The retail industry is undergoing a major transformation as e-commerce disrupts traditional brick-and-mortar store models and gives rise to new modes of “experiential retail.” The experiential retail trend is being driven by a number of factors, including the increasing popularity of e-commerce, the decline in traditional department store traffic, and the proliferation of mobile devices.
Just as e-commerce pioneers like Amazon.com provided exceptional online customer experiences, experiential retailers are reinventing the in-store experience, creating environments that attract and delight consumers through features like spas, cafes, theaters, art exhibitions, and a host of other amenities, along with personalized service, in-store kiosks, 3-D experiences, pop-up shops, mobile commerce, and more.
A key element of experiential retail is the innovative use of technology to provide interactive and immersive experiences. Retailers are employing artificial intelligence (AI), virtual reality (VR) and augmented reality (AR) to give shoppers experiences that engage, inform and entertain.
The success of brands like Sephora, Ulta Beauty and Rebecca Minkoff shows that consumers are responding to retailers that provide state-of-the art shopping experiences that are more sensory, information-rich, convenient and personalized.
Sephora, for example, enables shoppers to find products that match their skin tones by scanning their faces to get their "Color IQ." Sephora's mobile app, called Virtual Artist, enables users to digitally try out different products like lipstick shades, eyeshadows and false lashes through AR.
Rebecca Minkoff’s stores in New York City and Los Angeles feature an interactive video wall and self-checkout for small items and accessories. Fitting rooms are outfitted with “magic mirrors” that enable shoppers to see different styles and colors of clothes, change mood lighting, and order a free beverage that's delivered to their room along with their clothing choices by a salesperson. A list of the items customers have tried on can be saved and sent to their phones so they can order later via e-commerce.
Personalization Boosts Sales
Cosmetics retailer Ulta Beauty is thriving through experiential selling, with sales growth of 63 percent and plans to open 100 new locations. A key ingredient to Ulta’s success is an analytics-based CRM system used for personalization and loyalty rewards. When one of Ulta’s brands launches a new product, the retailer can identify customers most likely to buy the product and personalize communication, sampling and point-of-sale efforts directly to those customers. This process, says Ulta, is yielding higher sales rates and a strong return on investment.
Also leveraging leading-edge technology is high-end home furnishings brand West Elm, which introduced Pinterest Style Finder, an online tool that uses AI to help consumers turn their style inspirations into products they can buy at West Elm’s stores and from its e-commerce site. Style Finder is a complement to West Elm’s Style + Service, a free design consultation service available in its stores. Customers share a Pinterest board for a room, and the in-store designers suggest West Elm products to recreate the look.
To wow shoppers, experiential retailers are employing colorful displays and showmanship in their in-store environments. Burberry, for example, is creating immersive and theatrical events within its shops. In launching a store in Beijing, Burberry used 4-D video projection to transform real models into holographic presences that would burst into liquid or clouds of red powder and multiply into an army of clones.
Apple, meanwhile, continues to lead in experiential retail, spending hundreds of millions on stores worldwide, including a new Milan Apple Store that will feature an outdoor amphitheater for hosting cultural events. Apple has been a leader in providing a state-of-the-art in-store experience through the intelligent use of mobile devices for scanning, checkout, ordering and payment.
Other retailers are following Apple’s lead, including Saks Fifth Avenue, which has deployed software by Oracle that facilitates speedier checkouts and equips shop associates with relevant customer information during all points of sale, enabling associates to provide more personalized service and recommendations.
AR and VR Add Pizzazz
For experiential retail, two of the most promising and exciting new technologies are AR and VR. VR can take shoppers on dazzling immersive journeys through which brands can showcase their products. UK retailer Topshop, for example, is giving shoppers in-store VR experiences of its brand, while North Face is letting shoppers take a virtual tour of Yosemite National Park and the Moab desert.
While VR is self-enclosed, AR enables retailers to “place” products in consumers’ actual environments, with products appearing in realistic 3-D forms that the user can walk around, viewing it from different angles. AR enables shoppers to customize their experiences, such as trying different colors and shades of clothing and cosmetics, trying different clothing items and accessories, and seeing how different furnishings or shades of paint appear in their personal home environments.
Pop-Ups Take Off
Pop-up shops are a relatively new form of experiential retail that has became a $10 billion industry almost overnight. Pop-ups are theme-oriented shopping experiences that appear unexpectedly, are marketed as events, and often carry items not found anywhere else. The pop-up store has become a go-to marketing strategy for retailers looking to extend their brand and introduce new products.
Pop-ups are being staged in empty storefronts, as standalone kiosks, in trucks, and within traditional brick-and-mortar stores as a store-within-a-store. Nordstrom, for example, hosts a recurring series of Pop-In@Norstrom specialty shops, which feature products not typically found in a Nordstrom store.
Going forward, retailers will continue to employ technology to enhance the in-store experience and integrate online and offline experiences. As technologies like AI, AR, VR and the Internet of Things (IoT) continue to advance, retailers will be able to provide ever-more sophisticated personalized offerings, feature-rich interactive applications, engaging environments and elevated levels of service.
Retailers will employ an array of leading-edge technologies, such as chatbots and live streaming video, to give shoppers compelling new interactive experiences. As home voice devices proliferate, ever richer modes of home shopping will be part of the experiential landscape.
Small-scale shops, pop-ups and other streamlined establishments increasingly will be integrated with mobile and web channels to facilitate on-demand product fulfillment, including pickups, deliveries and returns.
Shoppers will be able to procure rapidly produced and customized products, such as on-demand tailored clothing, individualized makeup and formulated scents, and products created in-the-moment through AR-aided design and 3-D printing.
We're only on the cusp of what experiential retail can become. As the old department store model disappears, we're witnessing a disruption and rapid technological evolution that's ushering in an exciting new age of reinvented retail.
Bart Mroz is the founder and CEO of SUMO Heavy, a digital commerce consulting and strategy firm.
Related story: Creating a Buy, Not Browse, In-Store Shopping Environment
Bart Mroz is CEO at SUMO Heavy, a digital commerce strategy firm. The company builds, connects, expands and invests in growing online retailers. This group of experienced strategists, consultants, designers and developers works to build solid brands and to create effective online retail solutions. Bart is an expert in e-commerce, business consulting, and technology strategy.