The retail store as a site of commerce is blurring with its capability as a media channel, according to research from Starcom, which explores the ideas behind the store’s metamorphosis - here’s what you need to know.

The agency’s Future Tensions in Retail Report 2019 aims to navigate a path through the sector’s tricky waters. In the UK in particular, the scene is grim: one in 10 retail units lie empty; the next decade is estimated to see 900,000 fewer jobs in the sector.

Reasons for retail’s tricky situation are multifarious: Brexit uncertainty, mixed with a potential slowdown in the global economy reflect macro gloom, while more local considerations such as high business rates have retailers preparing for the toughest Christmas in a decade, according to Retail Week.

Viewed another way, a precarious moment for the sector indicates that disruption is now pressuring ever more facets of the industry. Opportunities remain and people are still shopping; retail isn’t going away. Brands and retailers need to understand the new normal and put in place strategies to prepare.   

Speed of operations: the streamlined silk road

The threat of online is never far away. Starcom reports that one in every five pounds are spent online in the UK. The impact of Amazon in the west and Belt and Road in China – the plan to build the infrastructure for delivery to 71 countries across Asia and Europe – is speed. With faster rates of production and delivery, it will be difficult for traditional players to adapt to this new world.

Meanwhile, the rise of direct to consumer (DTC) brands which are able to cut costs and enjoy a closer relationship with their customers are cutting out the traditional retailer and rallying around convenience.

The transition to convenience has been tough on brands. In a physical context, witness the brands that have followed consumer footfall to transport hubs. It gets even tougher for brands competing in the cutthroat e-commerce space. Profitero and Kantar Consulting figures from 2018 identify the main challenges brands face as pricing and profitability scenarios (55%), measuring and reporting on ecommerce (51%) and attribution of online influence to offline sales (45%).

Starcom argues that the response to this trend must centre on reducing complexity: “Expectations will only continue to heighten around what, and how quickly, we can access and return the things we buy.” Some of the more visible changes will involve the smart shrinking of stores to get closer to people. Other ideas include reducing friction and price displeasure: both Tesco and Sainsbury’s now have systems that allow shoppers to scan as they browse, meaning fewer queues and fewer nasty surprises on cost.

Lighter living

As people move to cities, there is simply less space for them to hold onto items they don’t need. The downside of this is the growing amount of waste – the average lifetime of a piece of clothing in the UK is just over two years, for example. The upside, meanwhile, is the growth of a second-hand market that brands are beginning to recognise as a way to find extra value from their items.

Currently, much of that market remains hidden from brands, says Lorna Hall, Head of Insight at WGSN, quoted in the report. “Money is coming out of the mainstream market because of this way of shopping, particularly in Generation Z.”

Some brands are, however, taking note. Recently, WARC wrote about the second-hand e-commerce platform Yerdle, which is powering platforms such as Patagonia’s Worn Wear. Similarly, platforms like Depop are making second-hand selling cool by integrating a social networking element. Now IKEA, the furniture retailer, is expanding its trial of a furniture buy-back scheme to recycle and resell.

Other firms are reducing waste through returnable packaging. Through the reusable metal packaging subscription service, Loop, large FMCG brands, including PepsiCo, Nestlé, Mars, and Mondelēz are dipping their toes in the packaging rental waters. Speaking at an event in London to launch the report, Heather Dansie, Research Director at Publicis Media commented: “All of these are solutions from our grandparents’ generation, but the internet has glamourised them.”

Stores as an experiential network

While physical shopping is diminishing, our desire for shops to visit remains undimmed. “We still want to shop in beautiful places among beautiful people,” Starcom states. Three ideas offer a remedy:

  • Home of the experts: “Most of our time shopping is not spent buying, but rather deciding what to buy … Whether it is to find functional advice, a chance to properly review options up close, to browse and be inspired, people feel reassured when they visit stores. It is the place to demonstrate a brand’s expertise in their category.”
  • Instagram: “In 2019 if your retail experience is not worth putting on Instagram then it isn’t good enough.” Stores are increasingly designing for the Gram: Primark in Birmingham, Story by Macy’s, and’s Instagrammable apartment in Amsterdam. These stores are places to be talked about rather than a building in which to stock up on product.
    A subset of this idea is exclusivity. For instance, you only need to wander to the end of Berwick Street in London’s Soho to see puzzlingly large queues outside the streetwear shop Supreme, which has helped to popularise the idea of the product drop. 
  • Services: As lifestyle spending increases at a rate well above that of retail spending (3.1% compared to 1.7%, per the Local Data Company), there is an argument that successful stores will offer an intangible that can’t be undercut online. After all, Euromonitor in 2019 found that 40% of global consumers say they prefer buying experiences rather than goods and products.

“Retail acts as an alternative to websites by offering people their space to self-actualise,” the report states. “What we have, is increasingly less self-defining than what we do. Taking photos of what we have just bought is gauche. Taking photos of great experiences we are having is not.”

The store and society

People lament the demise of their local high streets, even as they spend ever more online. The result is a vicious circle of empty shops and discontent. Though decline is slowing (just 0.3% in 2018), there is more that can be done.

Brands can step in here. Many of these empty spots can become spaces for brands to simply advertise, “particularly for brands that have seasonal spikes and don’t need retail space throughout the year but only for a few weeks. Experiential media is an increasingly attractive option for both brands, who often require short-term pop-up space, as well as landlords who are looking to fill their ‘meanwhile’ spaces.”

Visa, the payments company, collaborated with local businesses for its Christmas 2018 campaign to encourage people to spend on the high street. Meanwhile, the public admires brands that invest in people locally: Timpson, the shoe repairer, has made headlines for hiring a high proportion of former prisoners, investing where the company can have an extremely high impact.

Media and commerce

Ultimately, these are two sides of the same coin, Starcom concludes. The process is cyclical, depicted thus:

“The line of responsibility between media and commerce is blurring,” Starcom says. It gives four final recommendations:

  • Communicate re-commerce strategies for guilt-free indulgences
  • Embed transactional capabilities into all elements of media for easeful purchases
  • Build interactive social spaces for sharing and status kudos
  • Embrace the high street as a place for storytelling and community

Sourced from Starcom, Retail Week, WARC