The Future of Retail Space - Insider Trends€¦ · 8 The Future of Retail Space “The high street...

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The Future of Retail Space The role of physical space in the digital-first retail future

2 The Future of Retail Space

n an age of unprecedented changeanddisruption,muchhas been said about the future of physical retail. Naysayers see this asabattlebetweenbricks-and-mortarand online retail as though there can onlybeonewinnerinthebattleforsurvival.Inreality,weliveinanomni-channelenvironment,whereboththephysicalanddigitalareintertwined–whenretailersinvestinbrick-and-mortarstores,theironline presence thrives and vice versa. Butthere’sanotherimportantdimensionofretailsuccessthat’sadirect result of retailers’ physical retailventures:brandperceptionandawareness.Physicallocationsareplaceswherebrandscanmakegenuineconnectionswithconsumerswho aremoreengagedandinformedthan ever before. Consumersstillwantandneedphysicalstores,however,theyhavebecomeincreasingly'channelagnostic'–theyexpectaconsistentexperienceacross every possible touchpoint. As a result,retailerscannolongerlookattheironlineandstoreoperationsinsilo. Brandsandlandlordsalikeareembracingthesechallengesandare

I literally‘thinkingoutsidethebox’.Theyuseinnovativeandcreativestrategiestoproducepositiveandmemorableinteractionsthatdrivetransactionsacross all channels. Thisreportshowcasesthelatest,mostoriginalandinventiveuseofretailspacethatmeetsthedemandsoftoday’sconsumer:convenience,serviceandexperience.Ithighlightsthekeyfactors that you should consider in ordertomakethemostofyourretailspace. Thecasestudiesandviewsofindustry insiders that feature in this reportnotonlydemonstratethatthefutureofphysicalretailisfarfromover,butalsohighlighttheimaginativeway inwhichtheindustryisembracingandadaptingtothenewdigitalera.Retailspaces are evolving at a rapid rate to meetconsumers’changingneedsanddesiresand,alongsideacomplementarymixofotheruses,itwillremainafundamentalelementofsuccessfulplaces in the future.

Join us as we make this journey into ‘Retail 2.0’ together.

Introduction

Tokyu Plaza Omotesando Harajuku TokyoIn association with

The role of physical space in the digital-first retail future 3

Insider Trends focuses on the future ofretail.IthelpsclientssuchasNike,Chanel,GaleriesLafayette,Unilever andLegounderstandwhatiscomingnextinretailandhowtheycantakeadvantage of it. ItsHeadofTrends,CateTrotter,hasconsistentlybeennamedoneoftheworld’stopinfluencersinretail.

Cate TrotterHeadofTrends InsiderTrends


henyouthinkaboutyourretailing,whatpops intoyourmindfirst?Doyouthinkaboutyour stores?Doyouthinkaboutyourwebsiteor app?Ifyouthinkyourretailbusinessonlyrevolvesaroundonepart,we'dliketoinviteyoutothinkdifferently. Asthisguidewillshow,retailisfundamentallychanging.Retailcannowbeeverywhereintheworldaroundus.Yes,it’sinourpockets,onourphones, butretailcannowbemuchmoreintuitivethanthat. Retailerscanscanourbodiesovertheinternet, wecantapabillboardwithourphonetobuy,we canscananyimageorobjecttobuy.Digitalchannelsnowofferimmersiveexperiences,sophisticatedpersonalisation,enhancedrecommendationsanddiscoveryopportunities.Physicalretailishereto stay,butretailnowgoesmuchfurtherthanthefourwallsofthestore.

To answer this question, we drew on the latest research and thinking, as well as interviewing some of the world’s leading authorities on the future of retail space.

What we think about when we think about retail

So, when shopping can be

everywherein the world

around us, what is the role

of the store?

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In 2021, over 2.14bn

people worldwide are expected to buy

goods and services online,up from 1.66bn global digital buyers in 2016.

Statista 2017

Ecommerce is now driving 90%

of growth in American FMCG sales.

Nielsen June 2017

76% of American shopping

journeys now begin online.IRI, Consumer Connect Survey January 2018

67% of global ecommerce brands

that received funding of over $6 million openeda physical store within

the last 36 months. Hero 2017

83% of shoppers feel

stores are important as theyallow people to see, touch

and feel a product. Mindshare 2017

78% of shoppers globally

say an enjoyable in-storeatmosphere is a key factorin their decision to choose in-store over ecommerce.

Mood Media 2019

Theroleofphysicalspaceinthedigital-firstretailfuture


The digital-first ecosystemWhat it is, and why leadingretailers are thinking this way.

oesecosystemsoundmore rainforestthanretailtoyou?An ecosystemisjustanetworkof interactingelementsthattogethercreatesomethingbeyondanyonepart.Ifyouthinkaboutit,thestore,thewebsite,theapp,thechatbot...they’reallcomponentsofthemuchlarger idea of retail. Theverybestbrandsthinkoftheirretailchannelsinthisway,witheachchannel playing to their strengths and workingtogether.Retailisnowaboutsomuchmorethanthestore–it’saboutseeingthestoreasoneofmanydifferentchannels.Thesechannelsallinterconnectwithandfeedoneanotherasdifferenttouchpointsintheshoppingjourney. There’snogettingawayfromthefactthatthisecosystemisdigitally-led.Someoftheworld’smostforward-thinkingretailersarenowseeing50%oftheirsalescomethroughdigital.Thisisonly going to increase. Itwillincreaseascustomersbecomemoreconfidentbuyingonlineandasmoretried-and-testedecommerce

D“The high street isn’t dead – it’s just different.Retailisn’t dead – it just needs tobedifferent. It needs to adapt to the changing worldaroundit. Idon’tthinkretail canbejustlooked atasretailnow, it’sactuallya combination ofsomany differentthings.”

Tor BurrowsDirectorof Placemaking,Grosvenor,UK

NiketownLondon


solutionsareofferedtoretailers. Mostimportantly,digital interactionsareradicallychanging. Theynolongerneedtobeflat,silent,catalogue-styleexperiences.Throughgeolocation,augmentedrealityandscannableimages,chipsandcodes, newtypesofimmersiveshoppingexperiencescanbecreated.Andwithconnectedobjectsandtrackableapps,brands can understand and serve customersbetterthaneverbefore. Thegreatthingisthatan ecosystemapproachcannaturally buildrelationshipswithcustomers. TakeL’Oreal’ssmarthairbrush,forexample.Itconnectstoapartnerapp toanalyseyourhairtypeandcondition.Itthenusesthisinformationto recommendthebest products in its range for yourspecificneeds. Naturally,L’Oreal can also harvest this informationaboutusers’ hair to direct its product development.Inthe futureitcouldevenoffer

Digital-first interactions don’t have to rival thephysical space. Instead, theycan redefine and reimaginephysical retail, opening upincredible new opportunities.

acompletelypersonalisedhairproductmodelàlatheUS’sFunctionofBeauty. Likewise,theUS-basedonlinecustommenswearcompanyMTailorusesdigitaltoofferperfectlytailoredclothestocustomersshoppingathome.Usingjusttheirsmartphonetheycanbemeasured,customisetheirclothingandhaveitsenttothem.Fromanecosystemperspectivethatdatacouldbeusedtoenhanceacomplementaryin-storeexperienceofclick-and-collect,fabricchoosing and repairs.


“The high street shouldn'tbeafraid ofonline.Wereally need to push the digitalhighstreet forwardtoattracta youngershopper profile,andthathas tobeakeyelement ofanystrategyfor anytowncentre now.”

Dr. Steve Norris Head ofRegeneration,LambertSmithHampton

Thesenewchannelsletbrandsengagecustomersinspacewhilstthinkingbeyondthestore.Nikehasshowntheworldhowspacessuchasapark,restaurantorgigvenuecanbecomeastore.Ithasutilisedgeolocationandaugmentedrealitytechnologyinitsappstoturnnewproductdropsintoreal-lifetreasurehunts,andtolaunchproduct at concerts. Newtechnologiesmeanthattouchpointssuchasbillboardscannowbecomeinteractiveandshoppable,helpingcustomersdiscovernewproductsandofferalevelofconvenience to rival the store. SolutionslikeIsraelitech-companySyte’sAI-poweredimagerecognitiontechmeansthatalloftheimageswesee–inprint,onlineandonsocialmedia–cannowbeshoppable.Inthefuture,thiscouldextendtoanyvisualcontentanywherewitheverythingfromadvertstofilmsandTVshowsbecomingeasily shoppable Asweallknow,thestoreisn’tdying.Butbrandswouldbewisetoexplorewhattheycandowithdigitalinteractionsandexperiencesfirst. Theycanthenusethistorethinkwhatphysicalretailingmeans.Thismaywellinvolvethestore,butitmayalsoinvolveamyriadofotherphysicaltouchpoints.

SyteAI-poweredimagerecognitionapp

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What does your brand’s digital-first ecosystem look like?An informalworkshop task.

Now retailing is changing so fundamentally, we often suggest the following process to our clients:

• Invite your team to come together over lunch, pizza and/or beer. Provide them with flipchart paper and fat markers. • Dream up your digital-first ecosystem. - How would you sell and communicate with customers if money was no object? - How would you get to know them better and sell in more intuitive ways, through apps, connected objects, geolocation, connected billboards and more? - How can these touchpoints learn about customers’ body shapes and preferences, tailor products to them and let them sample things virtually? • Sit back and look at what you’ve devised. Consider what your new ecosystem CAN’T do. What customer needs and desires can’t be fulfilled by these touchpoints?

• Brainstorm and sketch out physical space to address these remaining customers needs and desires.

• Reflect on how your thinking has changed during this exercise and what you might like to do differently going forward.



“Weallhave differenttastes, stylesandbody types.Youcannot make something to fittheentiremass market.Consumers are now more than everlookingforthe experience.They wanttofeelspecial, be doted on and entertained or go to anewuniqueplace andhavefun.”

Jessica SarkissianPrincipalPlanner ThePlanningCenter,US

What’s the store’s role in a digital-first ecosystem?

o,asdigital-firstretailbecomes moreintuitiveandcompelling, howcanphysicalstoresand spacessupportthisecosysteminthemosteffectiveway? TheBostonConsultingGroupfoundthatthebrandsthatengagecustomersemotionallyareabletobothchargecustomersmore,andsellmore.Byengagingallfivesenses,andbringingthebrandtolifethroughstaffandservice,physicalspaceswillalwaysbekingoftheemotionalconnection. Waybackin2001,Applerewrotetherulesofretailingbycreatinganewretailformatthatdrewitsinspirationfromalibrary.Itinvitedcustomersintospendtime,experienceandplay.Byputtingsellingsecond,itcreatedaspacewithoneoftheworld’shighestsales per square foot. AsSteveCollis,StrategicDirector ofUK-basedretaildesignagencyJHPDesign,says:"If someone asks what makes an Apple store an Apple store, it’s the fact that you can touch and play with every product and the fact that you can pay any way without having any cash desks. That is a business shift. Those two things are as

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important as all the other elements that make up the experience." Whenaskediftheroleofthestorehaschangedmuch,RajWilkinson,CreativeDirectorofJHPDesign,noted:“It hasn't really. Before, you had a space that was well designed and created an environment that was engaging and enticing and attractive to consumers. That hasn't changed. It's just the means by which you do it that has changed.” PaulWest,StrategyDirectoratUKexperienceagencyDalziel&Pow,pointsoutthatasbrandschange,spacesneedto,too:“How has the purpose of the brand changed? The role of the store should be a reflection of that shift in purpose. I think the store can be themost fundamental part of an ecosystem, but it can also be a complementary part depending on the business model and the purpose of the brand. There will be different ways of treating these channels to play to their strengths.” JeffKindleysides,Co-founderof UK-baseddesignconsultancyChecklandKindleysidesagrees: “There’s no one approach – but one thing is for sure it now must be about more than a straight forward transaction.” Goingtoastoretostockuponessentialsisnowlessofanecessity. Butshoppingasaformofsocialinteraction,ofentertainment,asawayofdiscoveringsomethingnew,isverymuchthriving.It’soneofthereasonsexperiencehasbecomethego-tobuzzwordfortheretailindustry.

From top: Alexander McQueenLondon;10 Corso Como NewYork;Starbucks ReserveNewYork


"It’s thinking aboutwhat ‘fulfilment’means – people

go to the store to befulfilled in some wayor another; it might

be to take somethingaway with them,

or just to touch andtry something on."

“Thewaythe consumer makes a decision on where tobuysomething istheyintuitively thinkabouttime, touchandmoney. ‘HowquicklydoI need it? ‘Do I need to touch it and experience it?’ ‘How much am I willingtospend?’ Ilookatevery individualshopping centreorretailer andthenI’lltryto putmyselfinthe shoes of their target consumer and answer those questions.”

James Cook AmericasDirectorofRetailResearch,JLL,US

“Those very functional transactional journeys are the things that are reducing, but people will absolutely keep going for emotional reasons,”agreesKathrynMalloch,HeadofCustomerExperienceatUKpropertydeveloperandoperatorHammerson. ChrisDewar-Dixon,Co-founderofUKgraphicandinteriordesignagencyStudioFourIV,thoughtsimilar. “The experience of a store is absolutely paramount. People are fighting for individuality and to really own the experience across every single touchpoint – from customer service to how you pay.” JeffKindleysidesgoesfurther,invitingustothinkaboutthestoredifferently:

Gentle Monster is a leader in using its stores to create a brand experience.ThespacesfromthisSouthKoreaneyewearbrandhavemoreincommonwithartgalleries than they do stores. Although sales per squarefootseemtobethelastthingonGentleMonster’smind,itiscontinuingtoopennewstores–itstartedinSouthKoreain2011,opened stores throughoutAsia,openedNewYorkandLondonbranchesin2016and2018,andtherearemoretocome.

Gucci SoHo NewYork


ThebrandunderstandsthatGentleMonster’sphysical spaces aren’t aboutfulfillingorders–they’reaboutbringingitsbrandtolife.Thespaces create the desire topurchaseinthefirstplace. ThisisverymuchsomethingthatTedGalperin,DesignDirector,RetailofdesignandbrandingstudioPartners&SpadeinNewYork,isexploringwhenitcomestothefutureofretailspace. “I really enjoy pushing clients and brands to find the minimal number of objects needed to define a 'store'. There really is an opportunity where retail is not just the act of buying, but a way of creating a memory,” he notes. “For me, that’s the ideal place that retail is going. I liken it to running a marathon and someone handing me a water. It's part of your journey. It's not a destination. I think retail can do the most good when it focuses on adding value, rather than trying to be the whole purpose.”

Gentle Monster stores in variouscities

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The Future of Retail Space14

Shoppableapartmentsarealsoatwistontheexperiencemodel.Ratherthanjustplacingclothesonarailorplatesonastand,theshoppableapartmentplacestheminsituinacovetablelivingenvironment.Thestorebehaveslikeawalk-inmagazine.Ratherthanvisitingwithaspecificpurposeinmind,customersvisitforinspirationandendupbuyingsomethingtheyweren’tevenawaretheywanted. It’smadeevenmorecompellingbythefactthattheenvironmentlookslikethecustomer’sdreamhome.Logically,customersknowthatbuyingasetofplateswon’tturntheirhomeintothisgorgeousInstagrammableparadise,butthatwon’tstopthembuying. Meanwhiletheshoppablehotel,suchasJapanesehomewaresretailer

“Retailersthatare stilldoingwell haveproactively investedintheir storesinthelast 5-10yearstomake themengaging, interesting experiences that peoplewillwantto visitandspendtime andmoneyin.”

Adam BunnAssociateDirector UrbanShape,UK

Maison Sarah LavoineParisBless Berlin

RHNewYork

15Theroleofphysicalspaceinthedigital-firstretailfuture

“Digitalhasbeen asubstantial disruptor;however, research shows that90%ofretail transactionstouch astoreinsomeway. Forin-store, experience is kingandservices necessary,giving consumers a compellingreason tovisitanddrawing in shoppers who are in‘discovery’mode.”

Kyle Monk Head of InsightNewWestEndCompany,UK

Adidas OriginalsLondon

Gucci SoHoNewYork

Muji’slocationsinShenzhenandBeijinginChina,workonthebasisthatlivingwiththeproductsforafewnightswillbeinducementenoughtobuy.There’snobetterwaytoexperienceatoothbrush,forexample,thanusingitandifyouloveitwhyshouldn’tyoubeabletobuyit? Experiencesellsbecauseifweenjoyourselves,ifweareentertained,ifweareinspired,thenwewanttocapturethatfeeling.We’rewillingtobuyintoabrand,orproduct,thatmakesusfeelthatway.

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Experiencesdon’tgetmuchbiggerthanTommy Hilfiger’s Tommyland,whichraninFebruary2017inCalifornia,US.Thismulti-dayfunfair,musicfestivalandcatwalkshowcouldn’tfeellesslikeastoreifittriedandyetallofthecatwalkdesignswereinstantlyshoppableviaasmartphone.Theeventsoldaperceptionofthebrandfirstanditsproductsoffthebackofthat. Thepicturesandvideocapturedduringvisitsalsoformasocialcurrencythatcanbesharedwithothers.Thefocusisonspendingtimewiththebrand,whichcreatesthekindofrelationshipthatkeepscustomersreturning. However,Dalziel&Pow’sPaulWestnotesthatastoreexperienceisn’tjustaboutabigflagshipproduction.“Experience is often seen to be something that has to all-encompassing, super engaging, shareable, original, but it can also be something that's incredibly simple and convenient as well."

Tommy Hilfiger Tommyland California

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Do your spacessell more by putting experience before sales?

Theretailindustryis ataninterestingpointcurrently-everyoneistalkingaboutexperience,yetfewretailers are actually doingitwell.Youcanaskyourselfthefollowingquestions to see if your spaces trulyoffera compelling,brand-buildingexperience:

• Would someone pay to come into your space?

• Do customers take photos in your space?

• If your family had the opportunity to visit your space or go to the cinema, what would they choose? • Which features of the space make customers want to come back again and again?

"For us, experience isn'tsomething that is layered intoexisting stores; it's everythinga brand does to connect with a customer.”

He reiterates the point that a store has to be fully connected to the brand and itsexperienceacrossalltouchpoints:


Good things in small packages

igexperiencesaren’ttheonly waytomakeuseofphysical spacethough.Wedon’talways wantthisslower,wowofferingwhenwe’reshopping.Sometimeswewanttojustgetthejobdone.Inthesecaseswemayturntophysicalretailasafasteroptiontoonline,whichstillhastofactorindelivery,forconvenienceorbecauseweneedsomethingthat’snoteasily catered to online. Microspacesareafantasticwayforretailers to balance having a physical presencewithsomethingsustainablelong-term.Noteverytownorcityneedsalarge-scale,experience-heavyformat.Bycombiningsmallerspacesthatfocusonserviceswiththeserichflagshipexperiencesretailerscancreateanofferingthatservescustomersneedsonaday-by-daybasis. Somebrandsarealreadyputtingthisintopractice.John Lewisiswellknownforitslarge-formatdepartmentstores,butthebrandhasalsoopenedmicrospacesinkeylocationslikeLondon’s StPancrastrainstation.Whilethestoredoesstocksomeproductlines,itacts asausefulclick-and-collectpointfor

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John LewisLondonStPancras


thousandsofcommutersandtravellerswhopassthroughthestation. It’sworthnotingthattheUK’sNetworkRailreporteda2.3%increaseintrainstationretailsalesoverthe2018festiveperiod.Thevastnumbersofpeoplewhopassthroughtransporthubsmakethemmoreconsistentintermsoffootfallthanthehighstreetand therefore a great opportunity for therightretailoffering. Americanhigh-enddepartmentstoreretailerNordstromisalsoexperimentingwithsmallerspacesviaNordstromLocal.Insteadofstockinginventory,thesesmall-scalespacesarepackedwithservicesfromon-siterepairsandalterationstoclick-and-collect to personal styliststomanicures.It’saboutcreatingasingleplaceforcustomerstocomeandhavetheirneedsmetlocally.

“Thesmallestspace with the biggest message can become the loudestvoice.”

Jeff KindleysidesCo-founderChecklandKindleysides,UK

Argosisabrandmakinggreatuseofsmallspaces.

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InThailand,fashionretailerPomeloPinisusingsmallspacesforpick-upanddiscovery. A curated range of products areheldin-storewhichcustomerscantry on and then order digitally for collectionordelivery.CustomerscanalsoshoponlineandcollectfromPomeloPin.Thespaceactsasaneasyphysicalreturnspointaswell. Swedishfurnitureandhomewaregiant IKEA is another brand that has downsizeditslarge-scaleout-of-townstoresinordertoreachcitydwellingaudiences.StartingwithLondon,thePlanningStudiomodelletscustomersdesigntheirperfectIKEAspacesandshopproductsfordeliverytotheirhome. ThecompanyisalreadyplanningtoexpandthemodeltoNewYorkthisyear.IKEAistakingalocalisedapproachtoeachStudiotoensuretheofferingfitsinwithlocaldemand.It’sasmartconceptthatseesIKEAbreakingawayfromselling£4choppingboardsboughtonimpulsetoengaginghigh-incomebuttime-poorcustomersonbigticketpurchases. IfIKEAcanbreakawayfromanapproachtoretailthathasworkedforitfordecadesthenyoumightbeabletodothesame. Asourlivesgetbusierandourtimeseemsmoresqueezed,we’relookingforevermoreconvenience.Brandsthatfitinwithus,ratherthanexpectingustofitinwiththem,willhavetheedge.

IKEA Planning StudioLondon

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Brainstorm your micro-retail space

• Which locations might be best for your micro-retail spaces? Consider areas that are currently not served by your stores, transport hubs and other places that your target customers spend time, such as football stadiums, gyms, creches etc. • How might different spaces be tailored to different local audiences? • What kind of technologies would help you do more from a smaller space?

• What services might you offer or sell to customers, in or from the space?

• How would your micro-spaces and larger, traditional spaces interact? What would be the role of each?

• Has your brand invested enough in digital and logistics to support a network of micro- stores? If not, what are the most important investments and changes to make?


We believe that micro-stores are the future. You can start to dream up your brand’s micro-stores by discussing the following with your team:


Data-driven physical retail

lthoughdata-drivenretail certainlyisn’tnew,itspotentialis increasingallthetime.Whendata equalsinsight,andinsightminimisesrisk,everyretailershouldbeembracingdata.Leadingretailersarenowusingdata,notjusttodecidewheretosell,butwhattosell.Thiscomesfromknowingwhat’sgoingonoutsidethestore–wholivesinacertainarea,howtheymovearound,howmuchmoneytheyhavetospend,whattheydosociallyandmore.

saysRafaPulido,SeniorVPof Product&GrowthatSpanishlocationintelligencecompanyGeoblink."That’s a big shift because it's not just expanding for the sake of expanding. It's more about understanding the location and the customer."

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“The first step is to use data to truly understandwhat's the best experience that you can build

for a specific location. In a sense, data isactually defining the format and the type

of physical spaces that brands are building,”

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Nike by Melrose LosAngeles

Thebetteryouknowyourtargetcustomer,andthecustomersaroundyou,thebetteryour physical stores can catertothem.Brands’insatiablethirstfordataisanotherreasonwhytheyareinvestingindigital-firstecosystems.Customerswhointeractand buy via digital providemoredata,possiblyatlowerpricesthanpayinganexternalagency. Nike’sinvestmentinecommerceandappshave given it huge amountsofdatatominefor Nike by Melrose– itsnew,optimisedstoreconceptinLosAngeles.It’s called that because thecompanyconsidersthe space to have been ‘shaped’ by the local NikePlusmembers.Nikeusedinsightsinto their behaviour to not only choose wheretolocatethestore,butalsowhatproducts and services to provide. Thatproductrangechangesregularly based on localised buying data –particularlythatwhichcomesviaitsapp.Suddenly,it’snosurprisethatNikeisputtingitsappattheheartofalotofitsnewstoredevelopmentsincludingtheHousesofInnovationinShanghaiandNewYork.

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Inasimilarapproach,ChineseecommercegiantAlibaba'sHome Timesfurniturestoresuseinformationaboutthebestsellingproductswithinfivemilesofthestoretodecidewhat tostock.It’sasmartwayofusinglimitedin-storespacebyensuringthatthepeoplewhoaremostlikelytogointothestorecanfindwhattheywant.Thewholeproductrangeisavailable toorderin-storeforfastdelivery should they need anything else. MeanwhileAmazon has used data fromacrossitsentireecommerceempiretodeterminethestockforitsseriesofAmazon4-StarstoresintheUS.Asthenamesuggests,thestoresonlystockproductsthathavebeenratedfourstarsorhigher,areatop sellerortrendingonAmazon’swebsite.Thespaceaimstooffercustomersanopportunitytodiscovernewproducts,whilehavingtheconfidencethat they’ll be of a certain level of quality. It’saninterestinguseofreviewdatathatmaywellbeemployedbyothers indifferentmodels. Locatingandstockingstoresusingdataisparticularlyimportantforretailerswhowillmixanetworkofsmallerstoreswithafewbigflagships.Endlessaisletechnologiesandmobilewebmeanthatoncesomeoneisinastoreyoucanfulfilmostoftheirneeds,even if the product physically isn’t stocked.Gettingthemthroughthedooristhefirstpieceofthepuzzleandalocalisedapproachisagoodwayofdoing that.

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Dataprovidesarealopportunitytolookateachstoreonacase-by-casebasisandhowitcanbetweakedtomaximisevaluetocustomers. “It’s not only about the location, the consumers, their behaviour and what's happening around the area. It's also taking into account how big the store is, what’s the set-up of the space, what are the products, what are the marketing campaigns etc,”notesGeoblink’sRafaPulido. “By taking those business insights and the location insights and crossing them, you are in a much better position to tell what the drivers of your success are. Then you can make decisions on how to optimise that.”

Warby ParkerCenturyCity,LosAngelesAnotherbrandusingdatatohelpmakedecisionswhenopeningnewstores.

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But what if I havea 20 year lease?

stheworldspeedsup,itgets harderandhardertofindany retailertodisagreewithTina Qiu’sstatement(left). But knowingwhattodoisonething.Makingasuccessofyesterday’sdecisionsisquiteanother.Sometraditionalretailershavealargenetworkofstoresandaseriesofmulti-decadeleaseslefttorun. Ifyou’reoneoftheseretailers,knowledgeispower.Beforeyoudoanything,youneedtobeawareofwhatyou physically can and cannot do under thetermsofyourlease.Thatway,you’rehavingpracticaldiscussionsratherthanblueskyconversations. Thinkofyourspacenotasastorebut as a place. What can you do to makeitsomewherepeoplewouldliketocomeandspendtime?Couldyouaddinafoodandbeverageelement?Couldyourunclasseswherecustomerscangethands-onandmakethingsthemselves?Itcouldbeassimpleasputtingafewniceseatingareasaroundthestorewherecustomerscanstopandrelax.

“Beforeyoucan designsomething, youneedtothink about its intended purposes and how it can be used if things change.Weneedto create designs that adapttoafaster, moreagileand efficientlifestyle.”

Tina QiuSeniorAssociatePartnerPLPArchitecture,UK

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TheideaofplacemakingislikelytoonlybecomemoreimportantinthefutureasJeffKindleysidesofChecklandKindleysidesnotes:“Retail is the last bastion of some form of community. There’s collectively a bigger thing to be thought about there in terms of shops as places in our lives.” Pop-upsorin-storeconcessionscanbeagreatwaytoinjectnewlifeintoaspacewhilealsosharingsomeoftherisk.Gettingtherightnewbrandincanbeabigattractor.Youcanalsobenefitfromseeinghowcustomersrespondtothemwhichmaythenguideyourthinkingonnewproductsandservicesin the future. WhileUKdepartmentstorechainHouseofFrasermaynotbeflyinghighrightnow,thecompanydidhavesomegoodideaslikeworkingwithPoperteetoselectgreatpop-upsthroughAIandlocationintelligence.InHouseofFraser’scaseitwasperhapstoolittle,toolate,butitslosscouldbeyourgain.

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LastyearUSdepartmentstorechainMacy’slaunchedapop-upmarketplaceconcept called The Market @ Macy’s in anumberofitslocations.Brandsaregiven a pod of space on the retailer’s groundfloorinexchangeforafee,withMacy’sstaffrunningthespacesandselling product. InterestinglyMacy’salsopartneredwithFacebookovertheChristmasperiodtobring100digitally-nativebrandstoTheMarket.ThefeaturedbrandswereallsuccessfulsellersviaFacebookandInstagram.Partnershipslikethiscouldbeonewaythatyoucouldbenefitfromthemassesofdatageneratedonlineaswell.

The Market @ Macy'sUS


"A lot of our clients are looking at ‘dark stores’ –mini non-customer facing distribution centresthat allow for an incredible amount ofinventory to be nearby so they can replenish the store if they need to but are also able to take on more interesting retail."

Ifyou’rereallystruggling,youcouldalsoconsiderwhetherpartsofyourstorecouldbeusedtobetterservetheecommercesideofyourbusiness. Partners&Spade’sTedGalperin notes:

Otherretailershavefoundopportunityingivingoversomeof theirspacetoothermethodsofdrivingfootfallsuchasgymsandflexibleworkingspaces.Abarmightsuityourcustomersoranin-storehairdresserorfitnessclass. Couldyouoffersomeaddedvalueserviceslikepersonalshopping,jewellerycleaning,drycleaning, productdemonstrations?Aftercareoftenprovidesalotofopportunity. Forexampletrainerfansaresopassionate about their purchases and lookingafterthemthatanumberofcompanieshaveopenedupspacesforcleaning,refreshingandprotectingtheirbeloved shoes. But this could easily be partoftheshoebrands’ownin-storeoffering.ConsiderthesuccessofApple’stechsupportGeniusbarandtrainingmodelingivingexistingcustomersareasontoreturn.

10 Corso ComoNewYork

Gucci SoHoNewYork


What does the shopping centre of the future look like?

oputitinitssimplestterms, the shopping centre of the future isaspacethatpeoplewillvisit. “Whywouldsomeonecomehere?”Thisisthequestionkickingoffstrategysessionsfortowncentres,shoppingcentresandlandlords.Peoplespendmoneyinplacestheyspendtimein. “It’s almost a case of reverse engineering it,”saysAlfredBartlettpartneratUKpropertyandplanningconsultancyRapleys.“It’s about asking “what is the goal for this centre?”, “what type of customers do you want to attract?”, “what type of brands do you want to see here?” and then building a case that informs the design, layout and mix of operators in the scheme.” JHPDesign’sSteveCollisagrees.“We have a lot of friends in the architectural world who build shopping centres from scratch who have never really understood what makes a customer go into a store and pick a product up. We start with what people put in the bag. Once you understand that it's easy to design the store and the building to put the stores in.”

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Zeilgalerie Frankfurt


There are a few ways of doing this:

Tech-driven Westfield’sOneMarketconceptisoneexampleofthis.HavingbegunlifewithinWestfield,lastyearitwasspunoutasitsownbusinesswhichaimstocreateacollaborativenetworkarounddataandtech. Asaresult,OneMarkethasdevelopedanumberofproductsincludingengagementplatformHadleyandco-marketingplatformShopperExchange. Thetraditionalprocessinvolvesretailersspendinglargeamountsoftimeandmoneytryingandtestingdifferenttech,beforefindingoutthatdifferentsystemsdon’tplaynicelyinalivestoresetting.Bycontrast,Westfieldhasdoneallofthishardworkonce,lettingitofferclientsoptionsthatactuallywork.

Hammerson’sKathrynMallochalsobelievesthatinnovationdoesn’trequirehugetimeandmoneyinvestments. Sheadvisesaniterativetest-and-learnapproach. “I think there's a lot of fear that you can only take a finished product to your customer." "Actually they love to test new technology, they like to give you opinions and they like to be involved and I think too many companies are scared about that and not getting the benefit of that test-and-learn approach.”


More efficient interactions AlibabaGroup’sfirstbrick-and-mortarshoppingcentre,thefive-storeyMoreMallinHangzhou,China,isuniquelybuiltaroundthecompany’sbusinessecosystem.ThestoreshaveunmannedcheckoutsthatuseitsAlipaypaymentserviceandofferdeliveriesusingAlibaba’slogisticsnetwork.It’sthesortofneat,one-stop-shopservicethatfewcompaniescannativelyoffer,butperhaps the shopping centres of the futurewillleverageasimilarcentralisedsystemforcertaintaskslikepayments. Foranysortofshoppingcentre,offeringvalue-addedservicesisalsovital.Doneright,thesecanbeawin-winforbothoperatorandcustomerasUKplanningconsultancyUrbanShape’sDirectorCarolineMarginsonnotes: “When you have a managed indoor shopping centre you could use one of the vacant units for click-and-collect where customers can buy online, get it delivered to that unit, try it on and either take it home or return it." Zeilgalerie Frankfurt

Fünf Höfe Munich


More to discover Thesoon-to-opennew720,000sqftmallattheHudsonYardsdevelopmentinManhattanistakinganinterestingapproachtoup-and-comingonlinebrandsbydedicatingafloortothem.Thespacesarebiggerandtheleasesarelongerthanthestandardpop-up-in-a-shopping-centreoffering.Othersarealsolookingtotheseecommercecompaniestobringsomethingnewtotheir spaces. The13,000sqftNeighborhoodGoodsinTexasismoreofadepartmentstorethanashoppingcentre,butitsmodelcouldeasilybescaled into a larger space. Created by entrepreneurMattAlexander,thecompanyusesitsphysicalspacetohostanever-changingseriesofbrandsandexperiencesinordertodrivevisits. Eachfeaturedbrandisabletocuratetheexperienceoftheirpop-up,butNeighborhoodGoodshandlesallthestaffing,fit-outandtech.There’salsoacommunalspaceforeventsandinstallations,plusabarandrestaurant.NeighborhoodGoodsalsohasaninterestingappcomponentthatletsyoulearnaboutthebrands,messagestaff,getproductsbroughttoyouand,ofcourse,buy.

It’sanapproachthatSeanPrigmore,NationalHeadofRetailatUK-basedcommercialpropertyconsultancyLambertSmithHampton,seesopportunity in. “One of the trends we may see going forward is if landlords are going to let shops or shopping centres they almost have to give a turnkey option for those start-up businesses.” Fourpostisastore-within-a-storeconceptatMinneapolis’MallofAmerica-theUS’slargestmallatnearly5millionsqftandownedbyMOACMallHoldingsLLC.Brandsrentspacewithintheunitonamonthlybasiswiththemixofbrandsonoffercarefullycuratedtocreateaplacetogoanddiscover.Plus,thespacehostsregularevents.Theconceptisalsocomingtothe5.3millionsqftWestEdmontonMallinCanadathis year. Whether it’s a shopping centre or a towncentre,havingtherightmixisessential.Sometimesbrilliantinsightsaroundthatcancomefromretailersthemselves,viathingslikecontingentlettings,asRapley’sAlfredBartlettexplains:“We ask a retailer ‘who do you want to sit by?’ ‘Who acts as a generator for your offer?’ We then use this to build the mix and offer lettings dependent on securing other complementary brands."


Laser-like focus There’salsosomethingtobesaidaboutshopping centres that serve a niche. The450,000sqftopen-airBalHarbourShopsinMiamiisoneofthemostsuccessful shopping centres out there. Stillfamily-ownedbytheWhitmanfamily,BalHarbourtargetstheluxuryendofthemarketandisoneofthemostproductiveshoppingcentresintheworld. Itnotonlyhasa340,000sqftmulti-millionexpansionunderway,butalsoawaitinglistofbrandswhowanttogetinside it. Bal Harbour is successful because it’s focused on serving a certaintypeofcustomer.Inthiscaseit’sthedeeppocketed,butthereareamyriadofothernichesthatcouldbecatered to. The286,000sqftLifeTimeCenterinBoston,ownedbyTheBulfinchCompanies,Inc.,haspivotedtobecomeasuccessfulhealth,wellnessandfitness-focusedcentre.AnupcomingnewshoppingcentreinDubaifromVivaCity is going to be dedicated solely to sports,bothintermsoftheretailand

entertainmentoffering.TheSportSocietywillhavethreefloorscoveringanareaequivalentto12footballpitchesandhostvarioussportseventsandactivitieswithinthespace. Creatingaplacethatcaterstoaspecificinterestorwayoflifemaybeawayforshoppingcentrestosecuretheir future.

Zeilgalerie Frankfurt


More experience and leisureIfexperience,leisureanddiscoverylieattheheartofphysicalspace,itmakescompletesensethattheyalsolieattheheart of the shopping centre’s future. TheproposedMiamisupermallfromTripleFive,AmericanDreamMiami,istakingitsleisureoffertotheextremewithanamusementpark,waterparkandindoorskislopeamongtheentertainmentoffering.Earlyplansallowedfor1.5millionsqftforentertainmentand3.5millionsqftforretail.However,thosepositionshavenowbeenreversedtogivemoreroomtoentertainment.Thesesortsofdevelopmentsmeanthatwemaychoose to spend a day at a shopping centreoverathemeparkinthefuture. Italsoshowsthatretailaloneisn’talwaysconsideredenoughtogetpeopletomakeatriptotheshoppingcentreanymore.Gyms,co-workingspaces,offices,hotels,dining,residentialand health and beauty services are all amongthenewshoppingcentremix.

The Bowl at Selfridges London

PosnaniaPoznań


What shouldyou do?

hysicalretailisn’tdead!’criesjust abouteveryspeakeratpretty mucheveryretailconference. Andthewholeroomsighswithrelief.Thestatementmaybetrue,butthereactiondeeplyconcernsus. PhysicalretailISN’Tgoingaway. Butphysicalretailisgoingtolookradicallydifferent,verysoon.Weworrythatretailerstaketoomuchcomfortinthe fact that physical retail isn’t going away,andoverlookthechangetheyneed to undergo to survive and thrive. ThekeymaylieinceasingtothinkabouttheSTORE,andstartingtofocusonSPACEinstead. Theterm‘space’encompassestwokeychanges–functionandlocation. Dalziel&Pow’sPaulWestobservesthatthespacewilldoalotmorethanselling. “The space of the future will have a range of jobs to do – from instant fulfilment and convenience to full experience, education and community.” And,ofcourse,thesephysicalspacesandexperienceswillconnectwiththebrand’sofferingsinotherchannels. “What will tie them all together is that they have to be smart, they have to

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be original, they have to be informative and fulfilling, they have to be connected to the ecosystem of the full brand offer,”Paulsays. Anexcitingnewfuturealsoopensup,asimmersivedigitalinteractionschangethelocationforphysicalretail.ShoppingcanexistinsideANDoutsidethefourwallsofthestore,spreadinganywhereandeverywhereintotheworldaroundus.Storesmaybedottedaroundtheworld,butspaceiseverywhere–inshops,pop-ups,theatriumofshoppingcentres,busstops,parks,transporthubs,forests,mountainranges…Withthis,everythingcanbecomeashop,andshoppingcanbemuchmoreintuitivelyintegratedintoour lives. JHPDesign’sSteveCollisputsitbrilliantly:

“Be prepared for everything to break downa bit. Expect the definition of the differencebetween the place that you go to buy andwhere you utilise what you have bought todissolve and all worlds to become one. There's going to be a great breaking down of barriers because that's how we live our lives."


Asthesebarriersbreakdown,itmaygetalittlemessy.Thewayforwardmaynotalwaysbecrystalclear.Butwenowknowwheretostart,andactionalwaysbrings insight. Anywhichway,ourretailspaces,andourretailexperiences,areabouttobecomemuchmorerewardingandexciting. Enjoythemessandtheadventure.

Citadium Paris

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In conclusion

• Run the exercise on digital-first (page 9). What kind of physical store ecosystem emerges? • What kind of changes and investment do you need to make to support this ecosystem? What are the top priorities? • What services and leisure experiences could you offer from your spaces to break down the boundaries between selling and experience? • What can you do to make your physical spaces rival other leisure experiences to keep customers coming back? - It may help to imagine that your space wasn’t allowed to sell a single product. How would you bring your brand to life and keep customers coming back? - How would you link the physical experience with digital to encourage online buying? • What can you do to ensure every part of your space is as profitable as possible? Who might you partner with? • How can you start to embrace the retail space that exists beyond the four walls of your stores? - What is the smallest, lowest-risk experiment you could run?


Having interviewed all our experts and considered numerous world-leading examples, here are some questions you could explore with your team to stay ahead:

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The Future of Retail Space - Insider Trends€¦ · 8 The Future of Retail Space “The high street...

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