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Why Omnichannel Brands Say They’re ‘Feeling the Squeeze’

Consumers are learning to expect more from retail, and omnichannel brands are working tirelessly to keep up with the demand for new and innovative experiences, both in-store and online.

According to NewStore’s Omnichannel Leadership Report, released Wednesday morning, brands are “feeling the squeeze of evolving customer expectations and increased competition.” Store closures in recent seasons point not to consumers’ unwillingness to shop, NewStore argued, but to brands’ inability to find an approach that effectively draws people in.

“It’s hard to capture consumer attention these days, which is why brands are merging entertainment and technology with traditional shopping,” NewStore analysts said. They pointed to the fact that in-store experiences must be as immersive and engaging as the online experience in order to tear shoppers’ attention away from their devices.

Analysts pointed to Nike’s House of Innovation 000 as a shining example of experiential retail at its best. The athletic brand’s 68,000-square-foot Fifth Ave. retail store is home to a sneaker bar, pickup lockers that allow shoppers to reserve items while browsing outside of the store, appointments with brand experts on new products and technologies, and more.

Athletic apparel brand Lululemon is experimenting with the format of its retail locations, analysts said, by opening four different kinds of new stores, ranging from pop-ups to large-scale experiential retail hubs, while Abercrombie & Fitch is taking the opposite approach and downsizing. The brand will close its flagship stores and instead focus on smaller, more focused shops across the country.

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“What this tells us is that there is no longer a specific formula to brick-and-mortar. It’s clear physical retail still matters, but it’s up to the individual retailer to make the most of its real estate,” analysts said.

NewStore also pointed to subscription services as an omnichannel approach that could stand the test of time. Analysts pointed to recently released data from McKinsey that shows that the category has grown by more than 100 percent annually over the past five years.

There’s an element of surprise and delight, as well as perceived exclusivity, that comes with these experiences, analysts said. Consumers are keen to try new products that are personalized to their tastes and needs, and the subscription model offers them the opportunity to experiment with minimal effort. Best of all, there’s a huge opportunity for recurring revenue for brands.

American Eagle, Ann Taylor and Urban Outfitters have all launched their own services in recent times, likely spurred by the massive success of once-startups like Rent the Runway and Stitch Fix.

But even as far as in-store experiences and convenience-based services can court consumers, nothing engenders goodwill like a commitment to sustainability. For omnichannel brands looking to succeed in the modern retail era, a sustainable supply chain—or a pledge to work toward one—is an absolute must.

Today, there are 131 certified B Corp fashion and apparel companies, including popular brands like Allbirds, Athleta, Cotopaxi, Eileen Fisher and Patagonia.

Other companies have committed to specific goals, like Saitex denim mill (which services Everlane and J.Crew). The mill recycles 98 percent of the water used in production.

Fast-fashion leader Zara has pledged to craft its collections from 100 percent sustainable fabrics by 2025, and Abercrombie & Fitch, Fast Retailing Co., and Tapestry, Inc. have signed on to the U.N. Global Compact. As members, their operations must align with the organization’s 10 universal principles for human rights, labor, environment and anti-corruption.

NewStore analysts believe that brands and retailers who take on these commitments stand to benefit in the long-term. The Retail Industry Leaders Association (RILA) found that nearly 68 million Americans “base purchasing decisions on their values,” and they will also spend up to 20 percent more on “environmentally sound products.”

“Shoppers are more mindful now than ever before, especially the millennial constituency,” Newstore analysts concluded. “They have an unwavering expectation that the brands they buy align with their personal values.”