I’ve loved the experience of being in a great shop for as long as I can remember. It’s really a passion for me. There is nothing I enjoy more on the weekends than hitting a mall or two and checking out fun neighborhoods full of great boutique shops. Even as a very young child I recognized the emotional difference that a great retail experience can evoke versus a just ho-hum everyday shop, and the impact that such an experience can make to a brands identity, and more importantly their bottom line and longevity. There is a soul and a spirit to a fantastic retail experience.
I spent a lot of time over the holidays, as most people did, out in stores. And while most people who shop are looking for a certain product or gift, I tend to spend most of my time looking at the store environment; noticing how I feel in the store, and analyzing what I liked and loved, what inspired me, or conversely why I was disappointed or sent running from the shop. Some of it boils down to personal taste, but usually its about how much attention is paid to the actual store environment, and more importantly, how is it differentiated from every other store around it.
And then on our drive home from Los Angeles after the holiday I heard that Sears Holdings Corp. was shuttering upwards of 120 stores. While this was not shocking news as the writing has been all over the proverbial wall for Sears for quite some time, it got me thinking more on the current dearth of great mass retail experiences.
Let’s face it, we can buy that sweater, coat and dress just about anywhere. But what compels us to shop in any specific store over another? Price is obvious, and sure trend plays a large role, but I believe that the image of the brand and how it manifests itself physically is more critical than most retailers recognize and what is most often overlooked and invested in last.
Through most of the 90′s and into the late ’00′s we saw retail growth and a thirst for brands unlike that which we had ever seen in modern times. New retail brands were popping up and old ones resurrected to satisfy a seemingly unquenchable consumer demand. And they were stamped out like cookie-cutters in malls and in big box and value centers across the country. It was part of the great homogenizing of America. But going on twenty years later not too much has changed in how retail shops are put together. And we see a lot of the same, and very little excitement.
With the exception of a few innovative players, there hasn’t been much change in the actual brick and mortar shopping experience. Apple has certainly been a retail superstar from which many others are taking notice and learnings, but who else has fundamentally put forth an experience that vastly differentiates itself from the competition?
Restoration Hardware has upped the ante on retail experience with their move to a gallery store format putting them on par with Ralph Lauren, a league that few other mall-based retailers can claim to be part of. And J.Crew’s store renovations, concept stores, and curated merchandise assortment have kept them interesting and fresh. There is no denying the uniqueness and exceptional environment at Anthropologie, and its parent company Urban Outfitters Inc. seems to have finally gotten a handle on core brand Urban Outfitters. Though they also they have a way to go before they’ve nailed their format again (BTW, we loved the UK stores!). And on the luxury side, Barneys New York is investing in store experience to further differentiate itself and from its competitors. And after popping into the new West Elm on Beverly Blvd. in Los Angeles, its clear that parent company, Williams-Sonoma Inc., is on to something with that brands re-invention. But I think that they can push the concept further and better.
Specialty retail and department stores have been lacking game changing brick and mortar experiences for years. And many have barely bothered to maintain their stores. Over the last decade or more we’ve seen how retailers that consistently mismanage their iconic brands and use them as cash cow vehicles for their larger parent company in order to maintain earnings to shareholders or return on investment capital to private equity firm owners can erode a brands relevance and affinity with consumers. These same retailers often view the store experience (which is ultimately brand identity) as just a cost center. This type of management philosophy eventually puts customers off a brand no matter the product contained within the walls. Gap Inc. and Sears Holdings Corp. are probably the best recent examples of this in action.
In Gap’s case they found themselves massively over-stored domestically; which may have been manageable if they also hadn’t encountered severe product and marketing missteps. However; Gap has been unable to stabilize the merchandise in any of its three core brands (Gap, Banana Republic and Old Navy), though they have seen occasional seasonal successes. And it took far too long for (many, many iterations of) management to admit that the biggest elephant in the room was its sheer size and square footage. There were (and still are) simply too many domestic store fronts to tackle both product and store experience at the same time. The Gap Inc. family of brands have unfortunately largely become just another basic commodity in the mall and have lost the “specialty” appeal that they once held.
For years Gap Inc. has ultimately been sacrificing one for the other (store experience or product). Some store investment was met with a do-more with less attitude from a product perspective, or when there has been investment in product there has been a similar attitude on the store side, both with physical maintenance and renovations and also with store labor. This has been most apparent at the Gap brand. Gap Inc. has struggled to maintain consistent comparable same store sales, never mind sales growth. And while there have been several store renovation initiatives in all three brands, there hasn’t been a game changing experience. Which is ironic given that Gap is credited by many in the industry as being the game changer and innovator in the way the company approached merchandising and store experience in the mid-to-late 1980′s. Gap Inc. is finally closing stores to right size its fleet, but it also discussed plans to increase their penetration of their value expressions (Gap Outlet, Banana Republic Factory Stores). One can only hope that once Gap get’s its domestic fleet leveled that they also invest significantly in those remaining stores. For it is their iconic domestic stature and reputation that affords them the ability for international and new brand growth. Though a lot of Gap Inc.’s near-term fate will likely be determined by the results of their 4th quarter.
This week Sears Holdings Corp. announced that the company plans to close 120 of its Kmart and Sears stores after quite a disappointing holiday season. Now this store closure represents just a fraction of their fleet, but it is perhaps further proof that management, led by Chairman Edward Lampert (who is a hedge fund manager), have been milking the brands for cash and chasing empty strategies. Some may speculate that they were purposely managing the downward assent of the brands; however Mr. Lampert and his hedge fund have seen a huge losses in the value of their share of Sears Holdings Corp., so I doubt that scenario. But still, Sears and Kmart are perhaps the best example of utter lack of attention to their store environments (I would argue that Office Depot is another major offender who has opportunity to improve vastly). And more store closures can be expected in the coming months from Sears as it is unlikely that they can fix such a huge problem in a timely manner.
And perhaps that’s okay. Often it seems that those who run retail businesses act a bit like addicts with a more is more mentality. But perhaps the lesson here (and that of most retailers that have grown beyond their management ability) is that sometimes just the right amount done really, really well is actually more. Perhaps the U.S. really doesn’t need 2,100 Sears and Kmart locations. Perhaps what it needs is a lesser amount done exceptionally well. This is probably not a popular thought in board rooms across the country.
And even Target and Wal-Mart have seen bouts of struggle in recent years. Given the shape of the economy both retailers could be expected to benefit from consumers who are trading down from more expensive specialty and department stores, but they’ve also struggled. While both big-box giants have generally well maintained their stores and even introduced new shopping concepts (i.e. urban stores, approaches to check-out, etc.); the fundamental experience of walking into a Target or Wal-Mart is the same as it was a decade ago with more often than not uninteresting store visuals, and a decline of unique and well executed product assortments. Target specifically needs to pay attention to and evolve their store experience (and format), and offer products with greater uniqueness (apart from the apparel) in order to maintain their caché as Targét.
While the economy continues to sputter along retailers cannot continue to rely on discounting and marketing gimmicks alone to entice consumers though their doors. The idea is simply unsustainable in the long-term. In an environment of little to no sustained economic growth, it is important for brands to differentiate. But more importantly than that, there needs to be large-scale brick and mortar innovation within the industry. Mass retail shops are going to have to innovate their brick and mortar experience better and faster than ever before in order to keep up with not only changing consumer shopping techno-trends, but increasingly sophisticated consumer tastes and expectations in shopping environments.
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