The following is a guest post by Elaine Kleinschmidt, executive vice president of strategy and experience design at WD Partners. Views are the author's own.
Over the past five years, the retail industry has been turbulent, to say the least. Many brands, both mature and novice alike, have been rocked by forces all around them — shifts in shopper behaviors, generational preferences, local nuance, economic pressures, commercial real estate values, and the infusion of private equity and resulting expensive corporate retail debt — which has put many retailers into a tailspin, if not out of business.
Brands that have historically been in offensive mode on growth and expansion, have been forced to live in defensive mode where the struggles of meeting day-to-day goals have inhibited them from making real progress on future visioning. Branded manufacturers who have historically built their retail proposition through wholesale points of distribution are doubling down on direct-to-consumer (DTC) retail (e.g. Nike and Adidas). And brands who have predominately built their business around brick-and-mortar stores have found their sea legs with robust digital commerce capabilities. Even digital pure-play brands are expanding their strategy to include brick-and-mortar (e.g. Amazon, Warby Parker, Wayfair, Bonobos and One Kings Lane).
We all know that e-commerce is not putting companies out of business, it's simply changing the way customers connect to brands. Instead, private-equity-backed real estate, high-interest debt and brands' inability to focus on investments that will connect all facets of their digital and physical ecosystems, have been their downfall. The result? Brands who are winning today have focused investments on mapping brand experience strategies to both the needs of the customer and to the overall health of the brand.
Let's cut to the chase — the old prototype store model is obsolete. It is too inflexible and tone deaf to serve the needs of today's sophisticated customer. This dated approach — of one ideal-state design that's sized to small, medium or large — leaves retailers stranded with anomaly stores, which are difficult to replicate, may contain un-scalable experiences and/or operational challenges, posed by a lack of integration between their retail storefront and digital operations.
Most importantly, the prototype design fails to accommodate the new reality of retail, ruled by personalized experiences, local flavor and nuance, new options in order fulfillment and service offerings dictated by what customers need for on-demand access to product de jour. Yet, for all those flaws, giving up the prototype is hard to do.
"We're still talking about retail development [through] the lens of a traditional prototype. That is exactly our problem, and we wonder why it's been so painful," says one senior executive we visited recently.
A new strategic approach to concept, design and execution has emerged. At WD Partners, we call it a "retail portfolio strategy." It is a flexible set of modules to help retail brands create a strategically designed system of integrated parts and operations, to achieve synergy and scale, with both customers and their brand in mind.
This broad, multidimensional approach lies beyond the capabilities of the old ways of store design and retail concepts. Having a retail portfolio strategy can help brands get out in front of the changes that are reshaping retailing. They can pursue a broader, more strategic vision as they take the initiative to reinvent their operations, improve the shopping experience, enhance their engagement with customers and better integrate online and in-store efforts. Ultimately, a retail portfolio strategy helps brands achieve an ideal state of agility by operationalizing innovation and prioritizing spend, based on customer insights and business analysis combined.
Reaping further rewards and new growth from the mash-up of clicks and bricks will require retailers to adopt smarter distribution logistics, overhaul and retrofit existing stores for faster curbside delivery, online pickup and returns, improve app features and knit together data systems for loyalty programs, sales, marketing and more.
New formats will blend clicks and bricks so well, that they barely are distinguishable. After all, to the customer, retail is retail. The challenge for brands is seeing themselves from the customer's point-of-view. Brands will succeed by investing in integrated brand experience and technology strategies that map a shoppers' experience, agnostic to place, space and time. All of this is accommodated by a retail portfolio strategy, especially when it comes to DTC efforts. In contrast, almost none of it is covered by the narrow scope of the old retail prototype model.
As mentioned earlier, brands are facing an epic offensive/defensive struggle. Historically, retail brands were on the offensive in pursuing growth and customer acquisition. In recent years, buffeted by the forces afflicting the industry, they have been forced to live in defensive mode in adapting to the rapid-fire changes in retailing. How do brands get to a place where offense and defense can co-exist, where innovation and operation are not at odds? When planning a new store concept and/or DTC growth strategy, retail executives must weigh some dynamic and tectonic shifts that lie beyond the old prototype model's reach:
- Product innovation
- Experiential retail
- Distribution logistics
- Value-added services
Given these shifting dynamics, gone are the days of the old prototype model and a one-size-fits-all solution for retail development — and these days should be gone. By deploying an integrated retail portfolio strategy, retailers can strategically architect an integrated system-of-parts to drive scale vs. a tactical application during a prototypical site-adaptation process.
In discarding the prototype model, retailers can use retail portfolio strategy to take a broader-based approach to designing and maintaining a brand ecosystem. Modules are dialed up or down for the dynamic conditions of their retail experience, with the ability to prioritize various modules relative to store format and locale, to serve the needs of a variety of primary shoppers, instead of store size being the driving factor.
Retail becomes a portfolio of formats instead of mere channels of distribution. In applying the RPS approach, retailers can serve business needs and consumer needs at once, gaining their customers' trust and loyalty.
Retailers know they must "get unstuck," unshackle themselves from old ways and change their approach to most everything. The hard part is to know where to begin and what it should look like. While the base framework is simple, the hidden shackles lie in designing a system of parts for developing and applying the strategy to today's current and future state. The two diagrams below illustrate the contrasts between the old, inflexible prototype store model and a retail portfolio strategy base framework.
New build and remodel programs are now strategically planned through the evaluation of both customer and business needs, with market expansion and real estate strategy as key components. Brands are free to solve problems and stay locally relevant while reining in and fine-tuning the costs of providing experiential retail and value-added services. A retail portfolio strategy helps retailers account for regional and cultural nuances that the prototype-store design fails to serve. And, reconfigures both clicks and bricks to account for one another — as portals to and from each other.
Breaking the mold of the past lets retailers reassemble the clicks and bricks into a structured yet scalable model for brand resilience and growth. As more online retailers open more storefronts, and storefront retailers improve their game in the ether, the lines between physical and digital, and even brand and retailer, are long past blurred.