As retailers look for ways to keep shoppers in physical stores, design has an important role to play.
In recent years, the intense attention paid to unemployment and housing statistics as a measure of economic recovery has somewhat eclipsed another important economic indicator…the health of the retail industry. Retail sales are an important predictor of GDP in the U.S. because consumer spending contributes as much as 70% of economic growth. And right now, despite a macroeconomic picture that remains uncertain, consumer confidence is at the highest level in five years and retail sales are on the rise. This is happening in a way that will both challenge and provide growing opportunity for retail designers.
According to Kiplinger, a leader in business forecasting, 2012 retail sales in the U.S. are on track to post a 5.5% gain over 2011, mostly owing to what is turning out to be a robust holiday shopping season. Yet the simultaneous 3% decline in year over year department store sales during the holiday shopping season through mid November reveals another side to the story, and throws into focus one of the biggest challenges being faced by bricks and mortar retailers: online shopping.
MediaPost, an online resource for advertising media professionals, reports that as of mid-December, e-commerce spending was up 13% to $35 billion, compared to the same period last year, according to comSource, a global leader in digital business analytics. Some important milestones were hit during the period of December 10 to 16, which marked the first weekend in history where online spending surpassed $7 billion, and four individual days that exceeded the $1 billion mark. When added to 2011 results, the trend becomes even clearer. According to the U.S. Census Bureau, total nominal sales for the 2011 holiday season were up 6.2% compared with a year earlier, well ahead of most forecasts. “Normally such an increase would qualify as a stellar season, but few retailers would characterize it as such,” notes the 2012 Annual Retail Report produced by FTI, a global business advisory firm. Non-store sales accounted for as much as 22% of the holiday season sales, up from 20% in 2010.
The proliferation of online-only retailers is mounting serious competition for traditional retailers, but those with physical stores are also competing with themselves. By all accounts, one of the most significant trends sweeping the retail industry today is “showrooming,” whereby customers visit stores to have a look, touch and feel, and try on the merchandise, but then go home and order online. For retailers with real estate who are anxious to keep these wayward customers coming in and buying, design has never been more important.
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Dean Rubin, CEO of Rose Displays Ltd., made special mention of the threat of online retailing. “In retail design we’re seeing a move toward experiential environments,” he said. “We’re seeing retailers find the need to grab customers and keep them in stores. In order to keep them away from the online alternatives they have to find something that is exciting, new, fresh—it’s experiential as opposed to something that’s transactional.” Retail design icon Denny Gerdeman, CEO of Chute Gerdeman in Columbus, Ohio, also noted that customers are getting information and making decisions about what they want and where to shop before they even get into a store. “They’re so well-prepared, and how we then tailor the merchandise offerings, and how we present the product in the store is really going to be key moving forward.”
But for Rubin and Gerdeman and others like them who see challenge as opportunity, the world of retail design has never been more interesting, as it moves away from simple branding and merchandising exercises toward immersive experiences for customers. “There simply has never been a more exciting time for retail than right now,” says Christian Davies, executive creative director of Americas for FITCH, a global retail design firm. “Everything is up for grabs, from when and where people will shop, to how they will do it.”
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Davies is quoted as such in DDI magazine’s annual Portfolio Awards report on key retail industry luminaries, where he and several others were recently honored for “unparalleled creative excellence” in the retail industry. Fellow honoree Harry Cunningham, senior vice president of store planning, design, and visual merchandising for Saks Fifth Avenue in New York, said physical shopping should be fun, above all else. “We want to add a bit of fun and interest to both show windows and interiors. I want displays that will excite you, windows that cause you to stop and smile. Then, we will interject technology in interesting and unexpected ways to be part of the total experience.”
Ray Ehscheid, senior vice president of store design and merchandising for Bank of America (who rejects the notion that retail banks are uninteresting) was quoted as advocating a customer centric approach to design. “I want someone who walks into one of my projects to understand intuitively the space and how to find their way to complete their tasks,” he said in DDI. “Moments of unintentional delight on that path—new discoveries of a material, a piece of furniture or an element of lighting that strike their attention—are the touchstones to me of a successful environment.”
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Also honored in the DDI Portfolio Awards 2012 report, Aaron Spiess, co-founder, co-CEO, and president of Big Red Rooster, a multi-dimensional brand experience firm based in Columbus, Ohio, talked about the need to combine technology and physical space “to bring stories to life” in the retail environment. And global retail design icon Giorgio Borruso, founder of Giorgio Borruso Design in Marina Del Ray, Calif., talked about challenging the customer’s point of view and understanding of space to encourage exploration and interaction with the environment. “Desire and interest should be the driving forces moving us through the space,” he said. “It’s about engaging all the senses.”
Gone are the days when the retail environment expressed branding two-dimensionally, and attempted to recede in deference to the merchandise. Now a successful design must offer an experience that differentiates the retailer from its competition, and provides value that cannot be found online. As Cunningham notes, “You can’t touch a dress on an iPad.”