10 October 2017

Is the physical shop still viable in an increasingly digital world?

Our expert panel discusses the mess of problems currently causing trouble for bricks and mortar retail businesses.

We hosted this Courier Talks session at 18 Montrose in King’s Cross to debate how the physical shop is changing. On the panel were Alice Ratcliffe (Appear Here), Paul West (Dalziel and Pow), Tom Broughton (Cubitts) and Ben Banks (Four Marketing).

Courier: What would you say are the biggest shifts happening in retail right now?

Alice Ratcliffe: Brands are demanding greater flexibility. They don’t want to be tied to a 20-year lease at one location. We’re trying to make retail space accessible and simplify the whole process so you can book a shop online, just like you order a taxi or book a hotel room.

Tom Broughton: In a world where you can buy with one click on Amazon, you really have to excel at service. Cubitts started as an online brand four years ago, and we were trying to cut through the digital landscape with little budget. We survived, but it was hard.

We realised we are fortunate to have a product with a whole customer service element wrapped up in it; frame fitting, eye examinations and lens choice. When we opened our first shop in Soho three years ago we honestly had no idea what we were doing. On the first day, someone tried to buy some frames and we were completely flummoxed. We didn’t even know how to take payment so we had to put it through the website. Now we have five physical sites.

Paul West: Dalziel and Pow is now 33 years old. In our business, it used to be enough to design better-looking stores and create great flagship experiences. But now brands have to work so much harder. We’re seeing banks as well as fashion retailers trying to build trust and authenticity with customers and create a more engaging experience. Twenty years ago, being a successful retailer meant having 200 branches on the high street. Is it fair to say that’s no longer feasible or even desirable?

TB: Historically, you’d create a product, convince a buyer in a department store to buy it, and then in maybe 20 years you would have built up enough brand awareness to have your own store. That’s completely changed now because of the internet. You can build a loyal customer base without even having a store. As a consequence, it’s led to an explosion of small independent brands opening their own retail sites. I’m not sure we could have launched 20 years ago.

AR: Interestingly, our fastest growing user group is online brands coming offline to launch physical stores. What a lot of them are learning is that the physical store is a great way of boosting visits to their website. So they are looking at it more as a marketing tool, instead of spending money on Google Adwords, which is becoming increasingly expensive.

Ejder For Life is a streetwear brand with a cult following. We showed the founder some deserted urinals in Old Street station, which TfL had seemingly forgotten about for the last 70 years.

Not many brands would look at that space and be like, ‘Yes, this could be my shop’, but he liked it. It became this underground location – the secretiveness became the most attractive aspect of it. And then suddenly you had Old Street station in meltdown because thousands of people were queuing up, not just to get through the turnstiles, but to get into the Ejder For Life store. Another brand we’ve worked with, Surfdome, which is an online surfwear marketplace, gave special codes to people who visited their store. Afterwards, they could see that for people who’d visited the store, their average basket size online was double what someone who hadn’t visited the store was spending.

So stores are a bit like expensive billboards?

Ben Banks: It’s much easier to convey a story in a physical place than online. Online, people have such short attention spans and, frankly, a lot of brand stories are very derivative so it’s really hard to cut through.But in a physical space, by the time the person has passed the threshold they’re not just hit with how something looks on a screen, but how it smells, how it’s lit, what the people look like and what they say to you when you come in. That’s not to say online isn’t a good way of telling a story, but having a physical space for us really was transformative.

AR: Brands are telling us that when they’re launching these stores they see their sales go up online. That’s happening for a number of reasons. Obviously, it’s more eyeballs on their brand, but also by launching a store you are generating PR. It’s a new story for the press to talk about. Brands aren’t so worried about driving sales in store. If someone leaves loving their brand they might not make a purchase for two months, but they’ve already converted them into a fan and they’ll see the rewards later on.

Ben, these screens surrounding us here in your new store, are they an extension of what Alice is saying about using stores as advertising?

BB: Yes, I think so. Brands spend millions creating content and there are so few places to actually see it. This store is a little bit of an Appear Here because we’ll measure the success of it by the level of engagement. That’s not just the pure profit and loss of this space, it’s also about hosting events for brands, creating opportunities to invite our customer base to meet us and to socialise with the brands, and giving something back that’s more than a pure online transaction.Because everyone’s got a smartphone these days, the customer is so much better informed. 20 years ago if I went to Tokyo I’d be trembling with excitement at what I was going to see. Now, unless you abstain from your social media feed for 12 months, you feel you’ve seen everything to a certain extent before you get there. Brands want to be authentic and while now you’ve got much quicker access to your audience, it’s also much more fragile when you get there. Do you think there’s still a template for what makes a successful store?

BB: No. We run stores that sell just one brand, and then we have an environment like the one we are in now where we’re selling third-party brands. You can damage your philosophy if you put the wrong brand inside your multi-brand store.

PW: It depends on the brand’s purpose. Some want to entertain and create theatre – like Lululemon on Regent Street with its yoga events. But equally, sometimes it’s simply about fulfilment and convenience. We did some work with Rockar, a car showroom that pops up in a small format, where you can buy a car in under eight minutes. It’s out-performing the whole UK dealership network for each of the brands it works with. It’s a very different proposition to Lululemon. It comes back to creating experiences that are absolutely relevant for the brand and not jumping on the bandwagon of creating a tech-led space.

Retail has a habit of bringing in quirky innovations that are disconnected to how we want to shop such as QR codes in windows and iPads for customers. Is there another rush to embrace tech for tech’s sake?

PW: There can be a backlash around realness when brands try to create something showcase-y and shiny. It’s about real social experiences, threaded together by mobile but not slaves to it – using digital in useful, meaningful ways as opposed to just showcasing something in a corner that nobody really looks at.

What are the best uses of tech in retail?

TB: We work with a company called Hoxton Analytics which has developed footfall counters – cameras that look at people’s shoes. So you put a camera in a doorway, and you can see live the number of people in a store, that kind of thing.

That’s quite spooky.

TB: We know from our previous stores that between 0.5 and 0.8% of people who walk past one of our shops will cross the store threshold, and then a certain percentage – I won’t tell you what – purchase a product. It’s not exact, but it’s a good filtering mechanism. It allows us to understand the flow of customers and their purchase behaviour in a more intimate way.

Paul, there’s clearly a huge amount of customer data now available. Is it changing how you design shops?

PW: Data is obviously important, but unless you’ve got a really exciting idea it doesn’t matter. We’ve been looking at how to decode what makes a great retail space, and there are six clear principles across the big brands like Apple, Ikea, Muji and H&M.The first is purpose; a clear mission. The second is personality – the brand image, content and tone of voice. Then it’s people – do the people of the brand deliver all of that purpose and personality? – followed by process; Amazon, Apple and so on have interesting ways of transacting through mobile, for example. Finally, it’s the space, and then the product. All those ingredients are fundamental in creating a retail experience. Capturing data is an essential part of that, but I don’t think retail spaces should be driven by data.

Finally, what’s the most exciting thing you’ve seen in retail recently?

AR: The small guys always stand out. You can’t beat the experience of walking into a shop and dealing directly with the founder or designer who made the products.

TB: Can I say something really boring that’s been around for ages? Click and collect. It completely changes the nature of what a shop is. It suddenly frees up retail space and makes its use more efficient.

PW: It’s a really creative time for retail. Brands that are delivering holistically across the whole experience are doing well. One example is Mini; it’s got the smallest showroom in the world – a Mini taxi in Paris that has content inside it – as well as bigger projects like the Mini Living Initiative that’s been popping up in different parts of the world, which is all about the future of cities and the clever use of space.

BB: There’s a retailer in the US called Kith and in its Broadway store in New York there’s an ice-cream parlour, tied in with Nike. It’s called Kith Treats and is based around taking you back to your childhood.

This is a condensed and edited version of a conversation that took place on 30 August 2017.

The panel

Paul West, Dalziel and Pow. West is strategy director for retail design company Dalziel and Pow. He joined in 2015, after a previous stint at retail experience agency Household.

Tom Broughton, Cubitts. Cubitts was founded by Broughton in 2013; it now has five London sites. The company produces handmade and bespoke glasses.

Alice Ratcliffe, Appear Here. Appear Here provides businesses with short-term leases in prime locations around the world. Ratcliffe has run marketing and editorial since 2013.

Ben Banks, Four Marketing. Banks is a founding partner of fashion agency Four Marketing. In August 2017 it opened its third physical retail space; 18 Montrose in King’s Cross.

Open mic

‘As Tom Broughton put it, the future of retail begins by redefining the role of the person in the shop. The internet is very flat, whereas a store is a three-dimensional experience that should eventually convert spectators into shoppers.’

James Hayes, brand strategist

‘There is something very interesting in how the shopping process is becoming more fluid between online and physical shops and vice versa. The whole “showroom” thing discussed this evening was interesting – especially when you think even in a couple of years the online turnover of John Lewis will overtake that of its stores.’

Richard Wassell, Twenty Retail

‘It was particularly interesting to hear Tom from Cubitts talk about combining data with a qualitative approach when researching new shop locations. Opening bricks and mortar shops is no small feat but he seems to have nailed it with his balanced approach.’

Lucy Ward, Trouva

‘Given the entrepreneurial audience, I assumed the talk would be about retail’s demise, so it was pleasantly surprising to hear completely the opposite. Especially interesting was the correlation between opening a physical store and sales online.’

Bob Taylor, Brightstar Capital

First appeared in Issue 19 Oct/Nov