June 16, 2008
Experiential Concepts Ready for Rollouts
By Tom Ryan
While retail expansion has slowed significantly this year, many of the newer concepts are offering fresh takes on the experiential retailing trend, according to Retail Traffic magazine. At experiential retailers, the way consumers interact with the store
environment is often more important than the merchandise.
For example, American
Girl Place stores include a café with special booster seats for the chain’s
18-inch dolls, an on-site theater featuring young actresses as characters from
the company’s books, and a salon where girls get their dolls’ hairdos made
over. Other retailers known for experiential strategies include Apple stores,
Build-A-Bear Workshops, FAO Schwarz, Niketown, and outdoor retailers such as
REI and Bass Pro Shops.
Among the new crop of experiential retailers, according
to Retail Traffic,
is Gilly Hicks, an intimate apparel spin-off from Abercrombie & Fitch. The
10,000 square foot concept is built around the fictional story of Gilly Hicks,
an English teen who moves to Australia with her family in the 1920s and opens
a lingerie store. It resembles a beach house but is designed as a colonial-style
manor house with rooms featuring fireplaces, chandeliers, plush sofas and antique-styled
cabinets. “Gilly’s” portrait hangs in the “living room” of the store, between
the foyer and the “bra library” where hundreds of bras are displayed on dark
cherry wood shelves.
Other examples of newer experiential concepts:
- House of Hoops: A basketball-themed concept from Nike and Foot featuring technology to help consumers color coordinate their footwear and apparel and customize T-shirts. A VIP Area allows shoppers to read magazines, or check out commercials and behind-the-scenes interviews with top NBA players – all from leather chairs in front of a 65-inch TV screen.
- Ridemakerz: Described by the Chicago Tribune as the American
Girl for boys, consumers can customize their own toy car or truck with a
choice of colors, tires, wheels, lights and various options. Each comes with
a certificate of title, personalized license plate and assembly tools; - Aura: From French cosmetic giant, L’Oreal, the stores feature diagnostic
stations where salespeople help customers pinpoint the product best suited
for their skin type; - Finish Line Ltd: Created by Nike and Finish Line, the stores are
divided into three sections – running, sport style and training – and feature
a wide array of products ranging from Nike footwear to iPod Nanos. Customers
can test numerous products before buying them.
“You can’t just put merchandise in a store nowadays,” Mike Tesler, partner and principal with Retail Concepts, told Retail Traffic. “You have to put action into it.”
Discussion Questions: How do you see this experiential retailing trend working its way across retail? Are these strategies somewhat limited to specialized concepts? What are some of the best and worst examples of experiential retailing in the marketplace?
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An experiential shopping experience can take many forms and I do not think it needs to be limited to specialty stores. Some may argue that a warehouse format such as Home Depot or even Costco is experiential depending upon what is going on in-store such as product demos, food sampling and the overall experience of shopping in mass vs. specialty. Poor examples would include formats that go too far and significantly limit product selection, access and customer convenience.
Experiential shopping must continue in order to compete with shopping online from home in one’s PJs but not at the expense of customer convenience.
Just about all the “experiential retailing” concepts listed above have very high gross margin percentages and higher-end price points, compared to other stores in their respective categories. And it’s not easy to sustain experiential stores. The Disney and Warner Bros. Studio stores started out that way, but had profit disappointments and were cut back. Banana Republic started out similarly, but morphed, after much trial and error, into a more conventional positioning.
An observation: Mass retailing works best when there is a moneyed mass market. The polarization of our economy is shrinking the middle class, leaving retailers, product marketers and service marketers with two future options: trade up or trade down.
Interesting that most of these experiential retail concepts are also attempts to target shoppers up the price ladder. Is “experiential” the new code word for “upscale”?
Experiential retailing is not the wave of the future, it is what is necessary today to not only survive, but to prosper. Whether it is sampling at Whole Foods, trying on a set of Bose noise-canceling headphones at the Apple store, or climbing a wall at REI, all of these retailers prove that sales can increase if retailing is treated like theatre. Those retailers who think it is too expensive, or not necessary, will be able to join the ranks of Linens ‘n Things, Circuit City, etc, as these chains start to disappear. Just ask CompUSA, who kept all equipment under lock and key. Where are they today?
The latest marketing thinking is that emotion is baked into rational decision-making in a way that consumers are not even aware of; read “Predictably Irrational.” From the work at the ARF, we believe that a self-expressive sense of belonging will result in a tremendous halo effect in a way that begins to favorably color impressions of a store’s assortment and prices. Hence, emphasis on experience is critical as a differentiator and by that we don’t mean just short lines at check-out but an experience that creates a true sense of belonging (think Apple, or how a musician feels when he/she walks into a Sam Ash/Guitar Center).
First I disagree with the comment that this process of creating interaction in stores is further segmenting the market. The market is already more segmented than it ever has been and that trend will continue regardless of what retailers do.
Second, today’s retail environment in the US is changing significantly for two reasons. Many stores now also have an online presence so consumers can purchase products online without visiting the physical store. In addition, if online, consumers can purchase the product from any variety of companies. As a result, visits to physical stores decline–except for visitors who want to see, touch, and try the product before going home and buying online. In this circumstance retailers need to give consumers a reason to want to come to the physical store.
One of the disadvantages of purchasing online is having to pay delivery or shipping charges. However, the second reason for a change is the price of gasoline. Rather than taking a trip to a store, consumers are likely to begin to figure out whether it is more cost effective in gasoline charges to go to the store where they may actually spend more money or to order online and pay the shipping charge. For example, some people have decided that Amazon has good prices so they have paid the $75 a year to have two-day free delivery any time they make a purchase. If it costs $60 to fill up on the tank on your car, that $75 charge could save a lot of trips to the store.
Again, what can the retailers do to make people WANT to visit the physical location? Apple is doing something right, given the crowds in their stores even though they have an online store.
All retail is experiential. It’s about the shopping experience. This article is more about retailtainment. The pioneers in retailtainment were FAO Schwartz in NYC and Nike with their Chicago Niketown store on Michigan Ave. While it was fun, it didn’t help Schwartz compete against Big Bix discounters. Niketown was more about creating a highly visible venue that promoted the Nike brand overall.
While creative and fun, A retailer doesn’t have to spend a lot of money on gimics and show biz promotional tactics to build a relationship with the consumer or provide an experience that delights, drives traffic and builds loyalty. A great example is Trader Joe’s–a store with great, unique products that you won’t find anywhere else-and at lower prices, and happy employees dressed in Hawaiian shirts who schmooze with customers, know the products, will actually go look in the back if they’re out, and will run to an open register to check you out if you’re in line. They don’t advertise. The word of mouth “Ya Gotta try Trader Joe’s” reputation keeps ’em coming.
Another example is Nordstrom. While Macy’s customer service is almost non-existent (more so since they took salespeople off commission), Nordstrom sales people go the extra mile, above and beyond. We’ve all heard the classic stories about Nordstrom service. Nordstrom’s is also known for its shoe department, not only for the styles, but for the range of sizes and their guarantee that they will carry your size.
Bottom line: The razzmatazz is fun, but doesn’t make up for the essential shopping experience of product quality, selection and customer service in a visually appealing environment.
Experiential retailing is probably not a mass market business model. However, a number of very good businesses are being generated following this approach. Most have a ceiling: but so what? Does every retail concept have to be a 1500 store chain to be valuable?
I know of a brand new concept, Scribble Press, with a single location in SoCal. This store sells the experience of creating and publishing a hardbound “book” with your child. It’s fantastic. Is there a 1000 store potential here? Probably not. Is it worth paying attention to? Yes, because it proves that “experiential” retailing is valid.
I think the experiential store concept is great as long as it remains a brand concept, not a retail one. It’s easy for Nike, Apple, Nokia, etc to keep exciting visual concepts and new experiences coming. But they need to respect that other retailers are trying to sell their products as well.
Niketown customers should become more loyal to Nike products regardless of where they shop. Nokia store visitors might not be able to afford the upscale products they see there, but maybe they can walk out thinking Nokia is they brand they want when their contract runs up. Apple Store customers should not believe that the Apple Store is the only place to buy Apple products.
One idea: This concept should find a good e-commerce execution. Maybe part of a major brand could load an e-commerce site with minimal retail tags and maximum new products, cool visuals and more community than more tactile e-commerce sites have.
One-off stores like this are expensive to build, so I don’t think you’ll see them popping up everywhere. That said, if people have fun and enjoy their shopping experience, they will go back for more.
I don’t get the concept A&F is trying out…a teenager moves to a new continent and opens a lingerie store in a beach house/colonial manor? Am I missing something?
My favorite experiential retailer is Anthropologie. I’m also amazed at how they fly ‘under the retail radar’ so much in terms of press. Their knack for doing THE best retail displays and merchandising is nothing short of astounding. They also, every one of them, look completely different, which is another testament to their creativity. Really, really a wonderful retail experience.
If all retailers would look at Anthropologie as more of a modern retail emulator vs. just a curious competitor, you’d see much more innovation at retail.
All these retail concepts have one component in common. They are further segmenting the consumer market. With this narrowing approach comes the need for additional store elements to keep consumers coming back. The problem is, when do you segment the consumers too narrowly resulting in a great store but too few consumers? This extreme segmentation seems to work great on the internet, but I have yet to see it work in retail.
The other side is for a store to have lasting consumer pull. Some of the concepts look like they will bring the consumer in one or two times, and then they will be tired of the store. This is called a fad. Best example I have seen of this is Cold Stone Ice Cream. Fund to shop the first few times, then they become old hat.
Great retailers always change with the times and keep the excitement coming. I see real concern for these formats, but greater or narrowing consumer segmentations will continue.
Experiential retail concepts are wonderful opportunities for deeper connections with shoppers and shopping to be explored. They help define how and why shopping is so culturally important, appealing to consumers who love to anticipate an adventure that’s unique and creates a story for shoppers to tell.
Even better, they create groundswell that can be fantastic brand building tool.
But all retail should not aspire to one format, regardless of how entertaining, exciting or satisfying it may be.
I think the key marketing opportunity is to push the envelope beyond the shoppers expectation in the concept stores, and then listen and learn how and where to apply!
Wave of the future sums it up best. What we are trying to do is add value to the customer’s shopping experience. Putting product on a shelf with a price label will not cut it anymore. We need to razzle and dazzle the customer and make them want to come to the store. These new concepts are great at making shopping fun again. Apple really stands out as a retailer that actually promotes browsing. All the products work and are available for use without distraction. Sales people are friendly and know their products well
In an age of commoditization, consumers shift their focus from product and service attributes to the experience obtained while using the product or service. The more relevant and memorable the sensory experience, the higher the value, the higher the worth, the higher the price that can be charged. Customers are actively engaged, involved–they have a relationship with the product, the brand, the company. Needs, wants and desires are fulfilled.
Bottom line: the experiential is never a commodity. The experiential = differentiation/competitive advantage.
A great example of experiential retailing is L.L.Bean. At their flagship store, Bean is developing a family-friendly outdoor adventure attraction with lodging amenities. Visitors will soon be able to hike, bike, golf, cross-country ski, or go kayaking, seal watching or fishing in nearby Cisco Bay. Then they could eat and stay the night on the property.
Is this a savvy move? Very much so. Roughly 3 million people walk through the Freeport stores every year, making L.L.Bean Maine’s second-most popular tourism destination behind Acadia National Park. In recent years, Bean has branched out into recreation through its Outdoor Discovery Schools, where customers take lessons for activities like fly-casting or kayaking. These activities are very popular, and Bean has found they generate good customers who buy products.
Creating a destination adventure center such as the one being discussed–where people can stay and participate in these and other outdoor activities–takes the formula to a higher level, and would propel Bean from being a store, mail-order retailer and a brand into a full-fledged outdoor experience. Bean is on a fast track to make the project happen: it wants to see the theme park operating within three years.
Bean operates seven full-price retail stores and 14 outlets on the East Coast. It plans to open 35 more full-price stores within five years, and future stores also could be linked to outdoor adventure centers in other states. Experiential retailing is a trend with staying power–people increasingly want to combine leisure, travel, learning and family vacation time–and adding retail to the mix is a brilliant gambit.
Perhaps the best “experiential retailer” right now is The Apple Store…ironic since the store’s roots are in technology development, not in conventional retailing. This may have given them the freedom to toss out the rulebook about how to design and run a store.
It’s not a surprise to see new concepts cropping up that echo the success of “interactive” retailers like Apple, Build-A-Bear, Cabela’s and others. There may be a lesson to traditional retailers that customers are looking for a more engaging and involving experience as well as a level of interaction with store associates missing in many stores.
This is a terrific thing when the opportunity is there, but it isn’t always there. I don’t want anything more than price tags beneath the tuna fish and toilet paper, thank you. Too often, a store that is a success via unique circumstances is held up as a model for others to aspire to, when attempting to do so would be just disastrous. Nice to have in your PowerPoint slides, and fun to talk about, but not a whole lot more than that.
Having said that, in a few cases where conditions permit, this is marvelous. For a quick one-two punch, visit both the Apple store and FAO Schwarz in New York City, within steps of each other at the Southeast corner of Central Park. Then, for good measure, walk up to the Southwest corner of the park and visit Whole Foods. Fabulous experiences, all.
To James Tenser’s point, “experiential” is the new name for growth. With the mass market squeezing profits out, and the consumer continuing to fragment, segmented, niche retailing is likely where the growth in retail will appear. It will not be exclusively upscale, but it certainly won’t be at the mass market level where price drives everything. And it won’t lend itself to the same operational economies of scale that has driven so much of retailing for so long.
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An experiential shopping experience can take many forms and I do not think it needs to be limited to specialty stores. Some may argue that a warehouse format such as Home Depot or even Costco is experiential depending upon what is going on in-store such as product demos, food sampling and the overall experience of shopping in mass vs. specialty. Poor examples would include formats that go too far and significantly limit product selection, access and customer convenience.
Experiential shopping must continue in order to compete with shopping online from home in one’s PJs but not at the expense of customer convenience.
Just about all the “experiential retailing” concepts listed above have very high gross margin percentages and higher-end price points, compared to other stores in their respective categories. And it’s not easy to sustain experiential stores. The Disney and Warner Bros. Studio stores started out that way, but had profit disappointments and were cut back. Banana Republic started out similarly, but morphed, after much trial and error, into a more conventional positioning.
An observation: Mass retailing works best when there is a moneyed mass market. The polarization of our economy is shrinking the middle class, leaving retailers, product marketers and service marketers with two future options: trade up or trade down.
Interesting that most of these experiential retail concepts are also attempts to target shoppers up the price ladder. Is “experiential” the new code word for “upscale”?
Experiential retailing is not the wave of the future, it is what is necessary today to not only survive, but to prosper. Whether it is sampling at Whole Foods, trying on a set of Bose noise-canceling headphones at the Apple store, or climbing a wall at REI, all of these retailers prove that sales can increase if retailing is treated like theatre. Those retailers who think it is too expensive, or not necessary, will be able to join the ranks of Linens ‘n Things, Circuit City, etc, as these chains start to disappear. Just ask CompUSA, who kept all equipment under lock and key. Where are they today?
The latest marketing thinking is that emotion is baked into rational decision-making in a way that consumers are not even aware of; read “Predictably Irrational.” From the work at the ARF, we believe that a self-expressive sense of belonging will result in a tremendous halo effect in a way that begins to favorably color impressions of a store’s assortment and prices. Hence, emphasis on experience is critical as a differentiator and by that we don’t mean just short lines at check-out but an experience that creates a true sense of belonging (think Apple, or how a musician feels when he/she walks into a Sam Ash/Guitar Center).
First I disagree with the comment that this process of creating interaction in stores is further segmenting the market. The market is already more segmented than it ever has been and that trend will continue regardless of what retailers do.
Second, today’s retail environment in the US is changing significantly for two reasons. Many stores now also have an online presence so consumers can purchase products online without visiting the physical store. In addition, if online, consumers can purchase the product from any variety of companies. As a result, visits to physical stores decline–except for visitors who want to see, touch, and try the product before going home and buying online. In this circumstance retailers need to give consumers a reason to want to come to the physical store.
One of the disadvantages of purchasing online is having to pay delivery or shipping charges. However, the second reason for a change is the price of gasoline. Rather than taking a trip to a store, consumers are likely to begin to figure out whether it is more cost effective in gasoline charges to go to the store where they may actually spend more money or to order online and pay the shipping charge. For example, some people have decided that Amazon has good prices so they have paid the $75 a year to have two-day free delivery any time they make a purchase. If it costs $60 to fill up on the tank on your car, that $75 charge could save a lot of trips to the store.
Again, what can the retailers do to make people WANT to visit the physical location? Apple is doing something right, given the crowds in their stores even though they have an online store.
All retail is experiential. It’s about the shopping experience. This article is more about retailtainment. The pioneers in retailtainment were FAO Schwartz in NYC and Nike with their Chicago Niketown store on Michigan Ave. While it was fun, it didn’t help Schwartz compete against Big Bix discounters. Niketown was more about creating a highly visible venue that promoted the Nike brand overall.
While creative and fun, A retailer doesn’t have to spend a lot of money on gimics and show biz promotional tactics to build a relationship with the consumer or provide an experience that delights, drives traffic and builds loyalty. A great example is Trader Joe’s–a store with great, unique products that you won’t find anywhere else-and at lower prices, and happy employees dressed in Hawaiian shirts who schmooze with customers, know the products, will actually go look in the back if they’re out, and will run to an open register to check you out if you’re in line. They don’t advertise. The word of mouth “Ya Gotta try Trader Joe’s” reputation keeps ’em coming.
Another example is Nordstrom. While Macy’s customer service is almost non-existent (more so since they took salespeople off commission), Nordstrom sales people go the extra mile, above and beyond. We’ve all heard the classic stories about Nordstrom service. Nordstrom’s is also known for its shoe department, not only for the styles, but for the range of sizes and their guarantee that they will carry your size.
Bottom line: The razzmatazz is fun, but doesn’t make up for the essential shopping experience of product quality, selection and customer service in a visually appealing environment.
Experiential retailing is probably not a mass market business model. However, a number of very good businesses are being generated following this approach. Most have a ceiling: but so what? Does every retail concept have to be a 1500 store chain to be valuable?
I know of a brand new concept, Scribble Press, with a single location in SoCal. This store sells the experience of creating and publishing a hardbound “book” with your child. It’s fantastic. Is there a 1000 store potential here? Probably not. Is it worth paying attention to? Yes, because it proves that “experiential” retailing is valid.
I think the experiential store concept is great as long as it remains a brand concept, not a retail one. It’s easy for Nike, Apple, Nokia, etc to keep exciting visual concepts and new experiences coming. But they need to respect that other retailers are trying to sell their products as well.
Niketown customers should become more loyal to Nike products regardless of where they shop. Nokia store visitors might not be able to afford the upscale products they see there, but maybe they can walk out thinking Nokia is they brand they want when their contract runs up. Apple Store customers should not believe that the Apple Store is the only place to buy Apple products.
One idea: This concept should find a good e-commerce execution. Maybe part of a major brand could load an e-commerce site with minimal retail tags and maximum new products, cool visuals and more community than more tactile e-commerce sites have.
One-off stores like this are expensive to build, so I don’t think you’ll see them popping up everywhere. That said, if people have fun and enjoy their shopping experience, they will go back for more.
I don’t get the concept A&F is trying out…a teenager moves to a new continent and opens a lingerie store in a beach house/colonial manor? Am I missing something?
My favorite experiential retailer is Anthropologie. I’m also amazed at how they fly ‘under the retail radar’ so much in terms of press. Their knack for doing THE best retail displays and merchandising is nothing short of astounding. They also, every one of them, look completely different, which is another testament to their creativity. Really, really a wonderful retail experience.
If all retailers would look at Anthropologie as more of a modern retail emulator vs. just a curious competitor, you’d see much more innovation at retail.
All these retail concepts have one component in common. They are further segmenting the consumer market. With this narrowing approach comes the need for additional store elements to keep consumers coming back. The problem is, when do you segment the consumers too narrowly resulting in a great store but too few consumers? This extreme segmentation seems to work great on the internet, but I have yet to see it work in retail.
The other side is for a store to have lasting consumer pull. Some of the concepts look like they will bring the consumer in one or two times, and then they will be tired of the store. This is called a fad. Best example I have seen of this is Cold Stone Ice Cream. Fund to shop the first few times, then they become old hat.
Great retailers always change with the times and keep the excitement coming. I see real concern for these formats, but greater or narrowing consumer segmentations will continue.
Experiential retail concepts are wonderful opportunities for deeper connections with shoppers and shopping to be explored. They help define how and why shopping is so culturally important, appealing to consumers who love to anticipate an adventure that’s unique and creates a story for shoppers to tell.
Even better, they create groundswell that can be fantastic brand building tool.
But all retail should not aspire to one format, regardless of how entertaining, exciting or satisfying it may be.
I think the key marketing opportunity is to push the envelope beyond the shoppers expectation in the concept stores, and then listen and learn how and where to apply!
Wave of the future sums it up best. What we are trying to do is add value to the customer’s shopping experience. Putting product on a shelf with a price label will not cut it anymore. We need to razzle and dazzle the customer and make them want to come to the store. These new concepts are great at making shopping fun again. Apple really stands out as a retailer that actually promotes browsing. All the products work and are available for use without distraction. Sales people are friendly and know their products well
In an age of commoditization, consumers shift their focus from product and service attributes to the experience obtained while using the product or service. The more relevant and memorable the sensory experience, the higher the value, the higher the worth, the higher the price that can be charged. Customers are actively engaged, involved–they have a relationship with the product, the brand, the company. Needs, wants and desires are fulfilled.
Bottom line: the experiential is never a commodity. The experiential = differentiation/competitive advantage.
A great example of experiential retailing is L.L.Bean. At their flagship store, Bean is developing a family-friendly outdoor adventure attraction with lodging amenities. Visitors will soon be able to hike, bike, golf, cross-country ski, or go kayaking, seal watching or fishing in nearby Cisco Bay. Then they could eat and stay the night on the property.
Is this a savvy move? Very much so. Roughly 3 million people walk through the Freeport stores every year, making L.L.Bean Maine’s second-most popular tourism destination behind Acadia National Park. In recent years, Bean has branched out into recreation through its Outdoor Discovery Schools, where customers take lessons for activities like fly-casting or kayaking. These activities are very popular, and Bean has found they generate good customers who buy products.
Creating a destination adventure center such as the one being discussed–where people can stay and participate in these and other outdoor activities–takes the formula to a higher level, and would propel Bean from being a store, mail-order retailer and a brand into a full-fledged outdoor experience. Bean is on a fast track to make the project happen: it wants to see the theme park operating within three years.
Bean operates seven full-price retail stores and 14 outlets on the East Coast. It plans to open 35 more full-price stores within five years, and future stores also could be linked to outdoor adventure centers in other states. Experiential retailing is a trend with staying power–people increasingly want to combine leisure, travel, learning and family vacation time–and adding retail to the mix is a brilliant gambit.
Perhaps the best “experiential retailer” right now is The Apple Store…ironic since the store’s roots are in technology development, not in conventional retailing. This may have given them the freedom to toss out the rulebook about how to design and run a store.
It’s not a surprise to see new concepts cropping up that echo the success of “interactive” retailers like Apple, Build-A-Bear, Cabela’s and others. There may be a lesson to traditional retailers that customers are looking for a more engaging and involving experience as well as a level of interaction with store associates missing in many stores.
This is a terrific thing when the opportunity is there, but it isn’t always there. I don’t want anything more than price tags beneath the tuna fish and toilet paper, thank you. Too often, a store that is a success via unique circumstances is held up as a model for others to aspire to, when attempting to do so would be just disastrous. Nice to have in your PowerPoint slides, and fun to talk about, but not a whole lot more than that.
Having said that, in a few cases where conditions permit, this is marvelous. For a quick one-two punch, visit both the Apple store and FAO Schwarz in New York City, within steps of each other at the Southeast corner of Central Park. Then, for good measure, walk up to the Southwest corner of the park and visit Whole Foods. Fabulous experiences, all.
To James Tenser’s point, “experiential” is the new name for growth. With the mass market squeezing profits out, and the consumer continuing to fragment, segmented, niche retailing is likely where the growth in retail will appear. It will not be exclusively upscale, but it certainly won’t be at the mass market level where price drives everything. And it won’t lend itself to the same operational economies of scale that has driven so much of retailing for so long.