Can in-store experiences save retail?
Presented here for discussion is a synopsis of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
In-store “experiences” are often portrayed as the way stores can combat the juggernaut of online ordering via Amazon.com and other sites, but are they worth the effort and money that retailers are pouring into them?
Wharton marketing professor Peter Fader notes that competing to create ever-more-stimulating retail environments could lead to an “arms race,” much like the way online retailers have competed to reduce shipping costs and have basically trained customers to expect free shipping. What’s more, it’s easy for businesses to copy in-store event ideas from each other so they no longer serve as differentiators.
Plus, Prof. Fader says, with many of the things we shop for, we’re not really looking for a fun and engaging experiences. If you’re just buying underwear or a dish drainer, you probably want to get in and out as quickly as possible. He also questions the ultimate payoff of experiences such as “smart” digital walls and mirrors and free glasses of champagne at the designer Rebecca Minkoff’s SoHo store. He comments, “As if that is going to keep people from going to Amazon: ‘Oh, I can get champagne.’”
In fact, Prof. Fader characterizes many of the initiatives that brick-and-mortar retailers engage in — at a time when many companies are forced to close their doors — as merely “rearranging deck chairs on the Titanic.”
While acknowledging creating in-store experiences have a role in the marketing mix, Prof. Fader believes a better strategy for retailers is to focus on data and analytics: to understand their customers’ lifetime value and find ways to make the in-store experience better for individuals who are more valuable to the business. Essentially, the idea is to treat different shoppers differently and solve important customers’ pain points on the spot, rather than trying to “wow” everyone en masse.
Yet he says that as a group, retailers are risk-averse, afraid of data, and too set in their ways — and he believes they are making a mistake.
“A magic [dressing room] mirror, anyone can have,” says Prof. Fader. “But a deep understanding of your customers — you just can’t buy that.”
DISCUSSION QUESTIONS: Are retailers better served focusing on data analytics for a better understanding of customer behavior or creating unique in-store experiences? What are the limits to the value of such investments?