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Retail reinvention – Part 1: disrupting the tradition

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Capgemini on how retailers can best pivot and scale up new concepts

The purchase of products is part of our everyday lives and while traditional retail may be in decline, retailing is not – it just requires transformation into something new. In this three-part blog series, we will explore what the store of the future could look like, what kinds of innovations are now taking place, and the new propositions and technologies behind it.

The world’s top fund managers are now investing in bricks and mortar and luxury, betting on a post-pandemic boom as economies reopen and people go back to their normal lives. Along the same ‘positive flow’ – and seizing a combined opportunity of cheap rent and surplus vacant space – for the first time in years, US retailers plan to open more stores than they close.

This surely does sound encouraging to both retailers and avid shoppers across the globe who have spent a significant part of the previous year confined to their homes, but also raises some key questions: what will the ‘store of the future’ look like? What underlying technology will enable it to fit its purpose? And, ultimately, how can they innovate and tempt customers back to stores?

The key to survival is reinvention

Modern retail was born of the Industrial Revolution, when the manufacturing boom propelled higher standards of living, shifting trade activities from mere utility to a means of fulfilling desire. Fast-forward to the post-war period of economic prosperity, we see the emergence of the first shopping malls laying the foundation for a new era of retail as destination and entertainment.

Retail experiences have historically been built around the premise of customers coming to retailers’ owned spaces, whether physical or digital, and visiting these was the only place to be inspired and explore products, make transactions and get advice and support.

Many retail needs are now being met outside of the stores, with traditional spaces being transformed into experiential destinations serving a purpose beyond shopping. Increasingly, stores are evolving to become hubs to enable greater convenience, offering customers immersive experiences and new and exciting ways of engaging with their favorite brands – just look at Camp’s events and activity-based concept, M&M’s digital immersive experience and Burberry’s social retail store.

Despite concerns surrounding the death of the high street, research estimates that stores will still make up over 70% of retail sales by 2025, meaning it is more important than ever for retailers to understand how to best utilize their physical spaces. Even e-commerce and technology giants are realizing the value of offering tactile real-world experiences and have been experimenting with how digital and physical can blend together: Amazon continues to diversify by looking at bricks as well as clicks – while capitalizing on its wealth of data to best manage stock and merchandise products – and Google opens its first physical store in New York this summer.

The advance of consumer products and FMCG companies into the direct-to-consumer arena is just another example of a disruptive force that should prompt retail to reinvent itself. Unilever continues to upgrade its operations, while Nestlé bets on it to boost customer loyalty post-Covid and Coca-Cola is reviving its subscription model.

Being a big and established retailer does not mean you are a survivor. The future of stores has been called into question by the coronavirus pandemic, and experts believe the key to survival is reinvention. To attract customers, brands will need to focus on making their own spaces (physical and digital) attractive by providing what customers cannot find elsewhere: new valued experiences, service propositions, customizations, partnerships and unique offers or events. This kind of innovation is not just hard – it requires creative talent and can be risky. However, retailers will need to play a broader role in customers’ lives to stay relevant.

Traditional retailing is being disrupted

The next frontier of retail is going to be owned by those who not only meet the bare minimum, but embrace the new world by integrating a bit of ‘edge’ into the modern shopping experience. The key now is not in a product at all; rather, in improving the selling experience and overall consumer journey, whether on- or offline (or both).

Tomorrow’s store will be very different to the one of today, evolving to become a more intelligent and dynamic environment, with technologies creating new opportunities for insight and automation. With 73% of shoppers saying they will spend more time and money in stores offering experiences, we are already seeing some of these trends taking shape.

Nike’s House of Innovation combines touch-free browsing and purchasing, AI fitting and expert services; & Other Stories’s smart vending machines serve as an interactive hub featuring a large touchscreen that allows users to explore products in greater detail, alongside in-depth visual storytelling; and HEMA stores act as a mini fulfilment centre for online orders, while enabling customers to scan and pay for items as they shop and enjoy an in-store robot-enabled dining experience.

Emerging brands — those born online and operating across channels, such as Shopify — are also disrupting traditional retail (reliant on physical storefronts and centralized distribution models) by shifting customer expectations with strategies such as online to offline (O2O) integration, agile fulfilment and delivery, and a direct-to-consumer approach.

With an ever-increasing blend of physical and digital, the main task at hand now is how retailers best pivot and scale up new concepts. It is the urgent need to address this, and to understand how today’s customers want to interact with retail spaces, that will spearhead future retail reinvention.

To find out how Capgemini, in partnership with The Drum and SharpEnd, have reimagined this retail reinvention, check out our CornerShop concept store in London’s Shoreditch. It is a live retail space, in which retailers and brands can explore, develop and test tomorrow’s shopping innovations in a feasible way that can be implemented and scaled today.

Click here for part two and part three, where we will explore some examples of finding new ways into customers’ lives as the retail journey is transformed.

Ella Paludo, senior manager at Frog Customer First, with editorial input from Nike Müller-Brunotte, consultant.

For more on the reinvention of retail, check out The Drum’s Retail hub, where we explore everything from livestreaming e-commerce to AR shopping and conscious consumerism.