Business of Fashion assembled a month ago a series of business cases to generate some insights about how retail will look like in the future. Interestingly enough, the fashion-specialized media focused its business cases on connected businesses (DNVB, online retailers..) as if brick and mortar was not able to bring in lessons as well.

The example of Warby Parker shows that DNVBs are faced with increasing competition and costs of advertising online. The combination of both lured such brands into going brick and mortar quite early, allowing them to fully express their universe and values IRL. Business of Fashion mentions that, in the case of Warby Parker, more than 70% of customers browsed the brand website before entering the brand store. One might wonder however if such an behaviour is not applicable to all transactions nowadays, and if DNVBs are not, after all, just another commercial iteration instead of being promoted as a species per se.

The corollary importance of having to do physical retail ‘whatever happens and whoever you are’, is backed by the following sections of the report. When exploring the London based, Farfetch owned, Brown’s multibrand, BoF quotes futurist Doug Stephens, in saying “it’s not ‘here’s our online, here’s our offline’, it’s about creating a platform that allows the consumer to activate whatever parts of this experience as they choose”. In other words, put a final end to the dichotomy between brick and mortar sales and e-commerce, and consider everything as a brand touchpoint. Why is this so important in the case of department stores, who are lagging behing when it comes to going digital, and what sense can they make out of this? According to the Business of Fashion analysis grid, there are 4 key stores utilities to be considered:  product engagement, loyalty development, brand awareness spreading and experience. Let’s read them with department stores’ issues in mind:

• “The store as a service touchpoint”, i.e. how do you convince the customer to buy in a given location a product that is also available online or in other locations? By staging exclusivity and bringing additional services to customers he/she might not find online. VIP programs are here for that, and they are also available online. Therefore, the only element that can not be automatized online is the personal relationship, and this is where department stores have an edge: their staff ability to connect and create bonds with customers. This is the reason why Galeries Lafayette conducted an ambitious transformation program when they opened Champs Elysées and decided to replace sales staff by style advisors.
• “The store as a brand billboard”, i.e. how to introduce the customer to new brands and universes.  BOF argues, and we support this view, that in that mission, the existing KPIs are no longer relevant. To know the efficiency of a store in customer acquisition, sales per sqm are no longer relevant and new KPIs need to be set up, such as Store Media Value, Repear Purchase Rate or Cost per Acquisition. In parallel, carrying permanent excitement and novelty is key, as we have seen recently with Neighborhood Goods or Showfields. One may wonder however how to translate this into actual sales and value (their actual turnover is not public).
• “The store as a community hub”: BoF mentions Sephora, which is indeed quite good at being a hub connecting boutiques, web platforms, social medias, in a worldwide synch’ed way. However, according to us, there are many more relevant examples on how to serve a purpose and integrate into a local community: Neighborhood goods, Monoprix Montparnasse. What is at stake in reality is the core activity of department stores:  how to locate again department stores at the centre of their customers’ lives? One of the answers could be by making sure that customers always have a good reason to come back. One would also need to acknowledge that, often, this good reason is not commercial, and adjust accordingly.
• “The store as an immersive entertainment”: IADS members are already aware of this part, with SKP-S, Galeries Lafayette Champs Elysées or Breuninger’s B-Place. Business of Fashion reminds however that, as soon as a toe is dipped into excitement of experience, this needs to be taken seriously, as customers will always expect the “next big thing” and, in any retail organization, this can not be done at the expenses of customer service. As they correctly mention, “you can have all the entertainment you want, but none of it matters if the basics aren’t there”.

To conclude, the striking part in this report about the future of retail is that none of its components, nor its conclusions, are contrary to what department stores are today in their core, or their actions. This might be a reassuring reading to take home the fact that nothing in this report invalidates the role of department stores tomorrow. This is all the more notable in a media actively promoting the notion of “retail apocalypse”.

Read the full report below

Tapping in the future of physical retail