The retail industry is constantly evolving, and keeping up with the latest trends is crucial for businesses who want to stay competitive. In recent years, we've seen a major shift toward experiential retail, with DTC companies opening their own brick-and-mortar stores and shop-in-shop formats gaining popularity among some retailers. Let's take a closer look at these trends and the benefits, challenges, and limitations they entail.
Experiential retail
Experiential retail is a retail model that prioritizes customer experience over selling products. By creating an immersive and engaging environment, customers are encouraged to spend more time in-store, leading to increased brand loyalty and customer engagement.
Two of the most well-known successful examples of experiential retail are Nike's House of Innovation and Samsung's 837, both designed to showcase the latest products and technology. In both stores, products are elevated beyond the typical shopping experience, allowing visitors to make a unique, personalized connection to the products they're looking at.
The benefits of experiential retail are numerous. By creating an immersive environment, retailers can increase brand loyalty and customer engagement, resulting in increased sales and revenue. Additionally, experiential retail helps these businesses differentiate themselves from their competitors, making it easier for them to stand out in a crowded marketplace.
Brick and mortar stores for DTC businesses
Direct-to-consumer (DTC) businesses have traditionally operated online, but many are now opening physical stores to reach a wider customer base. Tuft & Needle and Warby Parker are good examples of DTC businesses that have successfully expanded into brick-and-mortar retail. This shift toward DTC opening physical stores has been underway for some time, but it has accelerated exponentially due to the impact of the pandemic and retail closures.
Some of the benefits that DTC companies can expect from opening physical stores include the opportunity for customers to experience their products first-hand, increased brand exposure, and an improved ability to collect customer data to help create and market their products.
The rise of shop-in-shop
The shop-in-shop, or store-in-store, model has become increasingly popular in recent years. In these formats, a major retailer creates space within its store to sell another retailer's products, often with a sole focus on that brand.
This has been evident in several different store styles and styles in recent years, such as Petco joining Lowe's, Ulta joining Target, and Sephora joining Kohl's. In each of these stores, a significant portion of the store is dedicated to the partnering brand, and it is clear to customers that this section is distinct from the rest of the surrounding store.
This model has become an essential component of many successful retail businesses as it provides a mutually beneficial partnership, allowing both brands to benefit from increased foot traffic and awareness.
Factors to consider in today's market
The retail market is constantly evolving, and there are several factors to consider in order to remain competitive. The preferred store size is changing, with many retailers downsizing or opting for more modest sized spaces than before. The F&B industry faces many obstacles these days as customers shift to online platforms and demand convenience. Additionally, many retail businesses are facing challenges due to evolving technology and increasing competition in the e-commerce space.
Challenges and limitations
Of course, there are some challenges and limitations to keep in mind when exploring these trends. Experiential retail can be particularly costly, and it can be difficult to adequately measure the success of these efforts initially. These types of retail stores may remain in the market for a long time before seeing any appreciable benefits, especially if brands are expecting large-scale adoption from their customer base.
Moreover, for brands without a defined customer base, opening physical stores can be risky, and maintaining a consistent brand image across online and offline channels can be difficult.
Why is it successful in the current market?
Despite the challenges, there are several reasons why businesses are finding success through these methods in today's market: Changing customer preferences are creating new opportunities for businesses to differentiate themselves from their competitors, making the combination of online and offline retail increasingly popular. Advances in technology and their integration into modern retail also provide businesses with new opportunities to engage with customers and drive sales.
Jeff Carpenter > Partner
As a Partner at SimonCRE, Jeff Carpenter is responsible for identifying opportunities in both ground up development and value-add asset acquisitions. Jeff has delivered successful projects across the country and has been integral to the rapid growth SimonCRE has experienced since joining the firm.