As shoppers head back to the UK high street, fashion retailers are investing in their bricks-and-mortar footprint. Drapers explores the five key elements that make a store a success today.
Days out shopping are back on the agenda for consumers. After more than two years of intermittent store closures, physical retail is rising in demand – and businesses are once again extending their bricks-and-mortar footprints.
Last month, high street behemoth Next attributed its strong second-quarter performance to a “retail renaissance” that led store sales to rise by 12% year on year in the three months to 30 July.
In recent months, Ted Baker, Hugo Boss, Uniqlo, and Nike have all opened new stores. In May, Superdry reported a 60% rise year on year in store revenue for the 12 months to 23 April 2022. In July, JD Sports Fashion revealed plans to expand the network of Blacks, Go Outdoors and Millets stores. Ted Baker, Hugo Boss, Uniqlo and Nike have all opened new stores in 2022, while Levi’s also announced its intention to grow its presence globally by 20%, opening 400 new stores by 2027. Even digital natives such as Gymshark are making the leap, with the launch of its flagship store on Regent Street set for later this year.
Drapers speaks to leading fashion retailers and property specialists to examine the make-or-break factors for store success.
Lifestyle and clothing brand Weird Fish celebrated a 133% leap in EBITDA for 2021 following a digital overhaul.
But Ben Mercier, customer director at the retailer, says physical stores are a vital part of its strategy: “When we open a store in a specific location, we tend to see triple-digit growth in our online sales within that area. That just demonstrates the power of stores from an awareness point of view, and engagement with our products and staff in those locations.”
Weird Fish celebrated a 133% leap in EBITDA for 2021 following a digital overhaul
Weird Fish currently has 17 stores across the UK and plans to open three new shops a year, focusing on destination locations and market towns, such as Newquay, St Ives, Portsmouth and York: “One of the main reasons we look there is there’s a constant flow of new customers coming in – you might go to Cornwall for a holiday and then you bring the brand back home with you, wherever you live in the UK,” Mercier says.
While market towns are fruitful for some retailers, big cities are still in popular, says Tiffany Luckett, retail director at property agent Savills. She reports that demand is still strong for London flagship stores, but other cities are proving popular. “[Brands are] looking at the data from their online sales to see where they should be located. Edinburgh, Manchester and Oxford have all come up frequently.”
A Shopify/Forrester study in January found 31% of retail brands overall plan on establishing or expanding their physical retail footprint in 2022, but 47% are concerned about securing affordable commercial leases.
However, Savills has observed lease lengths reducing over the past decade and predicts that 90% will be less than five years by 2024. For retailers opening stores, particularly those digital natives making the first leap into physical retail, shorter leases makes the high street more accessible and less of a commitment to try new locations.
Luckett also reports more turnover-based leases agreed during the pandemic and believes this is a lasting trend. In 2020, New Look launched a CVA proposal that switched more than 400 of its stores to turnover-based rents. Ted Baker is “shifting to variable rent structure and to open short-term lease stores in new locations”, CEO Rachel Osborne revealed in an earnings call in November 2021.
While footfall to retail parks surged during the pandemic, investor demand, which jumped 170% in the first half of this year, has focused on smaller in-town shopping centres, and a handful of larger destination malls.
Claire Barber, asset management director at Chelsea landlord Cadogan, says brands are using data to drive location decisions: “The knowledge and data from online sales clearly shows them where their core customer is concentrated. Our experience is that they are then seeking out a presence in these locations to strengthen these relationships and boost sales across all channels. They’re looking for genuine neighbourhoods, where they can see and build relationships directly with their customers.”
Online sales data can then be used to decide which locations brands should explore opening new stores.
Each of eyewear retailer Cubitts' stores has a bespoke design
Andy Turnbull, executive creative director of retail design agency Green Room Design, which works with Puma, The North Face, Coach, Burberry and Cos, notes that retailers are rethinking the store experience: “Customers going back into shops, technically, is the best opportunity you've ever had because they miss shopping in real life.” He points to Coach, Nike, Freitag – which recycles truck tarpaulins into bags – and eyewear brand Cubitts as examples of brands using design well.
Freitag stores: “Everything that you see and interact with is entirely drawn back to the origin of the brand”
Turnbull says that with Freitag stores, “everything that you see and interact with is entirely drawn back to the origin of the brand,”. It’s also visually impressive – in Zurich, the Freitag store is composed of 19 recycled shipping containers, and in Amsterdam the store includes a bike cinema, which is powered by pedalling specially adapted static bikes, and free bike rental.
Eyewear brand Cubitts has 13 stores in London, Brighton, Cambridge and Leeds. They are “only little boutique stores", Turnbull says. “But every one of them is distinctly different in size and design, and localised.”
Cubitts' "little boutique stores” are all "distinctly different" and localised”
Research carried out by shopping centre owner Unibail-Rodamco-Westfield in 2020, found that almost 60% of consumers across 10 countries in Europe – France, the UK, Spain, Germany, Austria, Sweden, Poland, the Czech Republic, Italy and the Netherlands – expect retailers to dedicate more floor space to experiences than products.
Store design is becoming more theatrical, aiming to create moments that cannot be replicated online. One of the best examples is Canada Goose’s “cold room” in its stores in Toronto, Paris, Milan and New Jersey, where shoppers can stand in a room chilled to -32℃ to judge the benefits of one of its coats. Similarly, Turnbull's Green Room Design agency designed an immersive Skill Cube experience at Puma’s flagship Fifth Avenue store in New York (main image above). In the multi-sensory environment, customers can try out the latest footwear, for example, by doing short drills on a towering screen, with sportspeople such as Lewis Hamilton, Antoine Griezmann and Romelu Lukaku.
The ideal store size depends on its purpose.
Rebecca Guzman Vidal, group head of retail strategy at real estate agency Chelsfield, which works with brands such as Burberry, Zara and The Kooples, says there is a balance between slow and fast fashion: “Fast retail is all about convenience. We’re seeing satellite stores that help boost the brand’s UK profit and loss. They’re not flagships but they’re really tailored to a local market. And you absolutely need those as much as you need big fancy flagships.
"There’s been a real shift – a lot of brands have gone back to doing smaller-format stores. Bigger isn’t always better.”
Alfonso Segura, who wrote Fashion Goes Tech, which investigates how technology and digitalisation are empowering retail, agrees adding a lot of the decisions about size of store come down to location: “Many brands are betting on better locations and adapting the format, size and assortment of their stores. Nike is opening House of Innovation [flagship stores], Nike Unite [community concept stores], Nike Live [smaller local stores] and Nike Rise [larger high-tech] stores. These are different store formats targeting different customer needs and brand experiences.”
Turnbull adds that the ideal size of the store comes down to “whatever [premises] you can get in at the best location”. Retailers should use the space they have to create the most visually exciting experience for customers, while not straying too far from the product itself.
“Don’t miss the big picture,” he adds. “Hero the product, invest in great visual merchandising. Above all, I think brands just need to let loose and show off a bit. Don’t be bland. We’ve had enough of it.”
A number of retailers are harnessing in-store technology to remove customer pain points such as long queues and limited stock availability.
Nikki Baird, vice-president of strategy at software provider Aptos Retail, says: “If I were designing a store today, 50% of my real estate would be the fitting rooms. That’s where conversion happens.”
Browns' changing room smart mirrors
Research by McKinsey & Company in 2021 has found customers who engage with in-store technology spend up to four times longer shopping than those who do not.
Segura points to luxury etailer Farfetch, which bought London independent Browns in May 2015, as an example of best-in-class omnichannel orchestration. The two stores, Browns Brook Street and Browns East, in Shoreditch, have smart mirrors in the changing rooms, but Farfetch has pioneered connected mirrors and virtual try-on tools in partnership with Chanel to enrich customers’ retail experiences.
Lee Whittle, Browns’ customer experience director, says the capabilities have been incredibly popular with customers: “This technology shows how each product can be styled, alternative colourways, detailed images and their conscious credentials – all enabling storytelling and rich product discovery.
“What’s important is that we implement technology that is always rewarding. This isn’t tech for tech’s sake – it’s about delivering real benefit for the customer and allowing us to provide that luxury service end to end, from pre-visit to in store and sustaining this when they return home. We know customers don’t shop in one way any more, so being truly connected across every online and offline touchpoint is critical.”
Superdry has been experimented with mobile devices for fitting room attendants, so that shoppers can pay for items immediately. Adidas’s Bring It To Me tool, alerts staff when a customer wants to try on a pair of shoes
The best technology strategy, Baird adds, is: “to focus on the customer pain and remove it".
Segura adds that technology has allowed brands to reimagine their approach to physical shopping, with tools such as heat mapping and loyalty programmes that help identify previously anonymous in-person customers: “Stores are not ‘warehouses’ any more in the sense that the main objective is not high traffic and high conversion (which would require holding a huge amount of stock), but more about experience. Technology is supporting that, from a hardware perspective but also from the back end. Artificial intelligence can personalise product suggestions to customers, RFID [radio-frequency identification] technology can improve inventory availability and accuracy, and predictive analytics can improve forecasting.”
In 2020, Zara parent company Inditex announced it would be spending €2.7bn (£2.3m) on omnichannel capabilities, blurring the line between physical and online retail. The Zara app’s Store Mode allows customers to check real-time inventory information, use geolocation to find specific items, book fitting rooms and join a virtual queue to complete a purchase. RFID tags track the item in store and interactive mirrors allow shoppers to virtually “try on” clothes.
Other retailers are using technology to entice shoppers to come inside. At Hugo Boss new flagship store in London’s Oxford Street, for example, a high-tech window display invites passers-by to play a video game on their mobile device.
At Hugo Boss's flagship store in Oxford Street, a high-tech window display invites passers-by to play a video game on their mobile device
Once inside, interactive screens allow shoppers to see different denim fits without having to try the item on, browse products and sizes to see real-time availability, and make a purchase (organising for it to be shipped home or to the store). Another screen shows the Boss social media feed and identifies the exact products worn in an image (allowing shoppers to add them to a basket or see availability in store). And there is a customisation table, where customers can see how a personalised cotton T-shirt, polo shirt or top will look before placing an order.
However, Segura adds that retailers need to carefully consider what they want to achieve before investing and carry out a cost-benefit analysis: “Brands should think about the return on investment and the customer experience. In many cases there is no impact.” Just adding digital screens in store, for example, is unlikely to deliver. “It needs to be something that improves the customer experience and supports sales growth and conversion.”
The boom in ecommerce during the pandemic has raised customer expectations when it comes to convenience, and many expect quicker, if not instant, delivery. But increasingly, retailers are looking at how they can use their physical store estate to add functionality such as click and collect, ship from store, shop now, pay later options and in-store returns. Weird Fish, for example, is about to launch a new system that will enable shoppers to click and reserve items in store, and facilitate ship from store.
Last-mile, on-demand delivery network Gophr is working with Pangaia, Selfridges, Paul Smith, Dior and Abercrombie & Fitch – which has just launched same-day delivery across all 30 of its stores.
Abercrombie & Fitch: “With click and collect, we see customers come in to pick up their order and then add to their purchase"
Kristin Scott, president of global brands at Abercrombie & Fitch Co, which has already opened 13 new stores (including five in EMEA) in 2022, says about beginning to provide the service: “We know our customers’ shopping habits have changed [and] it was a service we knew our customers wanted,” she says. “With click and collect, we see customers come in to pick up their order and then add to their purchase. It’s a great way to get them into our stores, interacting with our associates.”
“As a global omnichannel retailer, it’s really important to meet our customers whenever, wherever and however they choose to shop,” she adds. “We know our customer is looking for a smaller, more intimate shopping experience and that is our priority. We’ll continue to focus on smaller, omni-enabled locations in the range of 2,500 to 6,000 square feet. We’re a big 'test and learn' culture and we’re leaning into how we can further use our technology to create an even more seamless experience in stores.”
She points to its app functionality that tracks where customers are inside a store, and provides them with product details, ratings and reviews when a photo of an item is taken.
Catering to the "now economy" will require many retailers to change how their inventory and supply chain is managed. Like Zara, Matalan invested in RFID tags across 220 of its stores in 2019. During the pilot phase, it found the technology enabled staff to count more than 100,000 items of merchandise over a three-hour window, with 95% accuracy.
“Increasing the efficiency of stock filing also helps to drive down markdown by facilitating more accurate product placement and allowing us to better measure shrinkage and input solutions in a more timely manner,” Mike Jeans, Matalan’s operations director tells Drapers. “Separately, with the implementation of our fulfil from store system, we can now access stock that is in our physical stores as well as warehouses to more efficiently fulfil online orders, improving product availability. It’s a crucial tenet of our omnichannel offering”
Artificial intelligence and machine learning are also being put to good use at Levi’s, where it is helping the brand to optimise store inventory, save on shipping costs and accelerate delivery times. The retailer’s massive data repository contains inventory and sales information from Levi’s stores as well as some operated by other retailers.
It also houses a range of external data that tracks customer buying patterns and behaviours, weather forecasts, economic trends and more, which it can use to help predict demand. The denim retailer can also use it to support pricing decisions, and decide the best locations from where to ship a product. An online order, for example, might be better shipped from a retail outlet that’s closer to the shopper’s address, rather than a centralised distribution centre.
In the new dawn of retail, businesses should use stores as community spaces that offer something more than a transaction. In July, Gymshark opened a week-long pop-up barber shop called “Deload” in Shoreditch, east London, where customers could talk to mental health trained barbers while receiving a free trim.
Flannels’ new 120,000 sq ft store in Liverpool has three restaurants, a bootcamp-style gym, beauty salon, and rooftop terrace. Selfridges has added therapy sessions and wedding ceremonies to its suite of services, and fitness brand Gym+Coffee’s four UK stores in Liverpool, London, Manchester and Belfast, offer the local community a place to meet, hosting yoga classes, talks and exclusive events.
Gymshark's “Deload” pop-up barber shop in Shoreditch, east London
“Creating a community hub was very much a conscious decision from the outset,” Niall Horgan, CEO and co-founder of Gym+Coffee says, adding that the brand has a "make life richer" ethos. “I think it has a huge impact. customers are looking for more of a connection with brands. We feel that adding value to the brand and shopping experience through immersive events is the best way to elevate the store experience, making them meaningful destinations with a purpose within the community, and a place to inspire and educate.”
Marketing agency Marble LDN says in-person events account for 70% of customer acquisition for brands.
Rebecca Morter, founder of the independent designer concept store brand Lone Design Club, which runs pop-ups in London and throughout the UK: “Almost all (80%) of our customers start their purchasing journey from attending one of our events in store. We’re actually removing all the transactional points of our stores and replacing them with content creation, immersive zones and Instagram areas, to make it more about an interaction space as opposed to a shop.” Shoppers who do want to make a purchase will be helped to do so online.
“For me, Nike is one of the best brands that does this,” Chelsfield's Guzman Vidal says. In July, the brand opened its first Nike Rise store in the EMEA region, in Westfield London, White City. It’s a hyper-local concept that has already been well received in China and South Korea, with plans to open hundreds more in other locations. “Nike’s Rise stores take the data of that catchment city, and tailor the merchandising accordingly. They lead their running club from there, and do a lot of things to really get the community engaged.” There are localised sport stories broadcast on floor-to-ceiling screens, and shoppers can sign up for local events, including wellness discussions with experts.
To build on a store’s success and to truly resonate with the customer – and keep them coming back, retailers should look at events and strategies that build a relationship with customers who are local to their stores. Weird Fish’s Mercier advises: “Go and talk to them. We do a lot of surveys which give us huge amounts of data and insight but nothing beats visiting stores and speaking to customers.”
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