Marketing
Digitizing in-store retail: AT&T’s flagship Chicago showroom infuses digital and online technologies into a physical store environment to let customers experience the impact of its devices and services on their lives. It’s “like walking into a Web site.”
Courtesy of AT&T Intellectual Property. Used with permission.
There’s a flashy new store on Michigan Avenue in downtown Chicago’s high-end re- tail district known as the Magnificent Mile. The store is bright and inviting, with sights and sounds designed to pull people in and get them to linger longer. Customers sit at any of dozens of stations, sampling the latest phone apps and electronic gadgetry. Enthusiastic, iPad-wielding associates mingle with cus- tomers, talking tech and dispensing hands- on help and advice. With 130 digital screens and an 18-foot video wall, every aspect of the open space is designed to engage customers about future wireless technologies and ser- vices. It feels more like a techy neighborhood hangout than a place to buy products.
A gleaming new Apple store? Think again.
This is AT&T’s new flagship store. But the re- semblance to Apple’s groundbreaking retail concept is no mistake. Dozens of diverse retail chains—from high-tech sellers like AT&T to high-touch merchants such as Audi and Build- A-Bear—are remaking their stores in the image of Apple’s open marketplace prototypes. But even more, with the surge in digital, online, and mobile technologies invading the retail space, these store chains are blazing new ground.
They are digitizing in-store retail—transforming the traditional in-store experience by infusing digital and online technologies into their physi- cal store environments. It’s the future of store retailing, but it’s already happening.
When they first walk into AT&T’s new store, customers quickly realize that it’s like nothing they’ve seen before. “One of my favorite com- ments from a recent patron . . . was that it was like walking into a Web site,” says AT&T’s president of retail. Organized into zones and stations, the store’s technology immerses customers in multimedia and interpersonal ex- periences. In the Explorer Lounge, customers can play with and learn about the latest apps.
At the App Bar, “apptenders” give one-on- one or group demos, which are displayed on the Apps Wall for others to follow along. The 18-foot-high Connect Wall features a giant in- teractive video screen that displays customer interactions with content and product infor- mation, visible to the entire store and to pass- ers-by outside. Lifestyle Boutiques organize products, apps, and accessories by customer needs, such as Get Fit, Be Productive, and
Share Your Life. At the Experience Platform, customers can interact with AT&T products for home security and automation, entertain- ment, music, and automobiles.
Although it might seem that the store is all about products and technologies, the real focus is on the customer experience. The store is designed to let customers interact with devices and services, understand how they work, and experience the impact the devices can have on their lives. In one store area, for example, customers can experience how Jawbone’s Up Bracelet integrates with a smartphone app to monitor health and fitness by tracking sleep, eating, and movement pat- terns. In another, a Nissan Leaf is set up to interactively demonstrate various auto-based apps that help customers solve problems, such as monitoring how fast their teenagers are driving. The store is a physical manifes- tation of AT&T’s “It’s what you do with what we do” marketing campaign. “We used to sell phones,” says the AT&T executive. “Now we’ve shifted to offering solutions.”
Digitizing in-store retail is an obvious fit for a technology retailer like AT&T. But com- panies in a wide range of other industries are also pioneering the concept. Take German automaker Audi, for instance. In the lead-up to the XXX Summer Olympics in London, Audi
threw open the doors to its first Audi City, a stunningly innovative digitized showroom in London’s busy Piccadilly Circus area.
Rather than displaying a sea of shiny new vehicles, the Audi City showroom con- tains very few actual cars, and future Audi showrooms may have none at all. Instead, Audi City is all-digital. Prospective custom- ers use touchscreens and Kinect-style cam- eras to design and manipulate virtual, life-size cars of their dreams displayed on massive screens surrounding the showroom space.
When they’ve finished, a video shows the car they’ve designed in action, complete with the exact sound of the chosen engine in full stereo fidelity. The car is then loaded onto a memory stick that the customer can take for later re- membering and sharing.
The idea of buying a car without actually seeing it flies in the face of auto retailing tradi- tion. But these car-buying times are anything but traditional. Audi sees digitization as a way to fit showrooms into smaller urban settings and to overcome the limitations of physical dealer- ships. With 12 different models, each with up to six different trim levels, all with numerous options, no physical dealership can have every possible model on hand. Virtual showrooms, however, can present every model in Audi’s ex- tensive portfolio in every possible permutation.
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Build-A-Bear saw its sales decline and losses mount. Now, however, rather than fighting digital-age developments, Build-A-Bear is deploying them. Today’s Build-A-Bear stores are designed to engage the new generation of digitally adept children. A large video screen at the front of the store uses movement technol- ogy to greet children, engage them with in- teractive games, and introduce store features.
From there, each of the eight stations in the bear-building process is enhanced by touch- screens and digital features that give young bear-builders more hands-on involvement and more design options. Kids can even give their finished bear a virtual bath before fluffing it with real air.
For AT&T, Audi, and Build-A-Bear, retailing is nothing new. Each has been in brick-and-mortar retailing for years, with hundreds of showrooms worldwide. But these forward-looking retailers are now betting on a digitized in-store future.
AT&T plans to roll out six or seven elements of its Michigan Avenue store to each of its 2,300 other stores. Audi plans to open 20 more Audi City showrooms by 2015. And Build-A-Bear has already updated each of its more than 400 stores with its new digital workstations.
As AT&T’s president of retail points out, digiti- zation is more than just electronic whiz-bang.
“It’s all about creating [relevant customer ex- periences and] interactions rather than just transactions.”
For example, retailers choose the colors in their logos and interiors carefully: Black suggests sophistication, orange is associated with fairness and affordability, white signi- fies simplicity and purity (think Apple stores), and blue connotes trust and dependability (financial institutions use it a lot). And most large retailers have developed signature scents that you smell only in their stores:15
Bloomingdale’s uses different essences in different departments: the soft scent of baby powder in the baby store, coconut in the swimsuit area, lilacs in intimate apparel, and sugar cookies and evergreen scent during the holiday season. Anytime Fitness pipes in “Inspire,” a eucalyptus- mint fragrance to create a uniform scent from store to store and mask that “gym” smell. Sheraton Hotels employs Welcoming Warmth, a mix of fig, Jasmine, and freesia; whereas Westin Hotel &
Resorts disperses White Tea, which attempts to provide the indefinable “Zen-retreat” experi- ence. Scents can subtly reinforce a brand’s imagery and positioning. For example, luxury men’s fashion brand Hugo Boss chose a signature smooth, musky scent for all of its stores. “We wanted it to feel like coming home,” says a Hugo Boss marketer. Similarly, the Hard Rock Café Hotel in Orlando added a scent of the ocean in its lobby to help guests imagine checking into a seaside resort (even though the hotel is located an hour from the coast). To draw customers into the hotel’s often-overlooked downstairs ice cream shop, the hotel put a sugar cookie aroma at the top of the stairs and a whiff of waffle cone at the bottom. Ice cream sales jumped 45 percent in the following six months.
Such experiential retailing confirms that retail stores are much more than simply assort- ments of goods. They are environments to be experienced by the people who shop in them.
Price Decision
A retailer’s price policy must fit its target market and positioning, product and service assortment, the competition, and economic factors. All retailers would like to charge high markups and achieve high volume, but the two seldom go together. Most retailers seek either high markups on lower volume (most specialty stores) or low markups on higher volume (mass merchandisers and discount stores).
Sources: Christopher Heine, “The Store of the Future Has Arrived,” Adweek, June 3, 2013, www.adweek.com/
print/149900; Nicole Giannopoulos, “A ‘Magnificent’ In-Store Experience,” Retail Info Systems News, June 10, 2013, http://risnews.edgl.com/magazine/June-2013/A--Magnificent--In-Store-Experience86772; Elizabeth Olson, “Build- A-Bear Goes High Tech,” New York Times, September 27, 2012, p. B3; Rajesh Setty, “Re-Imagining the Retail Experi- ence: The Audi City Store,” Huffington Post, December 29, 2013, www.huffingtonpost.com/rajesh-setty/re-imagining- the-retail-e_b_4514046.html; and www.youtube.com/watch?v=GDdPN6mVLPM, accessed September 2014.
Moreover, customers can call them up instantly and make changes on the fly.
So far, the Audi City virtual experience is producing very real-world results. Audi City showrooms in London, Beijing, and Dubai are outselling their traditional counterparts by 70 percent, with an average increase in mar- gin per vehicle of 30 percent. And the digitized auto lounges are bringing more new custom- ers through the doors. Ninety percent of Audi City visitors are new to the brand.
The digitized showroom is finding its way into every industry imaginable. Consider Build-A- Bear Workshop. No stranger to retail innovation, Build-A-Bear revolutionized the in-store experi- ence when it burst into America’s malls almost 20 years ago with unique stores that were part showroom, part factory, and part theme park.
With the original Build-A-Bear format, children moved from station to station, constructing and customizing their stuffed bears and watching them come to life before their very eyes.
But as smartphones, tablets, and other digital devices changed the way children play,
422 PART 3| Designing a Customer Value-Driven Strategy and Mix
Thus, 110-year-old Bergdorf Goodman caters to the upper crust by selling apparel, shoes, and jewelry created by designers such as Chanel, Prada, Hermes, and Jimmy Choo.
The up-market retailer pampers its customers with services such as a personal shopper and in-store showings of the upcoming season’s trends with cocktails and hors d’oeuvres.
By contrast, TJ Maxx sells brand-name clothing at discount prices aimed at middle-class Americans. As it stocks new products each week, the discounter provides a treasure hunt for bargain shoppers. “No sales. No gimmicks.” says the retailer. “Just brand name and designer fashions for you . . . for up to 60 percent off department store prices.”
Retailers must also decide on the extent to which they will use sales and other price promotions. Some retailers use no price promotions at all, competing instead on product and service quality rather than on price. For example, it’s difficult to imagine Bergdorf Goodman holding a two-for-the-price-of-one sale on Chanel handbags, even in a tight economy. Other retailers—such as Walmart, Costco, ALDI, and Family Dollar—practice everyday low pricing (EDLP), charging constant, everyday low prices with few sales or discounts.
Still other retailers practice high-low pricing—charging higher prices on an everyday basis, coupled with frequent sales and other price promotions, to increase store traffic, cre- ate a low-price image, or attract customers who will buy other goods at full prices. Recent tighter economic times caused a rash of high-low pricing, as retailers poured on price cuts and promotions to coax bargain-hunting customers into their stores. Which pricing strategy is best depends on the retailer’s overall marketing strategy, the pricing approaches of its competitors, and the economic environment.
Promotion Decision
Retailers use various combinations of the five promotion tools—advertising, personal selling, sales promotion, public relations (PR), and direct and social media marketing—to reach consumers. They advertise in newspapers and magazines and on radio and televi- sion. Advertising may be supported by newspaper inserts and catalogs. Store salespeople greet customers, meet their needs, and build relationships. Sales promotions may in- clude in-store demonstrations, displays, sales, and loyalty programs. PR activities, such as new-store openings, special events, newsletters and blogs, store magazines, and public service activities, are also available to retailers.
Most retailers also interact digitally with customers using Web sites and digital catalogs, online ads and video, social media, mobile ads and apps, blogs, and e-mail.
Almost every retailer, large or small, maintains a full social me- dia presence. For example, giant Walmart leads the way with a whopping 34 million Facebook Likes, 37,000 Pinterest follow- ers, 446,000 Twitter followers, and 15,000 YouTube subscribers.
By contrast, Fairway Market, the small but fast-growing met- ropolitan New York grocery chain that carries a huge product assortment—from “sky-high piles” of produce to overflowing bins of fresh seafood to hand-roasted coffee—has only 86,000 Facebook Likes. But Fairway isn’t complaining—that’s nearly twice as many Facebook Likes per million dollars of sales as mighty Walmart.16
Digital promotions let retailers reach individual customers with carefully targeted messages. For example, to compete more effectively against online rivals, CVS distributes person- alized versions of its weekly circulars to the chain’s ExtraCare loyalty program members. Called myWeekly Ad, customers can view their circulars by logging into their personal accounts at CVS.com on computers, tablets, or smartphones. Based on Ex- traCare members’ characteristics and previous purchases, the personalized promotions highlight sales items and special of- fers of special interest to each specific customer. With the my- Weekly Ad program, “We’re trying to get people to change their behavior,” says the CVS marketer heading up the effort, “going online for a much more personalized experience” rather than checking weekly circulars.17
Retailer promotion: Most retailers interact digitally with customers using Web sites and digital catalogs, mobile and social media, and other digital platforms. CVS’s myWeekly Ad program distributes personalized versions of its weekly circulars to the chain’s ExtraCare loyalty program members.
CVS Caremark Corporation
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Place Decision
Retailers often point to three critical factors in retailing success: location, location, and loca- tion! It’s very important that retailers select locations that are accessible to the target market in areas that are consistent with the retailer’s positioning. For example, Apple locates its stores in high-end malls and trendy shopping districts—such as the “Magnificent Mile” on Chicago’s Michigan Avenue or Fifth Avenue in Manhattan—not low-rent strip malls on the edge of town. By contrast, to keep costs down and support its “cheap gourmet” position- ing, Trader Joe’s places its stores in lower-rent, out-of-the-way locations. Small retailers may have to settle for whatever locations they can find or afford. Large retailers, however, usu- ally employ specialists who use advanced methods to select store locations.
Most stores today cluster together to increase their customer pulling power and give consumers the convenience of one-stop shopping. Central business districts were the main form of retail cluster until the 1950s. Every large city and town had a central business dis- trict with department stores, specialty stores, banks, and movie theaters. When people be- gan moving to the suburbs, however, many of these central business districts, with their traffic, parking, and crime problems, began to lose business. In recent years, many cities have joined with merchants to revive downtown shopping areas, generally with only mixed success.
A shopping center is a group of retail businesses built on a site that is planned, devel- oped, owned, and managed as a unit. A regional shopping center, or regional shopping mall, the largest and most dramatic shopping center, has from 50 to more than 100 stores, including two or more full-line department stores. It is like a covered mini-downtown and attracts customers from a wide area. A community shopping center contains between 15 and 50 retail stores. It normally contains a branch of a department store or variety store, a supermar- ket, specialty stores, professional offices, and sometimes a bank. Most shopping centers are neighborhood shopping centers or strip malls that generally contain between 5 and 15 stores.
These centers, which are close and convenient for consumers, usually contain a supermar- ket, perhaps a discount store, and several service stores—dry cleaner, drugstore, hardware store, local restaurant, or other stores.18
A newer form of shopping center is the so-called power center. Power centers are huge unenclosed shopping centers consisting of a long strip of retail stores, including large, free- standing anchors such as Walmart, Home Depot, Costco, Best Buy, Michaels, PetSmart, and OfficeMax. Each store has its own entrance with parking directly in front for shoppers who wish to visit only one store.
In contrast, lifestyle centers are smaller, open-air malls with upscale stores, convenient locations, and nonretail activities, such as a playground, skating rink, hotel, dining estab- lishments, and a movie theater complex. In fact, the original power center and lifestyle center concepts are now morphing into hybrid lifestyle-power centers that combine the convenience and community feel of a neighborhood center with the brute force of a power center. Meanwhile, traditional regional shopping malls are adding lifestyle elements—such as fitness centers, common areas, and multiplex theaters—to make themselves more social and welcoming. In all, today’s centers are more like places to hang out rather than just places to shop. “The line between shopping, entertainment, and community building has blurred,” says one analyst. “Shopping centers aren’t just places to buy things. They’re social centers, places for entertainment, and employment hubs.”19
The past few years have brought hard times for shopping centers. Many experts suggest that the country has long been “overmalled.” Not surprisingly, the Great Reces- sion hit shopping malls hard. Consumer spending cutbacks forced many retailers—small and large—out of business, increasing mall vacancy rates. Power centers were especially hard hit as their big-box retailer tenants such as Circuit City, Borders, Mervyns, and Linens N Things went out of business and others such as Best Buy, Barnes & Noble, and Office Depot reduced the number or size of their stores. Some of the pizzazz has also went out of lifestyle centers, whose upper-middle-class shoppers suffered most during the recession.
As the economy has improved, however, malls of all types have rebounded a bit.
Many power centers, for example, are filling their empty space with a broader range of retailers, from the likes of Ross Dress for Less, Boot Barn, Nordstrom Rack, and other off- price retailers to dollar stores, warehouse grocers, and traditional discounters like Walmart and Target.20
Shopping center
A group of retail businesses built on a site that is planned, developed, owned, and managed as a unit.