visiting stores more often than they used to because of new entertainment or food options. Nearly half of respondents said they were shopping in more stores than they were a year ago.”

Apple isn’t the first to think of a retail establishment as a town square. As The Atlantic  magazine learned from Tracey Deutsch, a professor of history at the University of Minnesota, the man who designed the first indoor mall “saw himself as creating new public space.” That man, Victor Gruen, understood retail “as a key site for public encounters,” according to Deutsch. 

The nature of those encounters is now changing, and visionary retailers may delight their customers with ever-more innovative and surprising services and activities in the future.