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Tuesday
Nov272012

The Resurgence of the Department Store: Gamification and Beyond

Over the past year Kathleen Jordan, a principal in Gensler’s New York office and leader in the firm’s Retail practice, undertook an investigation into the future of the department store. Her premise was simple: for years she’s been hearing and reading about the upcoming death of the department store, but so far it hasn’t happened. To learn more, she spoke with industry leaders, visited successful examples around the world, and read a lot of articles. The result is a set of distinct advantages she sees for department stores in today’s business and retail climate, and a set of bold strategies to regain the competitive advantages these stores once held. This is the final installment in a six part blog series that conveys her findings.

NOTE: You can access a full white paper summarizing all her findings on Gensler's website.

Smart retailers are using customer input to their advantage, inviting the customer to influence the retailer’s product offering. But the smartest are moving a step beyond that to create or support platforms that put the customers in charge of the product creation or the actual transaction.

Hacking the “Customer Influencer Score” of your customer base

Social selling – evidenced by websites like shopmylabel.com and styleowner.com – leverages self-proclaimed “fashionistas” who then curate their own merchandise collections that they can share and sell to others through their personal social media networks. For example, approximately 80% of the products on both shopmylabel.com and styleowner.com are provided by Saks Fifth Avenue, driving their sales without hiring additional staff. These fashionistas-turned-virtual-boutique-managers are incentivized through the commissions on these sales. From Saks and Nordstrom to Amazon, retailers have embraced flash sale websites over the last year or so, FashionFix, HauteLook and MyHabit respectively, to join that burgeoning movement.

Think out of the box

Puma’s “creative factories” go another step even further and bring customers into the actual design and development process – “we [Puma] supply the materials and you supply the imagination.” Representing a seven-figure investment for Puma, it’s a prime example of “if you’re going to be a bear, be a grizzly” because they really go all the way with this gamification strategy. Customers create their own designs, share them via their social network, check out other people’s designs and vote for their favorites. The next level allows them to build their own boutiques depending on the popularity of the person’s design(s). Further gaming aspects can and will be added, such as design challenges.

Translate the online possibilities to the physical environment

The opportunities for department stores to deliver differentiated products and experiences are plenty. The challenge is to think beyond the ordinary, to make the bold investment, and to gauge the results.

But it does not end there. The challenge remains that the retailer must innovate continually. Target has recognized this, as they have disbanded their successful “Go International” program to pursue “The Shops at Target” initiative. Making that push means daring to be great, and understanding that change must be constant.

Designing your store for the future

For retailers looking to innovate and create these new in-store experiences, it starts at the planning stage. Everything from store layout and design, to your approach on staff training and marketing, is on the table – be prepared to give these experiments a chance as you re-train your customers, then keep what’s working and cut what’s not delivering. As you look to the future, expressing these bold business decisions through the design and programming of your space is a visible and direct way to engage customers in the evolution of your company. Use the opportunity to promote your core brand values, gather customer input, and deliver the unmatched customer experience that can make department stores great. Then reinforce this through consistent messaging – and accessibility - on your website and through Apps.

Think about setting aside spaces purely for brand or cultural impact, rather than just creating places only for merchandise and transactions. Hollister set back the front face of its 5th Avenue Flagship façade ten feet from the property line, sacrificing precious sales square footage, to install a reflecting pool backed up by a full height video wall streaming live feed from Huntington Beach (the brand’s home) spanning the façade’s full width – an unexpected surprise along a busy retail strip, and a visceral representation of their surf-inspired culture (though perhaps not the most environmentally responsible design solution).

Conclusion

As we wrap up this examination of the resurgence of the department store, there are several things to keep in mind. Whether the spaces you create express your environmental or social responsibility, celebrate your brand, or provide an unexpected customer experience, the result will be the same: you will have physically exhibited that your first priority is customer experience over pushing merchandise. In other words, you will demonstrate that you care. According to a McKinsey Report on the “Customer Decision Journey,” up to 40% of consumers change their minds because of something they see, learn, or hear in store. Make your in-store experience one that changes their mind for the better.

The opportunities for department stores to deliver differentiated products and experiences are plenty. The challenge is to think beyond the ordinary, to make the bold investment, and to gauge the results. But the challenge will be to continue pursuing bold innovations. Target has recognized this, as they have disbanded their successful “Go International” program to pursue “The Shops at Target” program. A one-dimensional strategy isn’t going to cut it. A far reaching, persistent, bold -- even risky -- strategy for success is what will push stores ahead of the pack. Making that push means daring to be great, and understanding that change must be constant.

For stores looking to innovate and create these new experiences, it starts at the planning stage. Everything from store design and layout, to your approach to training and marketing is on the table – be prepared to keep what’s working and cut what’s not delivering. As you look to the future, expressing bold decisions through the design and programming of your space is a visible and direct way to engage customers in the evolution of your company. Use that opportunity to promote your values, gather customer input, and deliver the unmatched customer experience that can make department stores great. Then reinforce this through consistent messaging on your website and through Apps.

Think about setting aside designed spaces purely for brand or cultural impact, rather than just creating places for merchandise/transactions. Hollister’s 5th Avenue Flagship set back its façade, sacrificing precious sales square footage, to install spanning its full width a reflecting pool backed up by a full height video wall streaming live feed from Huntington Beach (the brand’s home) – a welcome surprise along a busy retail strip, and a visceral representation of their surf-inspired culture (though perhaps not the most environmentally responsible design solution).

Whether those spaces express your environmental or social responsibility, celebrate your brand, or provide an unexpected customer experience, and the result will be the same – something unexpected that shows your first priority is customer experience over pushing merchandize.

Kathleen Jordan
Kathleen Jordan is a principal in Gensler’s New York office, and a leader of our retail practice with over 24 years of experience across the United States and internationally. Kathleen has led a broad range of retail design projects as both an outside consultant and as an in-house designer. She has led projects from merchandising and design development all the way through construction documentation and administration, and many of her projects have earned national and international design awards. Contact her at kathleen_jordan@gensler.com.

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