The Age of Retail Experimentation

Here we go again. We have not seen such rapid retail change since the dawn of smartphones. While many are trying to predict the future, the only way to navigate successfully is to test and learn our way there. Urgency is order of the day, as old competitors and new entrants use this black swan event to leapfrog those waiting for the smoke to clear. Below are three areas every consumer-facing brand should be briefing their teams on, in order to get agile concepts to market.

  • Experiment with local presence

The pandemic has reversed where people want to spend most of their waking lives. Recent estimates by JLL report that people are likely to only return to the office for 2.4 days per week on average – making home the main place to be 4.6 days/week. Reality lags behind these figures – especially for middle-income white-collar workers.

This polar economic shift means many of the ‘simple pleasures’ commuters enjoyed are now sought out closer to home. Dense office areas, and the retailers that depended on their footfall, are emptying. Local retail areas have recovered faster than urban cores and many local high streets and shops are booming. In countries like Italy, there has been growth in local store networks in the past year, proving the great potential of the next-door shopping. Carrefour Market, Pam Local, Esselunga LaEsse and Mediaworld Smart were all successfully added to the traditional large chains. The household items retailer Kasanova is expecting to grow with 100 new franchised proximity stores per year, and OVS shared its expansion plan across small towns.

A 2021 KPMG report also links faster recovery to the presence of culture infrastructure; including sport grounds and arts facilities as well food and beverage options. This presents an opportunity for non-essential retailers, who can begin to experiment with local formats that help create culture and simple pleasures for this new demand. Look to retailers like Sweaty Betty for neighborhood yoga classes, Lush for local treatment rooms for inspiration in creating service-led and culture-creating brand outposts in local communities.

Localisation is not just a big deal for distribution – it’s a big advantage for brand building.

As globalisation continues apace, brands struggle for authenticity and relevance. Being local is a short-cut to relevance, when done well. Before Covid, there wasn’t much of a business case for non-essential retailers to invest in local neighbourhoods. But research is indicating people will continue shopping locally for non-essentials, more than ever.

Start experimenting with rich ideas and experiences that could work for higher traffic high streets and become part of local cultural hubs.

  • Test new physical formats

The four horsemen of retailing – globalisation, digitalization, commoditisation and now localisation – have changed physical retails’ purpose from low-cost distribution to high-value brand-building. But whether you are a bank or an apparel retailer, many legacy locations continue to eat up budget and yet more untapped market opportunities remain.

Different format models are flourishing, including nomadic, unmanned and micro-formats. Lynk & Co, a new car brand, is busy building market share in Europe with a combination of 700 pop-up venues, sharable test-vehicles across cities and very few permanent flagship retail sites called ‘clubhouses’. This approach gives Lynk & Co permanent brand-building headquarters in key cities, visceral pop-ups for customers to connect more casually with the brand and not to mention, a more convenient way to test drive vehicles close to home.

Singtel, a Telco with 640m customers across Asia, has been rolling out unmanned locations where customers can trial products, pick up ordered products, do returns and speak to live agents over video screens for an all-new way to serve. Quotidiana transformed beyond its newsstand format and offer, to sell food, basic necessities and services in Milan in reaction to local demand during the pandemic.

Testing new formats helps retailers to operate more flexibly, enter new markets and limit large capital outlays, but also answer a general customer craving for ‘the new’ that seems never to be satisfied.

Nomadic, unmanned and smaller, more nimble formats help brands respond to trends and stay relevant – giving retailers a much-needed edge. These new outlets are not only commercially savvy, but they also enable faster brand-building.

  • Trial ‘Dream’ dotcom

It took Covid to show us just how boring shopping on websites can be. Most branded dotcoms rely on a friction-free ‘add-to-basket’ experience exposing brand-building weakness when compared to the best physical shops. As Tadashi Yania, founder of Fast Retailing says: ‘Online is our biggest store, but not our best store.’

Our own research finds that 75% of people who visit quality physical flagship stores are Millennials and GenZ. Young people don’t hate shops – they just don’t visit bad ones. The goal of most younger peoples’ shopping trips is to be inspired, have fun and learn something new – the D in Landor & Fitch’s DEL™ shopper mindstates framework; Dreaming, Exploring and Locating.

Dreaming-focused trips also bring roughly the same share of revenue and even higher margins. The reason? Dreaming experiences entice us to leave our rational minds behind and become immersed with the brand…and buying with more gusto.

But branded dotcom remains a rational experience focused largely on product listings, specifications and micro storytelling. Measurement, while critical, has created a rational focus for this online channel, in turn stunting more exploratory features.

A fun experience contributes bigger gains in customer advocacy than other parts of the offer, such as low price, great service or quality products. Yet the world of online experience is often bifurcated into ‘fun’ and ‘shopping’. Turn left to visit fun social media and turn right to add to basket and complete purchase. This break in the experience prompts us to switch gears and turn rational, explaining many abandoned shopping carts.

KitKat Brazil is a compelling example of a dotcom built for the Dreaming mindstate. KitKat lets its grocery partner channels cater to the rational ‘Locating’ mindstate and then gives visitors to the KitKat website a playful ‘Dreaming’ environment designed for fun activities; creating a custom flavoured chocolate, or printing your cats’ face onto a chocolate bar. These exclusive experiences generate traffic and sales, and importantly: a premium perception of the brand – helping maintain price in 3rd party channels that work to erode brand premium.

So much change in such little time is rare. Now is the time to really act; to host memorable retail experiences through innovation and experimentation. Acknowledging the core drivers of the ongoing change in retail will shape the future of consumer facing brands.

This article was first published on HBR Italia