The #futureofretail (BC)
The future of retail has been a headline story for past 15 years. From the retail apocalypse highlighted by the closing of department stores, malls and legacy retailers like Toy R Us and Payless Shoes to new DTC brands opening new, smaller, more curated stores, the retail landscape has been evolving to say the least. Recently, themes of debt, long term leases and unamortized capital expenditures have plagued large retailers like J. Crew, JCP Penny and the Gap. And to think this was all BC—Before Covid-19.
Over the past five years the #futureofretail has been written about almost as many times as the apocalypse itself. Every book, every article and every interview has has harped on how brands and stores need to think and act differently as the landscape of technology, real estate, e-commerce, and Amazon is evolving. Across the stores powered by the Leap Platform, we built our platform on technology powered experiential retail to allow customers to not only interact with the product through try-ons, but also learn about the brand from knowledgable associates and meet like-mind others through community events.
Then came the Virus
No retail expert or pundit could have predicted what was to come in 2020. COVID-19 has impacted every sector of the global economy — some benefiting greatly like delivery services and essential retail, while other sectors were forced to lay off thousands and shutter stores indefinitely.
Now, as global cities and US states begin to open back up, the question again begs — what is the future of retail?
And retailers everywhere must now ask ourselves:
“What is the role of a retail store and how can it be successful if some of the main reasons to go to a store (touch/feel & try-on, interact with staff, and attend community events) are now more likely deterrents instead of drivers.”
The #futureofretail (AC)
Retail (and the world itself) now has two definitive chapters — Before COVID-19 (BC) and After COVID-19 (AC). Bottom line is, no one really knows what AC looks like, and many questions loom. From traffic patterns to rent structures, to local marketing plans and the entire in-store experience, the playbook must be thrown out and re-written. However, the same #1 rule from BC is the same #1 rule AC—and that is the shopper must feel safe, comfortable and excited to shop in stores and the store must provide value that they could not receive elsewhere.
In addition to a great in-store experience, the role of the store must also be thought of even more holistically from a business perspective as relying on in-store transactions to drive 4-wall profitability is likely not enough in the AC world.
Mckinsey & Company outlined their perspective highlighting 5 key themes to adapting a retail strategy in today’s climate and at Leap we share much of the same perspective.
Leap’s 4 guiding principles
At Leap, we’re focused on building the future of retail and are excited to drive successful retail strategies for the brands on the Platform. As we re-open stores starting with the now open Koio Miami, here are 4 principles we believe are paramount to retail success going forward.
1. Creating a safe, welcoming environment
This is not a new principle in retail, in fact, it’s very much been an ante for hundreds of years. However, how this comes to life today is very much different than before. Today, the shopper and the employees alike must feel safe and welcomed from the moment they walk into the store to the moment they leave. This starts from the outside store with signage and lines for capacity constraints, with associates and customers wearing PPE, new sanitation SOPs and stations, contactless check-out and inventory sequestering — needless to say, the list of new best practices is long. We believe all these extra steps in-store will soon become the new normal in the same way you don’t flinch to take off your shoes at the airport.
At Leap, we’re building mobile-first digital training sessions for associates, with real time feedback loops and using the time we have while stores are closed to run practical scenario training sessions. Ultimately, staff training will drive success in understanding how to implement and enforce these new policies to make the shopper feel welcomed and excited to return to stores.
2. Meeting the shopper on their terms
Prior to COVID (BC) +95% of store transactions happened when someone walked into a store, picked out and purchased specific items. With social distancing policies and cautious outlooks, shoppers will look to shop differently. We’re excited to roll out new ways to experience the store across our fleet of stores to meet the shopper on their terms.
Appointments, once reserved for custom suits, dresses and services like haircuts will now be offered by retailers as a way to service shoppers in a safe way. Whether that be virtual through a zoom meeting or in the store in a private, more intimate setting—we’re excited to provide local (and nationwide) customers a new way to shop. Big box legacy retailers have already had success here, highlighted by Best buy rolling out appointments in 700 of its 1000 stores.
Curbside pick up is another concept that has been around for years in the restaurant world (hello Chili’s!) and grocery as well, but soft goods retail has been the last to follow. Now, more so than ever, all retailers must roll this out and integrate easy technology for the customer and associate to engage with. Across our stores we’ll be promoting curbside pick up in-store, on windows, in clienteling and of course in digital and social. Even with two or three day shipping, BOPIS—buy online, pick up in-store—and last mile delivery must also be unlocked for shoppers looking for immediate gratification without having to enter a physical store. As New Yorkers gear up for summer travel, we’re eager to provide that new outfit before the car (!) departs without having to walk into store will fill a real void.
3. The physical store as a fulfillment center and cost savings hub
To unlock additional value from the store, the physical location must be more than a place to buy and sell goods. As we re-open, we are ensuring stores are not only training centers, customer service outposts and research facilities but also act as logistics hubs.
Put simply, stores must be unleashed as a fulfillment center with order routing logic based on omnichannel availability to ensure no sales are missed online, as well as geography based logic to route local orders to the store.Putting these into action will unlock more sales, shipping & logistics savings, and most importantly, a better customer experience for our brands.
Upon reopening we’ll be fulfilling local ecomm orders from the store so the shopper receives items faster with personalized handwritten notes to drive store awareness and create omnichannel pathways.
This ultimately fosters a higher LTV omnichannel customer who may not only come to the store to shop but also to return online orders in store, further lowering the costs to brands by not paying for shipping, restocking and re-shipping fees from third party logistics partners.
4. Retail with less risk
As brand’s re-open stores, many are considering consolidation and different strategies for existing stores as well as future ones, if not putting expansion on hold. Brand are facing tough choices on how to drive success retail as they look across lease liabilities, unamortized capex, 4-wall profitability and strategic importance. Forbes contributor Jason Goldberg highlighted this impact recently saying:
“The net result for retail may be that a few retailers emerge stronger than ever, and that many specialty stores and independents no longer exist. Even well-positioned retailers may find they have to permanently close under-performing stores and take drastic cost cutting efforts to bolster their balance sheets. It’s easy to imagine the U.S. having 20% less retail space by the end of the pandemic.”
De-risking retail is fundamental to our Platform at Leap to help ensure brand’s avoid balance sheet strain that owned retail often brings. By signing leases and covering the majority of upfront design and build costs, the Leap Platform allows brands to drive growth in retail with significantly less risk. Over the past two months, our brands have benefited greatly as we’ve sheltered them from long term real estate risks and reset rent baselines coming out of Covid-19. As we build our real estate pipeline and reset current real estate costs with landlords, we believe retail with even less risk is a real possibility.
Despite the immense challenges the world has thrown our way in 2020, we’re just weeks away from re-opening our stores to help brands drive growth with physical retail. The role of the store is sure to continue evolve and we couldn’t be more excited