The Retail Reset

In business, as in nature, adaptability is the key to survival. Factors such as climate change, technological acceleration and a global pandemic have placed a great deal of pressure on today’s economy, and no better example of this exists than how we as humans purchase goods and services. 

Disruption in the retail industry can be painful, but it’s not uncommon. The mom and pop shops of the industrial revolution transitioned to the stand-alone department stores of the early 1900s. Supermarkets followed, then shopping malls, box stores, and e-commerce. Ultimately, these changes benefited consumers. With that goal in mind, here are some suggestions for retailers looking to adapt and grow their business.

Don’t discount the value of the physical space

Many experts suggested the “Amazon effect” would devastate mainstreets and highstreets, and that physical shopping would become a thing of the past. This is not the case. Studies have shown that when people are shopping in a physical capacity the serotonin and dopamine levels in their brain mimics the same sequence as when they ingest cocaine. It’s why we see a larger increase of foot traffic in a physical shopping space versus buying online during the holidays. People still enjoy shopping in-person.

Repurpose your space

The traditional role of the retailer was that of distributor. Keeping inventory on hand was the name of the game. Now, retailers no longer need to carry the cost or hassle of maintaining backroom inventory. This is a key shift in how people consume goods and services, and leaves the market with a problem: a surplus of brick-and-mortar office space and retail capacity. Ideas for repurposing the retail space include: 

• Micro-leasing opportunities: Tenants are looking for smaller spaces. There is less risk, less overhead, and more interaction. In 1990, the average square foot size for a retail space was 5,000. Today the ideal is 1,500. There is a surplus of space, but it’s not reflected in the price of real estate. 
• Co-tenants sharing leases: Since businesses are always looking to cut costs, sharing a space with another business is becoming more popular. Think large corporations like Indigo and Starbucks partnering together, or what independent stores like Weekly Salon and Take Care Cafe have done in Edmonton. 
• Co-working spaces: Thanks to technological advances that allow a variety of tasks to be completed from just about anywhere, people no longer need a dedicated office space. Coworking facilities are now a successful retail model, allowing people to eschew the traditional office while still being able to socialize and collaborate with others. 

Redline your space

For centuries, the marketplace was the only way merchants could reach customers. For marketplace owners, this business model was extremely profitable. From the invention of department stores and supermarkets to the rise of eBay and Amazon, the marketplace has ruled supreme. However, the role of the marketplace is shifting. Vendors and merchants are finding new ways of accessing their customers that don’t involve a middleman. Thanks to online platforms such as Shopify, businesses can enjoy a previously undreamed-of infrastructure and economy-of-scale that directly benefits the customer.

This doesn’t mean the end of the marketplace, however. Rather, it’s the end of the marketplace as we’ve known it. The value of the future marketplace is no longer price or product; it’s the customer experience. Experience can mean many things, such as convenience, service, authenticity, aesthetics and interactivity. It is important to incorporate as many experiential elements as possible, as long as they are not in conflict with one another. If your business’ value proposition is based on interactivity, then play to that strength. For example, movie theatres are no longer convenient. It’s much easier to rent or stream a movie at home. The value of the movie theatre is in providing customers with a fun and communal viewing experience. Successful owners will be the ones who work hard at enhancing and deepening that experience. 

A traditional marketplace model that can provide a guidepost for the future is the farmers’ market. An idea that might seem antiquated, the farmers’ market is seeing an increase in popularity precisely because it provides the consumer with a friendly and engaging shopping experience. 

Get back to the basics

With the competition for customers expanding into the remoteness of the digital space, retailers and businesses need to get back to basics in capturing the customers’ attention. In many ways, we are seeing this in how businesses are tackling the need to provide better customer service. Expanded food delivery and time slot shopping appointments are good examples. Consumers are prepared to pay a premium to have better service and are more loyal to a brand with superior customer service. 

Customers are also rejecting the premise of the big box store, and there has been a revival of the locally-owned mom and pop type shops of the past. Consumers are more aware than ever of the impact of their dollar, and want to keep that money in their community. Companies such as Walmart, Nordstrom and Starbucks are spending millions of dollars to repurpose their physical stores, shrinking down their spaces to create a more authentic atmosphere and localized shopping experience. 

This is where local businesses can really capitalize. Smaller retailers can excel by hiring staff with an intimate understanding of their product, and by focusing their efforts on becoming entrenched in their neighbourhood or larger community. By knowing which way consumers are headed, and being at the other end to welcome them with open arms, businesses can move beyond “just getting by” into real gains, growth, and profitability.

Heather Thomson is the Executive Director of the School of Retailing.