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Paco Underhill on Retail in 2016: “A Bunch of People Will Go Under”

If there’s any one certainty in the chaotic and changing world of retail, it’s that consumers are increasingly putting shareable experiences ahead of shopping.

Social media has been a proven driver of sales. A survey by Shopify last year found that nearly two-thirds of all social media visits to the company’s stores came from Facebook, while Pinterest reported that consumers redirected to a retailer’s e-commerce site from its platform were 10 percent more likely to make a purchase.

Footwear retailers who were late to the social media party are now hurting. DSW’s outlook has been sluggish as the company fights to gain back ground by expanding its online presence and offering new in-store experiences.

It begs the question: what should a shoe store look like in 2016? According to Paco Underhill, author of Why We Buy: The Science of Shopping, a good store today is likely vastly different from what we thought of as a good place to shop in years past.

“If I look at what made a good shop in the year 2000 and I look at what makes a good shop in 2016—there are differences, and those differences are a reflection of the evolution of us.”

Speaking during a seminar at FFANY’s New York Shoe Expo last week, Underhill, an environmental psychologist and author who studies consumer behavior, knows a thing or two about how to successfully sell shoes. He once worked on renovating the shoe sales floor at Selfridges in London, the luxury department store that now boasts the highest sales per square foot of any shoe store in the world.

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In an age when a single Instagram post can make a product sell out, traditional advertising is less important than social media. For independent retailers in particular, Underhill says this represents an opportunity to create unique experiences that larger retailers can’t replicate.

“I have a friend who sells evening wear, and if you send her an image of the dress you’re wearing she can guarantee no one will show up to the same event in the dress you’re wearing,” Underhill said.

“She has stopped spending any money on advertising,” he continued. “All of it is now based on social media, and she has an active program getting the women who buy things from her to send her pictures of them wearing what [they bought]. And those pictures go up every day. Her advertising budget five years ago was five-figures. It’s now zero.”

According to Underhill, creating compelling in-store experiences isn’t just about how much you spend, but about spending on the right things. Visual merchandising is a powerful tool. During his presentation, Underhill displays the image of a beautifully organized shoe closet. “It’s eye candy,” he said.

“Retail historically has been about birth, life and death.”

Retailers, in his view, should be promoting shoe storage as much as they discuss shoes, and using in-store displays as a model of how to perfect one’s shoe closet. In-store monitors can also be used interactively, to showcase social media posts of customers and their purchases, helping to express the fun and excitement of being a shoe collector.

Underhill cited progressive shoe and accessories stores as places where customers can now bring the outfits they want to adorn to try on with their shoes or jewelry. This, he said, is part of the magic of visual merchandising.

“Most independent shoe stores actually have the space to be able to put a dressing room,” he said. “If you see someone coming in with their prom dress to try on a pair of shoes, it sticks out in your mind, and makes you think, ‘well maybe I should be doing that.’ It adds to the romance of it.”

Brick-and-mortar is also increasingly becoming a space that works in tandem with online. A customer might choose to peruse styles on their phone before going to a shop to touch and try-on in-person.

According to Underhill, shopping online isn’t just about shopping, it’s about information acquisition. The job of retailers then becomes how to make the process of acquisition easier.

Underhill broke down the online shopping process into three steps: online research, visiting (what he described as “petting the product”), and purchase. “One of the things that’s very important if you’re a brick-and-mortar merchant is to understand what that process is,” he said.

But online shopping isn’t ubiquitous. Underhill said the way we shop is based on factors like location and delivery needs.

“The way we shop online here in New York City and the way we shop online in Scarsdale less than 15 miles way is different. So part of what we as retailers need to look at is how do we adjust to those needs.”

Underhill pointed to the grocery industry as an example of a space that has gotten online delivery right. He said that by a certain age, roughly 80 percent of a person’s purchases are routine, “So why go to store to buy the same thing over and over?”

At the same time, many of the same people who use online delivery for groceries still go to farmer’s markets. Why is this? Underhill said people still love the thrill of discovering something new, and it’s that remaining 20 percent of non-routine purchases that drive the retail business.

“Retail historically has been about birth, life and death,” he said. “If I look at the 10 largest merchants in 1960, 1970, 1980 and so on – that top 10 list changes dramatically.”

With Sports Authority already having called it quits this year, Underhill predicted several more big shake-ups in the coming months—but reassured that some good would come of the bad.

“Is it scary? Yes. But I also think that this process is necessary because it creates compost. Because when somebody goes under—and we’re going to watch a bunch of people go under before the end of this year—it just frees up space and people for whatever comes next.”