Traditional retail has come a long way since the early days of the pandemic, when one business after another temporarily closed its doors due to lockdowns. Now that the temporary spike in e-commerce sales has subsided, retailers have a better idea of their shoppers’ long-term preferences, and with it, new challenges. While more shoppers are returning to stores, fulfillment options like buy online and pick up in store remain popular. At the same time, retailers must also compete for the attention of more budget shoppers while I was stuck with excess inventory linked to supply chain disruptions dating back to 2021.
To adapt, both big box and specialty retailers are reaching into their bag of tricks and upgrading stores.
“I think we can expect a more significant turnaround in 2023 as retailers restart investment flows that have stopped or slowed in recent years,” Tiffany Hogan, Kantar’s chief retail information officer, told Modern Retail in an email. electronic. “These changes will reflect new ways of operating and driving efficiencies, as well as new ways shoppers approach the categories a given retailer sells.”
Making way for inventory
Target says the redesign of its largest store will allow the company to better meet demand, offer more merchandise and support same-day services. It also relies on its largest stores serving as hubs for digital compliance. The new Target stores will have backroom space that is five times larger than previous stores of similar size. This will allow stores to “fulfill more than 95% of the retailer’s digital orders and same-day services account for more than 10% of its total sales,” according to a press release.
“With the continuous evolution of multichannel and omnichannel retail experiences, getting product closer to the point of purchase for customers has always been a goal,” Matthew Katz, managing partner at global advisory firm SSA & Company, told Modern Retail. “So with customer expectations of immediacy or delivery later, delivery tomorrow, it’s important to move inventory closer and closer to end use.”
From an efficiency standpoint, maintaining compliance in a store also reduces the number of steps (and the amount of fuel) required to get items into the hands of shoppers. It’s also financially beneficial, giving businesses the ability to “earn millions of dollars annually in incremental revenue,” said Mike Hughes, vice president of customer experience at Aptos, a unified commerce solutions provider.
Customers who come in to pick up an item may make an impulse purchase, Hughes told Modern Retail in an email. Delivery, he said, “can typically save a sale that might have been lost if it weren’t for exposing store inventory to customers shopping online.”
“It allows retailers to distribute the majority of their inventory in stores (instead of having to keep an excessive amount of stock in the warehouse to fulfill all orders), which increases the chances for retailers to sell the items at full price instead of having to reduce excess inventory,” he said. Hughes added that “shipping cost can be reduced and the item can get to the customer faster” by pulling inventory from a nearby location, rather than a nationwide distribution center.
Reconditioning of product groups
Retailers are also changing the placement of merchandise within stores. Hogan said that with many retailers still carrying too much inventory in certain categories, rethinking merchandising displays has become a priority for more retailers.
“Creating a cohesive selling floor out of what they have too much or not enough has been a challenge, and we’ve seen more flexible and temporary structures come into play,” Hogan said.
Meanwhile, Ulta is radically changing the way its beauty products are displayed in more than 40 stores this year. According to WWD, these locations will group products by theme, such as bath and body care, “clean” brands, and travel products and trial sizes. The stores will have a “Cue the New” section at the front of the store to promote brand launches, while their “Beauty Bar” will host events and activations. The left side of the store will have a larger area for skin care, while makeup will be on the right side.
“We always want to reimagine and rethink, and more importantly, look at what our guests share with us,” Monica Arnaudo, Ulta’s director of merchandising, told WWD. “We wanted to bridge similar categories, what we call intuitive adjacencies, and create an aspiration for our guests when they walk in the door.”
Grouping merchandise differently within stores isn’t new, Katz explained, but companies’ motivations for doing so can change. “Retailers are always in an evolution of product display, mix and assortment,” she said. “And consumers are evolving too. And so where some consumers years ago might have wanted to shop by price, your current consumer today may want to shop more by use, more by category, or more in a social setting with friends.”
Ulta’s new design is “one more reflection of how shoppers really shop for beauty,” Hogan said. And, just like in-store fulfillment, it could also increase sales. “The cohesive joining of entire categories creates more opportunities for ‘mass migration,’ as Ulta calls it, or encourages shoppers to switch to prestige products,” Hogan said.
Experimenting with store sizes
It’s no secret that the coronavirus pandemic has crushed large swaths of commercial real estate. Within the US, sales of retail properties valued at $2.5 million or more plummeted 83% between May 2019 and May 2020. the National Association of Realtors found. A record 12,200 US stores closed in 2020, Fortune wrote in early 2021. 630 companies, including Neiman Marcus, JC Penney, J. Crew and Brooks Brothers, filed for bankruptcy in 2020. according to an analysis by S&P Global Market Intelligence.
Today, shoppers are returning to physical stores and businesses are in expansion mode. “We’re seeing the pendulum swing the other way right now, which is growth and store building,” Katz said.
In the past, “it used to be important for retailers to have a particular size store, because that’s how they best operated that business,” Katz explained. Now, “many are realizing that having different sizes in different locations is really a competitive advantage if they can get the mix right.”
For many large stores, this means experimenting with smaller store sizes. In July, Best Buy announced the debut of its first small-format digital store. The 5,000-square-foot space opened July 26 in Monroe, North Carolina and is one-seventh the size of a typical Best Buy store. It features a curated selection of products, offers Geek Squad services, and “encourages customers to do everything from shopping, selecting their product, and getting advice digitally while in-store,” the company said in a press release. There are also pickup lockers outside the store, “for 24-hour pickup options.”
Some retailers, especially department stores, are also experimenting with stores within stores to increase sales and attract customers. Sephora, for example, claims to have a presence in at least 850 Kohl’s locations by 2023, while Lowe’s has opened Petco store in stores in select locations. Other companies, like Glossier, are bring a community-based strategy to your storeswhile grocery stores, including Hy-Vee and Whole Foods They are investing in third spaces like bars and patios.
No matter the type of retailer, “I think what you’re seeing is just an evolution of the shopping experience,” Katz said. “Today we do not have the answers. And that’s the fun of retail, which is the constant experimentation and constant evolution of both product and display, ultimately culminating in human interaction.”