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The Compelling Case for Experiential Retail

March 22, 2022


In the years prior to the pandemic, physical retail was in trouble and the future appeared bleak. Some pundits expected the pandemic to be the last nail in physical retail’s coffin. The pandemic did, in fact, hasten the growth of e-commerce; however, many physical retail locations also managed to survive. Journalist Suzanne Kapner (@SuzanneKapner) reports, “After losing ground to e-commerce, bricks-and-mortar stores are back in style. Retailers this year are expected to open more stores than they close for the first time since 2017, according to an analysis of more than 900 chains by IHL Group, a research and advisory company. Most of the growth is coming from mass merchants, food, drugs and convenience chains.”[1]


One of the reasons physical stores are making a comeback is nostalgia. When stores were shuttered in an effort to control the spread of the coronavirus, people realized they missed their shopping experiences. Back in 1970, Canadian recording artist Joni Mitchell recorded a song entitled “Big Yellow Taxi,” whose famous chorus says in part, “Don’t it always seem to go, that you don’t know what you’ve got till it’s gone.” Another reason physical stores are making a comeback is that, ironically, they can support e-commerce sales. Kapner explains, “Stores have become integral in fulfilling e-commerce orders. They serve as distribution hubs and convenient places for shoppers to pick up and return online purchases.”


New Retail Realities


“Ecommerce is still gaining,” writes journalist Sarah Mahoney (@mahoney_sarah). “Yet there’s evidence that people are tiring of it, too, with foot traffic rising at brick-and-mortar stores. That means people in retail design are constantly asking themselves this question: In an age when you can buy anything online, what are people looking for when they go to a physical store?”[2] As I noted above, people have come to realize they miss the experience of shopping. Before the pandemic, the so-called “experiential economy” was on a roll — fueled mostly by Millennials who have shown a penchant for wanting to experience things rather than own things. As a result, Mahoney insists, “Experiential retail is important right now.”


Michelle Evans (@mevans14), Global Lead of Retail and Digital Consumer Insights at Euromonitor International, observes, “The fundamental role and purpose of retail stores are changing. Digital transformation forced brick-and-mortar outlets to evolve as more of the path to purchase shifted online. Now, as e-commerce expands, retailers are reimagining the functionality of stores and tapping into digital tools to keep those stores relevant. Physical retail will remain the largest and most important channel for the foreseeable future, but how space is leveraged will transform.”[3] Like Mahoney, Evans believes experiential retail is the “ticket entry” to the future. She explains, “In recent years, consumers adopted a minimalist mindset, prioritizing experiences over continued accumulation of products. In fact, 46% of global consumers would rather spend money on experiences rather than things, and this percentage increased 10 points in the last five years, according to Euromonitor. Creating unique engagements have the potential to generate new revenue streams.”


Tina Manikas (@tinaman), President of TracyLocke agency, agrees that physical retail stores are pivoting to provide more and better experiences. She states, “Stores can be more exciting and entertaining. They can be more inspiring and educational. Experiential retail has now risen to a higher level because stores are being redefined. And it’s especially important now because, after so many months of shopping less, there is a pent-up demand for new experiences.”[4] To “experience” something, consumers need to be active participants. Evans believes physical stores are a great venue for personal experiences. She writes, “Brick-and-mortar outlets can become places where store associates and shoppers come together to design and co-create products. This in-store experience will emphasize onsite product customization for the end-consumer.”


The Way Ahead


Retail journalists Daphne Howland (@daphnehowland) and Caroline Jansen (@jansen_caroline) report, “Stores remain the biggest pull for shoppers, and Forrester estimates that 72% of retail sales in the U.S. will take place there into 2024. The top reasons for shopping in store, Forrester found, are to test products (47%) and being able to walk away with an item after purchasing (38%).”[5] Nevertheless, Forrester analysts caution physical retailers cannot relax their vigilance. They told Howland and Jansen that retailers must ensure that their stores are worth the effort for consumers to visit. “The goal of these stores should be to deliver experiences and support operations that remove customer pains that impact behavior and provide diverse capabilities for catering to different consumer preferences.” Such comments beg the question: What types of experiences should retailers provide?


Kate Machtiger (@katetigre), founder of Extra Terrestrial Studios, believes retailers should treat their sales floors like stages upon which consumers always find an ongoing performance. In this scenario, she writes, “[The] ‘front of house’ is serene, while ‘back of house’ supports the complex maneuvers that occur on stage.”[6] She also believes that in a business environment where crowds are to be avoided, concierge retail may increase in importance. “If you can book a dinner reservation for 7:30,” she asks, “why can’t you book a shopping experience for 6:30 nearby? From yoga studios to therapists, a wide array of businesses are already using digital reservation systems. People will be reluctant to wait in long, socially distanced lines for casual shopping, so make the experience easy.”


The gold standard of retail sales has always been the personal touch — taking that extra care to make a consumer feel special. In that area, physical retail has a leg up on their online counterparts. Bobby Marhamat (@bobbymarhamat), CEO of Raydiant, insists, “Customer experience continues to be the great advantage of brick-and-mortar retail. … Making the customer feel recognized as an individual is an unparalleled way to enhance brand loyalty. Remembering their buying habits, providing discounts based on their purchasing frequency, and simply providing stellar customer service are all ways to personalize the customer experience.”[7]


Concluding Thoughts


Like Forrester analysts, EY analysts insist, “Bricks and mortar retail remains a crucial part of the customer journey.”[8] To keep it that way, retailers need to embrace experiential retail and other innovations. To keep in the game and stay ahead of competitors, Evans insists retailers must also become digital enterprises. Evans explains, “Stakeholders operating across retail need to rethink long-term strategies. While the first wave of digital disruption was about how stores could compete with e-commerce, this next wave will be about integrating and uncovering synergies. Data will be key to providing the necessary business agility to do so. … In the future, retail outlets will be multidimensional, with stores simultaneously operating as transactional, fulfillment, engagement and branding spaces.” In today’s world, it’s often difficult to separate physical and digital realities. In the retail space, it’s unwise to try.


[1] Suzanne Kapner, “E-Commerce Needs Real Store Locations Now More Than Ever,” The Wall Street Journal 25 November 2021.
[2] Sarah Mahoney, “New Retail Realities: Why Do People Still Shop At Stores?” Marketing Daily, 31 January 2022.
[3] Michelle Evans, “Three Ways The Future Retail Store Will Change,” Forbes, 1 December 2021.
[4] Mahoney, op. cit.
[5] Daphne Howland and Caroline Jansen, “Over 70% of retail sales will come from stores in the next few years: Forrester,” Retail Dive, 19 October 2021.
[6] Kate Machtiger, “What Will the Retail Experience of the Future Look Like?” Harvard Business Review, 16 June 2020.
[7] Bobby Marhamat, “5 Trends Shaping the Future of Brick-and-Mortar Retail,” Total Retail, 28 May 2021.
[8] EY, “Physical retail still vital path to purchase for digital home consumers, despite accelerating digitisation,” Cambridge Network, 4 August 2021.

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