By Rob Garf

The urban and rural physical store – the “box” – has gradually evolved over the past decade. It really came to light for me as lead retail analyst at AMR Research when I authored the research report “2007 Real Estate Lifecycle – Trends and Analysis” in conjunction with the National Retail Federation (NRF). In the report, I wrote about how retailers are seeking out new and innovative store layouts beyond traditional malls and strip centers. For example:

  • Traditional large box retailers, such as Staples, Best Buy and Walmart, started testing newly designed, smaller footprint stores with localized product assortments catered to the segment of the population that frequents the area.
  • Urban store locations in many cities have been revitalized with the influx of residents, businesses, restaurants and traditional retail.
  • As for rural store locations, the report declared that these “lifestyle centers” are seeing healthy growth.

Here’s a snippet from the report specific to the growth of lifestyle centers: 

“Destination is the best word to describe the strategy of lifestyle centers. The intent is to provide a convenient, diversified, and comfortable environment for consumers to spend an extended period of time — and a lot of money. By creating a mixed-use location, people can truly experience an entire day of shopping, eating, and entertainment without going anywhere else.”

The evolution of the traditional box—triggered in large part by changes in the economy, demographics and customer expectations—has forced retailers to rethink the format, function and technology of the four walls to better serve the digitally connected consumer. Let’s look at these in a little more detail:

  • Format: Staples is the poster child for the need to change layout and assortment. Much of its 50,000 square feet is largely unproductive, filled with merchandise that is either commoditized by Amazon or obsolete. In fact, some of the retailer’s biggest traditional categories—like software, digital cameras and external hard drives—fall perfectly into that category. But you have to give Staples some credit. The retailer did make an effort to reshape the store format by bringing Amazon Lockers into the stores. The reality is that Staples is not the only retailer that should be rethinking format; other retailers are not immune to the epidemic I describe here. There is a significant opportunity to explore alternative size and layout, not to mention innovative cash wraps and checkout techniques.
  • Function: The physical store has traditionally been a destination for purchases, returns and exchanges. And in most cases, individual locations, even if part of a regional or national chain, acted as an island unto themselves. We’ve all had personal shopping experiences where one store didn’t have information about a purchase from another store. This just won’t cut it in today’s digital world. Retailers should leverage this real estate by creating a tight network across the chain to broaden the functionality of the actual space. Macy’s and Pier 1 are two prime examples of retailers expanding beyond the traditional store function. Using the physical stores as distribution centers and showrooms, these retailers create inventory visibility across stores to efficiently fulfill orders based on what makes sense for margin and service. Warby Parker is another example of a retailer leveraging the showrooming advantage. The upstart retailer uses their flagship locations as a way for consumers to touch and feel the product, while the orders are ultimately fulfilled via their direct-to-consumer operations. Retailers that take advantage of their stores as distribution centers and showrooms can reap the benefits of lower inventory carrying costs and increased customer satisfaction.
  • Technology: Retailers are increasingly bringing the benefits of digital capabilities—personalization, guided selling, clienteling—into physical stores. Take a look at SOLSTICE. The retailer is rolling out our Digital Store solution nationwide. Powered by our cloud platform, the solution enables store associates to easily access comprehensive customer, product and inventory data on the sales floor. This allows associates to take orders using a tablet, providing customers with a more personalized experience and preventing lost sales caused by stock outs. According to NRF’s report, Digitizing the Store, retailers want to leverage their ecommerce platform as the next-generation POS.

As the physical and virtual worlds collide, and consumers become increasingly more connected and influential, retailers must embrace this store evolution and reinvent the box.