Each of today’s biggest retail buzzwords, “showrooming,” “omni-channel,” “experiential retail,” all come down to essentially the same thing: the role of the store is evolving and adapting to a new reality.
And it’s nothing new to retailers that the rise of e-commerce and mobile – which has fundamentally changed consumer behavior and their path to purchase – has resulted in a seismic shift in basic business dynamics.
While electronics is probably most notorious for having been severely impacted by the growth of online sales, most sectors are not emerging completely unscathed. The differences lie in how each sector must adapt to this new environment to survive.
Apparel, for instance, is the fastest growing online category, and for many of these retailers, online sales are growing faster than offline.
This translates to a complete overhaul of growth strategies and traditional real estate philosophies, as well as the seamless integration of mobile, online and in-store experiences (hence the terms omni-channel and experiential retail).
Retailers are focusing on greater sales productivity by removing poorly performing locations and are migrating to smaller showier stores as a greater percentage of budgets are siphoned off for the online and omni-channel experiences expected by consumers.
This is not a bad thing – it’s actually quite the opposite.
It just means that the role of the store, while still critical in optimizing sales, profits and loyalty across all channels, is different than it once was.
Shrinking store footprints allow apparel operators to reduce operating and inventory costs, while breaking into previously untapped markets with new in-store experiences.
Furthermore, smaller stores serve all demographics – baby boomers feel overwhelmed by large stores and younger consumers are comfortable and more accustomed to shopping online.
Ann Taylor, Kohl’s, Old Navy, and Gap are among a multitude of retailers who have reduced their store size as part of ongoing initiatives. Gap has worked to trim their average store’s size to 10,000 square feet compared to their traditional 18,000 square feet.
Most notably, Macy’s Inc. has been at the forefront with both its Macy’s and Bloomingdale’s brands.
Macy’s launched My Macy’s, an omni-channel business strategy focusing on localization in merchandising, marketing and the shopping experience.
Part of that strategy includes closing underperforming stores as a series of normal course adjustments to its portfolio, opening smaller stores in new local markets to adjust to changing consumer shopping patterns, adding fulfillment centers and renovating current stores in their portfolio.
The stores Macy’s are closing average about 260,000 square feet, while the new stores are averaging about 150,000 square feet.
Bloomingdale’s real estate business strategy is also focusing on expanding through new stores that are smaller.
Both brands are not only shrinking their store footprint, but are also making over the in-store experience by integrating technology – for instance, testing self checkout using smartphones and adding virtual fitting rooms.
And for the complete omni-channel experience, each brand has updated websites and mobile applications to help serve the customer in whatever way he or she prefers to shop.
However, while apparel retailers are accelerating growth by remodeling existing locations and by expanding through new stores with smaller footprints, it’s essential to determine what strategies are best for your brand.
So before investing in these strategies, questions such as, “would a remodel increase my profits?” and “what size store in which specific markets would result in optimal productivity?” need to be answered.
Understand Your Real Estate Potential
In today’s business climate there is little room for error. Remodeling and rolling out new store formats can be costly endeavors.
Customer analytics is helping apparel retailers alter their traditional real estate strategies to account for the overall shift in the retail environment by identifying who your best customers are, where more customers can be found and determining the value of these customers.
Buxton’s real estate evaluation tools, including prediction and forecasting models, can help you:
• Forecast sales performance
• Pinpoint underperforming locations and identify which sites should be relocated and which sites remodeled based on untapped demand to yield the maximum ROI
• Analyze the potential for a new store or streamlined format by scoring both new and old prototypes
• Find the best markets and locations for your concept when opening new stores and testing new formats to optimize your existing markets and reach your U.S. and Canadian potential
This hard market data will show you where your best opportunities lie, and provide the data support you need to adjust your format and design to target new environments.
The Bottom Line
In response to a number of factors, including the growth of e-commerce, apparel retailers have been driven to explore new growth strategies. But before investing time, money and other resources into experimenting with remodels, relocations, and smaller store footprints, apparel retailers need to strategically plan out these initiatives using customer analytics.
Are You An Apparel Retailer?
Let’s talk. In a short 15-minute phone call, we can discuss how customer analytics are being used to help apparel retailers like you mitigate the threats and exploit the opportunities the shifting retail landscape provides.