I find the whole argument of "physical stores are dead vs physical stores are not dead" quite boring. The answer seems pretty obvious to me.... essentially there are 3 broad avenues to go down.
The Good: Physical stores can be an excellent channel and outlet when executed well. They can serve as inspirational outlets and desirable destinations which serve customers and help them feel genuinely valued by the brand and the store team.
The Bad: Physical stores that don't operate effectively can be a financial drain on the company. And when you have a larger estate, it's natural to have a distribution of those stores that are very profitable and those that are not. Of course, elements like rates and rents don't help and neither do soaring stock loss budgets, so costs need to be carefully planned and managed to ensure that profitability doesn't take a hit.
The Ugly: And then there are those stores which are, simply, brand damaging. I'm sure we can all think of disastrous shopping experiences that we've had as customers. Messy stores, poor availability, rude customer service, dingy environments. You get it. These are the physical stores that leave a nasty taste for customers and can and will turn away future custom along with some negative recommendations.
So there is no one simple answer about if stores are overall a good idea or not. A huge amount rests on the execution and operating model - irrespective of whichever channel you choose to trade through.
But one thing is for sure. As we prepare for peak, there seem to be loads of new stores opening right now, especially flagship stores packed with experiential elements and ready to sell to customers as well as companies exploring shops for the first time, like Asos, Shein, Avon and several DTC brands.
Let's hope they fall into the "Good" bucket in the short and long term.
Retail transformation news headlines
💰 The Body Shop have been acquired by PE investor Aurelius Group for just 20% of their 2017 sale price. The group already owns FootAsylum and is rumoured to be circling footwear brand Dune, too. It seems from the official announcement that there will be a major focus on operational efficiencies. We've seen companies like Next and Frasers Group acquiring more brands and retailers in recent years. And a large part of this is about enabling synergies across aspects like distribution, technology and support functions. However, will this same approach work for private equity investment houses that may be looking for a sale in the future? Probably not as the business would essentially be powered by the operating model - which you would have to assume is not part of the future deal. It will be interesting to see how this evolves and if we'll see more PE houses pursuing the group model.
🥓 In Spain, Carrefour stores are starting to sell 3D-printed plant-based bacon. The plant-based meat alternative movement spiked quickly a few years ago, but financials seemed challenging at the time. This new range, which has been developed through a collaboration of Foodys and Cocuus, will be supplied across Carrefour's whole estate which suggests there could be some significant scale coming soon. Additionally, the new product is now priced at a "similar price" as the traditional product.
💄 Cosmetics firm Avon have opened their first physical store in the UK. The 137-year-old retailer has been popular for their broad network of sellers and shopping parties. In recent years, they have opened stores in Türkiye and plan to also open stores in Brazil and South Africa. The move into physical retail is a fundamental shift for the company and will present on-demand opportunities for shoppers to experience the product range. Earlier in the year, Avon also partnered with Superdrug to sell products via this channel as it noted a potential issue with their heritage channel.
👃 The Fragrance Shop have opened a new flagship store in London, including what looks like a make-your-own scent machine. The store is equipped with loads of experiential aspects and is perfectly timed as the Christmas gifting season approaches.
👗 Ecommerce pureplay fashion retailer, Asos, are opening their first physical store in London. The store will open for 4 days, including Black Friday, but will be returning to their digital roots for Cyber Monday. The event is there to allow customers to touch and feel products and they're looking to build that all-important connection with customers. Additionally, there is a partnership with Snapchat which is aiming “to take immersive shopping to the next level”.
🔨 Home improvement group Kingfisher, have launched an AI virtual assistant to give DIY tips to customers. The chat feature allows customers to ask questions such as how to install a basin or for painting tips. The tool has initially launched in France under their Castorama brand, and is ready to chat across a number of different languages to help serve customers. It will be interesting to see if and how the tool adjusts across different brands - for example, their mass market B&Q brand vs their more professional Screwfix brand in the UK.
🕵️ In the US, Temu is facing another legal battle over privacy and customer data. The claim is that their app has the most dangerous spyware known and after downloading the app, Temu allegedly have access to “literally everything on your phone”. Whilst I imagine that the majority of consumers are ignorant to the data snooping, it could quickly catch the eyes of national and international law makers.
👜 TikTok have had their share of privacy concerns but are now offering authentic, verified handbags via TikTok Shop. By partnering with Real Authentication, the social media platform will be able to demonstrate authenticity of luxury handbags sold via their marketplace.
📦 New data from the UK Police, collated by Quadient, has shown that doorstep parcel theft has increased 57% over the last year. And based on historic data, the busy peak period of November and December accounts for 27% of the annual total. The data also shows that this has risen alarmingly by 500% since 2019.
🚨 Meanwhile, new data from Retail Economics and Thruvision suggests that 40% of stock loss is due to staff theft. And zooming into that 40%, the report has found that 43% was in distribution centres vs 57% in stores. Retail executives interviewed felt that stock loss at distribution centres has accelerated recently.
🧵 And finally, many large fashion retailers, including H&M and Gap have committed to increase prices for garments produced in Bangladesh. Bangladesh is the second largest exporter of clothing, but has struggled with providing suitable working conditions and paying workers fairly. The Bangladeshi government has recently mandated a 60% increase in minimum wages. Even after the increase, the average salary is still less than half compared to other garment producers, like Cambodia and Vietnam.
New podcast episode: Golden nuggets from the fifth year of the podcast (part 2) - #264
In part 2 of our annual round up, continue to delve into the crucial aspects of transformation and change management in the dynamic world of retail. As we celebrate the fifth anniversary of the podcast, I'm bringing together more standout moments and insightful golden nuggets from recent episodes. This compilation highlights key discussions on the foundations of transformation, the challenges of change, the opportunities of cost savings and agility along with the importance of Lean Six Sigma. It also touches on the approach for innovating business models and maximising the likelihood of success in your initiatives. Tune in to absorb these condensed insights, which encapsulate the shifts and strategies shaping modern retail.
Take a listen to episode 264 of the Retail Transformation Show podcast and discover:
- Why the concept of turning the tanker is no longer relevant.
- How you can switch a classic cost-cutting tool to a valuable tool for shaping the retail business.
- And how you can ensure you’re maximising your chances of success.
Check out these recent episodes too:
Phew.... a bumper Briefing this week as loads of initiatives look to land before peak trading sets in solid! If you've still got last-minute initiatives to land - Good luck!
Keep transforming better,