Retail’s Reinvention – Resetting The Store Strategy

There was a brief moment in the pandemic, while stores were shuttered and online commerce was soaring, when retailers started to wonder what kind of role the physical store still had to play. Three years on, and we can say definitively that stores remain absolutely key to the retail industry’s future.

The data speaks for itself. With consumers less inclined to do their seasonal shopping from their couches, in-store foot traffic was up very strongly across the holiday period. And over the past year, more than twice as many stores have opened than closed in the US according to Coresight Research.

Stores, therefore, are right back at the top of the agenda in post-pandemic retail. But retailers need to be willing to reset their store strategies — and do so as part of a broader reinvention of the business — if they want to truly capitalize on the growth opportunities.

Location, location, location

Take store locations. Many retailers are rationalizing their footprints. But the smart brands are also being more scientific about their store base. That means leveraging data on foot traffic, sales, and customer demographics to gain new insights into where their brand sits within each different catchment area.

Retailers are then better placed to optimize the mix of store types and locations. In practice, this will often be about going smaller, more local, and more closely tied to the community. Increasingly, for example, we see retail brands focusing on strip centers and freestanding small-format stores rather than underperforming shopping malls.

This is true even for some of the largest and most iconic department store brands. Macy’s, for instance, recently announced it would open several new off-mall small-format stores across the United States. This is part of a broader strategy to reposition the brand’s physical store footprint and better serve customer needs with smaller stores focused on immersive discovery and convenience.

Destination shopping

Similarly, with the right data analytics, retailers can better tailor their layouts, in-store services, pricing and product assortments to the local catchment. Key to this is thinking creatively and innovatively about what the future retail store can be, seeing it as not just a place to purchase products but a multipurpose destination that offers a range of different experiences.

Increasingly, for example, retailers are adding adjacent services like cafes and wine bars for customers to enjoy while they shop. And during the holiday season, we also saw retailers sponsoring “holiday strolls” (local holiday-themed retail events with games, carol singing, and so on) as well as hosting pop-ups and trunk shows.

This reinvention of stores is also about combining online and offline channels into a seamless shopping experience for customers. At one level, that means services like in-store pickups of ecommerce purchases and localized inventory that lets shoppers check the availability of products before the come to the store.

At a more advanced level it can mean a fundamental reorientation of the store around localized micro-fulfilment, hyper-automation, and digitalized in-store shopping. We already see strong moves in this area from retailers like Target
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, with its new large-store format giving significant floorspace over to backroom fulfilment to support same-day delivery.

A place for driving engagement

One thing that sometimes gets overlooked is the role of the retail store in building relationships with customers and legitimizing the brand.

A physical presence gives customers a sense of security and reassurance that they’re dealing with a reputable company. Stores also have a symbiotic relationship with other retail channels. Retailers have learned, for example, that closing underperforming stores can negatively impact their ecommerce performance in that locality.

Not only that, stores can also be a source of critical insights into local preferences, behaviors and purchase patterns. These insights can then inform everything from forecasting and replenishing to marketing campaigns, to store design.

Look at the way Ulta Beauty’s major store redesign was partly based on listening to members of its Ultamate Beauty rewards program. This led to improvements in store navigation and product discovery, making the shopping experience more engaging, welcoming, and fun. The company has seen significant sales growth over the past year as a result.

The frontline workforce leads the charge

The retail workforce plays a critical role in this agenda. Reinventing physical stores at scale requires a highly skilled and motivated workforce. One that’s tech-savvy and able to engage with customers in new and innovative ways.

Retailers must therefore also look to invest in their employees, providing training and development opportunities to ensure they have the skills and knowledge to thrive in the future retail landscape.

They must also ensure they have the right platforms and applications to help frontline workers feel connected to each other and their work, so they can deliver the best possible customer experiences.

Stores as the route to retail growth

Much of modern retail is about managing constant change. But one thing remains the same. The retail store retains a crucial role in building relationships, understanding customer behaviors, and legitimizing the brand. Remembering that universal truth will be a critical factor as retailers reinvent their businesses for future growth.