Answering Retail’s Billion-Dollar Question Brick by Bit

Answering Retail’s Billion-Dollar Question Brick by Bit

By Elaine Kleinschmidt

On a jammed street corner in New York, a glimpse of the Store of the Future opened recently in SoHo, its décor well-suited to the hipster neighborhood in which it resides. Like the airy loft apartments that are a local trademark, the four-thousand-square-foot store has a super-high ceiling that is white, with HVAC pipes exposed. It boasts all-black walls, black shelves, black racks and black tags, a nod to the black apparel worn by locals. In SoHo, black is where it’s at.

It looks like a dollar store for punk rockers. Hundreds of oddly chosen products crowd the displays. This is Amazon 4-Star, offering only products rated four stars or higher (out of five) in millions of reviews posted by Prime subscribers on Amazon.com. It’s an invisible blend of in-store and online, culling the best data insights from consumers’ online shopping to draw them into the store and serve them in a better way. More personally customized, more locally authentic and more sleekly built-for-speed.

This store is a combination of great ideas—and none of them can be achieved by using the antiquated retail design methods in place for decades. The old prototype store model is obsolete. It’s too limited, inflexible and tone deaf to serve the demanding and fickle customers of tomorrow. The old prototype of one design, in small, medium or large, strands retailers with anomaly stores that can’t be duplicated. It mires them in unscalable flagship experiences and operational challenges posed by a lack of integration between their storefront and online operations.

Most importantly, the prototype design fails to accommodate the new reality of retail, ruled by personalized experiences, custom localization, in-store pickup of online orders and new service offerings dictated by what customers prize and how they want to shop. Yet, for all those flaws, giving up the prototype is hard to do.

A new approach to conception, design and execution has emerged. At WD Partners, we’re helping tier one and tier two brands with an integrated Direct to Consumer (DTC) Retail Portfolio Strategy. It’s a flexible kit of parts to help retail brands create a strategically designed system of integrated parts and operations. Rather than the passé prototype model that locks in an inflexible, one-style-for-all design, the DTC Retail Portfolio Strategy starts with a broader view across five major modules:

Customer Experience, Product, Services, Localization, Technology Integration and Distribution Logistics

To thrive, retailers must ask themselves: Are we stuck in old ways? Some of us talk about transformation in Power Point slides, yet we are doing a slow crawl toward the future. If we let ourselves get consumed by the chaos that inundates us today, we cannot transform our business for a bricks & bits future that others are shaping, right now. The DTC Retail Portfolio Strategy can help you get there.

To transform themselves, retailers must be able to set a nationwide (and potentially global) strategy, yet tailor their stores locally; they must merge their customer data sets from retail and online businesses that were running separately, and integrate systems for tracking inventory, orders and shopper behavior in both cyberspace and floor space to get a more revealing, 360-degree view of the customer.

Building a brand ecosystem requires an IMAX-wide view of all major fronts at once, from product selection to single-view-of-customer to in-store pickup and more. DTC Retail Portfolio Strategy provides this wide-angle lens and breaks it down into clean, compartmentalized functions. Deciding which components to clamp together, in which variations, can be a function of such factors as strategy, supply chain, product mix and current level of online and in-store integration.

Retail becomes a portfolio of formats instead of mere channels of distribution. Applying this approach, retailers can serve business needs and consumer needs at once, and that can help them differentiate their brands and build customer loyalty. The upsides of the DTC Retail Portfolio Strategy are clear-cut, and for the largest retail brands, the biggest obstacle to adopting this may be their own inertia.

One senior executive we visited recently indulges in a daydream: Imagine if we were a startup and we could rethink the store experience, from the foundation up, and free ourselves from all the things that keep us in line today? We could turn an old-guard retailer into a 21st century selling machine, sleek and fully integrated, the ultimate fusion of in-store and online, a place for selling and shopping and communing and living. We could do this, even as we stay open for business.

Imagine. Retailers know they must “get unstuck,” unshackle themselves from old ways and change their approach to most everything. Distribution logistics, technology integration and localization—many retailers have yet to lash them together to enhance their customer engagement and add new services. They struggle with the costs of free delivery, integrating inventory tracking for stores, warehouses and online inventory and producing a single view of the customer across myriad kinds of interactions.

The hard part is to know where to begin and what it should look like. This approach can provide an ideal map for retailers. The two diagrams below illustrate the contrasts between the old, inflexible prototype store model and the DTC Retail Portfolio Strategy.

This offers retailers an adaptable approach, with a big-picture view of the rapidly shifting retail landscape. The five modules across the top of the chart—shopping experience, product mix, extra services, localization and integrated technology—can be mixed and matched in different portions and combinations to fit different store types.

At WD, we are solving for the future of retail by breaking the mold of the past and reassembling the pieces into a structured yet scalable model for retail development. As more online retailers open more storefronts, and storefront retailers improve their game online, the lines between them are blurring. Today, shoppers only see one form of shopping. We have lost any distinction between what you buy in a store and what you buy on your mobile phone; each serves the other. Shoppers can get what they want when and how they want it… on demand.

We live in a world where corporate silos create barriers to integration across a retail organization which are only compounded by the DTC model adding additional silos into the mix (company owned, wholesale, e-commerce). Developing a DTC Retail Portfolio Strategy is the answer to the bricks and bits approach at a portfolio level. Brands that are winning at retail think and act this way already. Brands that are trying to catch up and deciding their next move need to think this way, and we can help you get there.

Elaine Kleinschmidt
Elaine Kleinschmidt
Executive Vice President, Strategy & Experience Design
WD Partners
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Comments

  • “unscalable flagship experiences and operational challenges posed by a lack of integration between their storefront and online operations” — that’s a great line, and so true. I would also say, based on a recent audit of flagship shops in Chicago, that the experience also depends on the quality of store *associates* and their willingness/ability to engage the visitor in a way that matches the store design. In what I’ve observed, this is a frequent point of failure: spectacular stores with bored associates who miss the opportunity to fulfill the brand promise. Thanks for the great article.

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