Retailers are finding creative ways to engage customers by turning sales floors into interactive showrooms with new technology and higher standards of customer service. The reason: Retailers are craving an emotional connection with consumers. But this comes at a cost. Can all stores adapt these new and innovative technologies? Or are they suffering from the price?
Benetton is out, Nike is in. When the Nike Training Camp studio moved to Armitage Avenue in Lincoln Park, Chicago in January, consumers were engaged by how the store was just as much a workout studio as a retail space.
“It’s hard not to be drawn into the ladies-only paradise that is the Nike Training Club in Lincoln Park,” said Jeana Anderson, an NTC attendee, in a Chicago fitness blog.
“The clothes, shoes and fitness accessories are bright and exciting for anyone who feels a little bit more motivated to walk out the door to a workout if she’s dressed to impress (in bright colors and spandex, obviously).”
This store was the first of its kind. The Nike Training Camp was originally a mobile application to help people manage workouts. Though Nike Inc. strived to set up workshops in conjunction with other fitness studios, there was no location solely for Nike to showcase how the brand works in real time.
Back in the early 90’s, “Nike Town” stores were considered revolutionary. “The industry needs a shot in the arm,” Gordon Thompson, a Nike executive, told Business Insider, who had called the store “theatrical.”
But theatrical may not be enough. New research suggests that consumers are demanding more out of an in-store experience.
And retailers are also craving more from consumers, craving “loyalty and buzz” to compete in an increasingly competitive retail landscape, said Peter Muratore, vice president of WSL Strategic Retail, a retail consulting firm.
“Competition among retailers has never been tougher. A retailer without a significant competitive advantage doesn’t stand a chance,” reported Plunkett Research Ltd, a market research company. “Superstores are battling each other on every major street corner.”
And Nike is not only competing with various fitness studios in the area, but also with the Lululemon Athletica store and studio down the street.
Muratore said millennial consumers are demanding in-store instant gratification, and companies are asking themselves: “How do you engage the shopper in new ways?” He said the answer is three pronged.
“One is to inform the shopper about the product, the other one is develop personalization for the shopper around what they want to buy,” he said. “Perhaps the most exciting one is creating an emotional connection with the shopper in the retail space.”
While Nike has done this through an extensive community fitness program, catered to the community it is in, the fitness industry in itself has been riding the trend of a consumers striving for greater health and wellness.
“Exercise apparel is one of the fastest-growing product categories in the apparel and shoe sector,” reported Plunkett Research, with more than 40 million Americans with a gym membership, and sports names such as Nike and Adidas benefitting from this trend.
How can this experiment with customer service translate to other fragments of the retail industry that don’t have the luxury of filling a demand for fitness?
To start with, a more creative use of technology, and creative means of customer service can attach customers emotionally, creating the “loyalty and buzz” that Muratore recommends.
“What Burberry does is definitely theater,” Muratore said, referring to a Burberry store in London that was included in Muratore’s and Deloitte Consulting LLP research.
But Burberry London, like Nike, takes theater to the next level through interactive technology.
With more than 100 LCDs like “small movie screens” throughout the store, the store gives customers the aura of a rainy day by displaying rain drops and providing dim lighting, giving customers the idea that they should buy rain gear, one of Burberry’s biggest lines, Muratore said.
But beyond the atmosphere, Burberry technology also provides utility for customers.
Their merchandise has “radio-frequency identification” tags that can be read by the Burberry mirrors. The mirrors then play a video about the merchandise, letting the customer know the details and origins about their purchases.
In this way, Burberry technology provides not only an emotional connection to the customer through atmosphere; the company also provides the information the customer craves.
Similarly, a Japanese clothing retailer, UniQlo, recently moved into the United States, using digital devices to help customers make their purchases. Mirrors in UniQlo dressing rooms allow you to change the color of the garment you’re wearing so you don’t have to change in and out of several clothes.
UniQlo’s goal is to be one of the largest retailers in the US in five years, and “they’re well on their way,” Muratore said.
Zipfit denim has done something similar to a lesser extent, helping men size their denim on tablets throughout the store. And beauty stores such as Sephora and Ulta have tablets throughout the store to help customers find and personalize products. Sephora even has a personality test for people to find fragrances that would best suit them, then allows the customer to create and dispense their own fragrance.
This new technology comes at a cost. [Deloitte trend on tech] and Muratore said generally, companies are willing to take on this cost to build brand loyalty in the long term.
But it doesn’t work for everybody.
JC Penney, he said, is a good example of the use of technology gone wrong. While bringing in former Apple executive Ron Johnson brought about an innovative use of technology, such as arming his employees with IPads and creating stores similar to UniQlo had, “sales dropped dramatically and he ended up getting fired for experimenting in trying to do some of these progressive things,” Muratore said.
“There is a risk to trying to go too radically away from where you started,” he said, adding that JC Penney’s audience simply didn’t yearn for the changes Johnson was making. “They didn’t take into consideration their shopper.”
When technology fails to reach the customer, stores are pressured to find new ways to engage to customer, and part of it goes back to the three points Muratore made about an emotional connection, product information and personalization.
The customer experience
So how do stores evolve the customer experience to remain competitive?
Nike was supported by advanced technology. Because the Nike Training Studio began as an app, it allowed the brand to build loyalty and buzz even outside the physical retail space.
But turning the app into a studio allowed for a greater sense of personalized customer service, similar to its Lululemon competitor.
Similarly, Sephora and Ulta have also proved that technology wasn’t enough. Their retail spaces simultaneously serve as beauty studios and salons, with “beauty consultants.”
These stores are indicative of a trend detailed by Deloitte, where new services “enhance the in-store experience” and keep the customer in the store for a longer amount of time.
This means, stores may be decreasing inventory, and increasing entertainment value.
This also means that sales associates must now become brand ambassadors, Deloitte reported. “Store associates will need to be highly skilled in order to provided a personalized, relevant customer experience supported by technology.”
But like the use of innovative technology, skilled workers and creative atmospheres come at a cost, and do not work for everyone.
Nike’s competitor on Armitage is Lululemon. While Nike’s store is one of its kind, Lululemon has 133 stores across the USA, Canada and Australia with community ambassadors across locations to better gauge and personalize the customer experience.
And while the Lululemon brand is thought of as widely successful, one strategist reported that Lululemon’s growth was a “hasty expansion to new locations with insufficient research,” wrote Dean Malka, a retail strategist, in a presentation.
Also, the Lululemon controversy in late 2012 surrounding the overly-sheer quality of yoga pants (known as the “pantsgate crisis”) put a stain on the company brand, showing that while the physical retail store may be an “embodiment of the brand,” as reported by Deloitte, the brand must go to lengths to protect their relationship to customers for continued loyalty and buzz.
And it further showed that the higher standard of customer service comes at a cost that must be carefully calculated while setting up stores. While customers such as Davenport enjoy the Nike Training Studio, others may continue to prefer the traditional fitness studio, separating shopping and fitness.
While the Nike studio on Armitage may draw in community members, there is no assurance that this will be the case in just any location, as Lululemon has learned.
Furthermore, the new sales floor techniques must work in conjunction with many other moving factors, highlighting the complexity in the changing retail environment that is far from “one-size-fits-all.”
In some cases this means technology, in some cases, this means exceptional customer service. In both cases, retailers are asked to find a delicate balance of the two that is right for their consumers, so that consumers find inspiration and emotional engagement along with better information, as both Muratore recommended.
“Millenials are seeking new things and that’s what retailers are trying to address,” he said.
“It really does ultimately come down to the shoppers attitudes, perceptions, desires and needs for specific retailers.”