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Why Flexibility is the Key to the Store of the Future’s Success

New shopping habits molded by COVID-19 are making what was a once necessary shift to store flexibility even more of an imperative, especially as more shoppers adopt curbside pickup and buy online, pick up in store. In a session during PSFK’s Future of Retail 2020 digital event last week, Melissa Gonzalez, founder and CEO of retail strategist Lionesque Group, highlighted that individual stores now have the responsibility of serving the dual purpose of discovery and fulfillment.

Gonzalez cited Adobe Analytics data indicating that the number of orders placed online and picked up at stores by consumers surged 208 percent between April 1 and April 20 compared with a year ago. With such a jump in pickups, it’s tough to see the trend falling off to pre-COVID numbers, illustrating that brick-and-moratr priorities must continue to shift in this direction.

And while the investments required to modernize a sprawling store base might seem intimidatingly high, the payoff is great for retailers that are all-in on this imperative dual reality. While Target fulfilled an astounding 80 percent of its e-commerce orders from stores in the first quarter, this method actually cut costs 45 percent from traditional warehousing delivery.

The store will have to be flexible for product allocation to create an environment that can fulfill multiple purposes throughout the year, whether it’s through pickup, returns or even hosting events.

“Sometimes we’ll need it 25 percent back of house and 75 percent front of house, sometimes we need it to be 50/50 and sometimes we need it to be the complete opposite so that it can efficiently serve as that point of fulfillment,” Gonzalez said.

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When experimenting with modular store designs, retailers also must take an online order’s journey into account as shoppers continue to merge their habits, particularly in optimizing package dwell time so that parcels are not sitting in a store for multiple days on end. This might involve expanding and abridging processing stations for product intake, or retraining staff members who are only used to more store-related tasks.

“We want to think about how we rearrange and use valuable floor space when, for example, we don’t have as many pickups,” Gonzalez said. “Maybe we want to use that moment for a pop-in shop or another spotlight. Maybe we want to just have a waiting space there. We also want to think about creating dedicated spaces for effective queue management and package tracking.”

As store designs evolve, display windows will have to deliver on a new purpose, becoming more of a storytelling module or even a point of purchase.

“During the week, when traffic is lighter, having fully merchandised windows and displays with QR codes might be most impactful,” Gonzalez said. “However, during higher traffic and weekend hours or days, the checkout or the pickup moment may take precedence as the window’s focal point.”

These displays, regardless of their store placement, must be relevant to shoppers in real time if the retailer has any intention on getting a real return on investment from the technology. In another session, Trevor Sumner, CEO of retail marketing engagement platform Perch Interactive, said that today’s digital signage is the “banner ad of in-store retail,” noting that most displays are great for labeling and brand building, but go no further to help shoppers buy a new product.

By contrast, Perch’s product line uses advanced computer vision technology to detect the products shoppers touch or pick up. Perch’s sensing technologies are designed to analyze in-store customer behavior to detect which products are drawing consumer engagement, and respond with a highly personalized digital message or application at a critical moment of product consideration.

“All of the design starts opening up when you have a platform for instrumenting each behavior at the shelf, each interaction with a product, each media impression that can be the packaging, the shelf talker [that displays product info], the QR code or an interactive display,” Sumner said.

He also made a compelling argument that stores are still where the money is, pointing out that omnichannel shoppers spend seven times as much as online-only shoppers, with return rates dipping 70 percent if the shopper first purchases the item in the store.

Sumner noted that retailers actually spend the most of their ad dollars on digital as if most shoppers spend the majority of their money online, when the inverse remains the case. This means the implementation of digital media within the store should be more of a priority for retailers, even though it hasn’t been.

“The reason is because we lack the ability to do product-level information and we lack data associated with it so that we can optimize these campaigns,” Sumner said. “If you think about touching a product as a ‘click,’ and you think about every single row and aisle in every store, that’s billion of impressions, product interactions and purchases, with almost zero digital media.”

Regardless of the technology implemented within the “flexible” store environment, there is no cookie-cutter answer to the type of store that best serves each market. Success is still going to come down to testing, iterating and gathering information on shifting shopper habit metrics, such as whether the average time at checkout is less than it used to be, whether the average shopper needs to check out on their own or whether the average consumer is okay with an interaction with a retailer’s storefront window.

Gonzalez said that while there will continue to see an increase in small-format stores, retail’s future will still consist of a mix of physical shopping options.

“In key markets, you’re going to see those flagship destinations, but it depend on the scale of the brand or the retailer,” Gonzalez said. “If we go to that mass retailer, what I would say is they are re-evaluating the footprint, they’re thinking of capital expenditures across the map and they’re looking at what the purpose each physical location serves. In certain markets, it’s going to make sense to have a bigger footprint, it’s going to make sense to be there 12 months of the year, but in other cities, it might make sense to show up at key times during the year, such as new product launches, new collaboration announcements and holidays.”