Why Starbucks & Others Have Redesigned Stores to Focus on Convenience
Starbucks Now store format in Beijing
Has there ever been a time where the vision for the future of retail varied so widely? From cashier free stores, to smaller stores, to stores that focus more on service it seems as if instead of a great convergence there is a great divergence of ideas. Do you remember the time when mom and pop stores and great department stores like Sears ruled the retail landscape? Well those days are over.
Today it is clear that retailers haven’t figured out exactly what a more empowered consumer is looking for. But no one can say that retailers are not trying. Take cashier free stores. Heralded by Amazon as the way of the future with a vision for thousands of these stores, development of Amazon Go started in 2012. Seven years later there are 14 of these stores in existence. Innovation takes time and getting consumers to adopt a new reality can take even longer.
What is clear is that technology will play a role in the store of the future but not at the expense of great customer service which is often still delivered by great sales associates despite technological advances. To get a sense of where the future of retail is heading take a look at what these retailers have in store for you.
1. Can you imagine a world where Starbucks is not the go to location to get a latte and lounge around for a few hours with friends? Well Starbucks, the nearly 50 year old retailer, is changing with the times. Earlier this month Starbucks opened its first Starbucks Now store format in Beijing China. The store is designed for customers who want to quickly pick up the coffee they ordered using the Starbucks mobile app and get going. When a customer enters the Starbucks Now store they are greeted by a concierge station where a barista can help them either find their mobile order or place an order. Seating is limited and is not designed for customers that are planning to stay a while. The store is also being used as a hub for coffee delivery orders which are popular in China.
Since most Starbucks locations were designed and built before the popularity of mobile ordering they are not always adequately set up for mobile order pick up, at times causing bottlenecks when too many people arrive to pick up their orders. Starbucks Now stores cater to three types of customers: customers who order at the counter, customers who order by mobile and pick up in store and customers that order online and have orders delivered to them. The store is located in the heart of Beijing’s busy financial district. Speaking about the new store format, Leo Tsoi, Chief Operating Officer and President of Starbucks China Retail said: “This new retail format and design approach provides us with a platform to offer customers a fast and convenient retail experience to suit their on-the-go lifestyle.” Starbucks plans to open more Starbucks Now locations in high traffic areas. These new stores should help Starbucks to serve customers faster.
2. In April of this year IKEA opened its first city centre store within the US in New York City. The 17,000 sq. ft three storey store, located on the Upper East Side, is significantly smaller than the average IKEA store that comes in at approximately 300,000 sq. ft. In this store customers can book design planning sessions with IKEA staff where IKEA hopes that based on the in-store consultation customers will pick out items that will be delivered to the customers’ home at a later time. Customers shopping at the IKEA store in NYC also receive discounted shipping, furniture assembly services if required as well as an option to pick up merchandise from that store location. Speaking about the new store format, the head of IKEA UK, Javier Quinones, said: "we know that the role of the store is changing. People want to shop in a number of different ways and count on brands to offer them services that reflect the way they live."
3. In September 2017 Nordstrom launched a new store concept called Nordstrom Local. Nordstrom Local stores are small. They are only 3,000 sq. ft and they do not carry dedicated inventory. The stores are focused on service and providing a great experience. Some of the services offered at Nordstrom Local stores include personal stylists, free of charge, manicures, pickup for eCommerce orders (including curbside pickup), returns, alterations, gift wrapping and complimentary refreshments.
Speaking about Nordstrom Local, Shea Jensen, Nordstrom’s Senior Vice President of Customer Experience, said: “we know our local market strategy is driving outsized market share gains in LA.” One of the key drivers of the popularity of these locations is the ability to easily return and pick up online orders. These locations are also drivers of eCommerce since customers know that they have a convenient way to return items especially if they are buying multiple sizes and variations of products.
These stores have performed very well for Nordstrom. On average a Nordstrom Local customer spends 2.5 times the amount of a regular Nordstrom customer.
4. Digital native clothing brand ModCloth sells vintage inspired clothing for women. The popularity and growth of the brand caught the attention of Walmart which acquired the company in 2017. ModCloth opened its first permanent store location in 2016. It calls its stores FitShops which are essentially merchandise showrooms that only carry sample sizes. Customers shopping at one of ModCloth’s FitShops browse the store and can try on merchandise. The majority of clothing in a ModCloth store is not available for a customer to purchase and take home on the day of the purchase. Instead merchandise is shipped to the customer’s desired location free of charge with expedited shipping. This allows ModCloth to only carry sample sizes on site instead of carrying the same amount of inventory as a traditional store. Clothing samples are available in sizes XXS to 4X. Having a FitShop allows customers to try on items to see if they like them before ordering the merchandise. Once customers decide which items they like they can order them in-store at a concierge station.
Since the stores are not dependent on high levels of inventory the company can open smaller stores. For example, ModCloth has a 2,000 sq. ft store in New York City. Speaking about its store concept, ModCloth CEO, Antonio Nieves, said: “other brands’ store associates are more like stock associates.” “But our associates are stylists; their role is not about managing inventory.” ModCloth only carries the best of the best of its assortment in FitShops, providing customers with an expertly curated shopping experience.
5. Amazon opened its first Amazon Go store to the public in 2018. Amazon Go is a convenience store that was first launched with no cashiers but instead uses machine learning and sensors to determine which items customers have taken off shelves. After customers have finished shopping they can walk out of the store without having to ever stand in a line or go through a checkout. When customers leave the store their Amazon account is automatically charged. However when the latest Amazon Go store recently opened in New York cash was accepted. According to Cameron Janes, Amazon's Vice President of Physical Stores: “adding more payment methods enables more customers to shop in the store. And that's great for customers and great for us." This move is likely due to the fact that a significant amount of US citizens (6.5%, or 8.4 million households) do not have bank accounts, making those customers unable to shop at cashier free Amazon Go stores.
Bloomberg recently reported that: “some Go stores seem almost deserted except for the lunchtime rush. Employees familiar with Amazon’s internal projections say the outlets in Chicago, in particular, are falling short of expectations, and the company has had to resort to raffles and giveaways of tote bags and other branded goodies.”
6. In 2017 Sephora opened its first small format store called Sephora Studio in Boston. It is a 2,000 sq. ft store, its smallest store format in the US. This new store format is focused on offering personalized advice such as beauty classes and value-added services such as free standard shipping or reduced next day shipping. Customers in the Boston area can make orders via the Sephora app and pick up the product the same day. Sephora now has two of these stores in the US.
7. A trend that is taking place in China is completely staff-free stores. One of the leaders in this area is BingoBox, which opened its first unmanned convenience store in 2016 in China. The 24-hour store sells convenience items such as chips, noodles and dairy products. To enter the store customers scan a QR code located at the store’s entrance which then opens a door to enter the store. Each item in the store is fitted with an RFID tag. To checkout, customers scan items at a self-checkout station then pay using WeChat or Alipay. There are over 300 BingoBox stores in China.
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