Have we actually reached a retail apocalypse?

[Disclaimer – this is a little preview into what my presentation will be on this Wednesday!]

You have been hearing it everywhere these days – retail is dead.

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Long gone are the hours spent in Macy’s shopping for the newest model of that KitchenAid mixer, or a fancy tie for dad’s birthday. E-commerce has become the buzzword of the era, as more shoppers are actually choosing to click purchase on those items collecting dust in their carts.

However, I am here to convince you of the very opposite – rather retail isn’t dying, it is only vastly changing.  

*cue the sigh of relief*

As Goldman Sach’s analyst Matthew Fassler explains, “The store still matters. How brick-and-mortar stores employ new technologies and new models may determine how they survive the relentless shift [to] online.” Today, eighty-five percent of retail sales are still made in physical stores, despite the general assumption and fear that shoppers are only purchasing online.

So what is exactly is changing you might ask?

Consumers are now demanding more from brands when they walk into a physical store. They are craving an experience – one that seamlessly integrates and compliments their online presence with their in-store one. This new retail experience is about creating destinations for customers that go way beyond the act of purchase, and immerse them in a 360-degree brand lifestyle.

As many industries are failing to recognize this shift (RIP Toys R Us), the beauty industry seems to be the one dark horse rising above it all. They are capitalizing on this “famed” retail crisis and significantly altering their in-store experience through digital technologies. According to the market research company NPD Group, prestige beauty sales in the United States has risen 6 percent in the 12 months preceding February 2017, tallying at $15.9 billion in total sales.  Additionally, the cosmetics industry as a whole is currently growing and expected to reach $429.8 billion by 2022.

With all this upward growth who is currently slaying the game?

That would be the black and white striped bag you ladies know all to well – specialty-beauty retailer Sephora.

They have transformed their in-store experience to cater to the “selfie-obsessed, image-driven culture of our time”, allowing customers to engage in a try-before-you-buy type mentality. Their technology is implemented with the goal of acknowledging and rewarding its loyal consumers, as well as converting new consumers that initially come in to just “play” with the products.

Below are just a few of the technologies Sephora has rolled out in the past year:

  • The launch of Color IQ – an in-store beauty service that scans the surface of a customer’s face and assigns it a Color IQ reference number – revealing a scientifically precise lip, foundation, and concealer match.
  • Sephora Beauty Studio – digital workstations that allow customers to learn how to execute specific and #ontrend makeup techniques. Need to brush up on your cheekbone contouring or ombré lip? Customers can take makeup classes taught by experienced associates which are then supplemented via video tutorials in-store.
  • Fragrance IQ kiosks which are essentially Sephora’s version of “Smell-O-Vision”, a touch screen with a fan that lets consumers smell the scents — everything from floral, to earthy, to sweet — categorizing fragrances based on these adjectives.
  • The use of beacon technology, which immediately recognizes Sephora app users when they walk through the door. These small devices communicate with smartphones and tablets to deliver real-time marketing to registered users. This technology provides customers who opt-in for updates with prevailed alerts, an in-store map, promotions, exclusive loyalty offers, and their product wish list. This is an attempt to tackle the challenge of “fast walkers” by developing and enhancing their consumers omnichannel experience.
  • An augmented reality technology, Sephora Virtual Artist, which can be used  through both a mobile app and in-store kiosks. It allows customers to try on curated full-face makeup looks or just specific shades of cheek, eye, and lip makeup in real-time. Additionally, customers can then post pictures of themselves with the various makeup styles, tagging the products they used for a specific look through Sephora’s online “Beauty Board”. Again we see this seamless integration of an in-store experience and a consumers online presence. Voila! – the very foundation of experiential retail.

[NOTE] this type of technology is not entirely revolutionary – many other makeup conglomerates have been harnessing the power of AR to allow customers to test their products as well. L’Oréal started the trend with their IOS application Make-Up Genius – which scans a consumers face through the front camera and then virtually allows them try on looks from a beauty catalog in real-time. Its fiercest competitor in the prestige beauty industry, Esteé Lauder closely followed suit. It partnered with YouCam, (more or less Make-Up Genius with a different name), altering the mobile application’s user interface for big-screen kiosks, and combining it with its consumers in-store shopping experience. London based brand Charlotte Tilbury was not far behind, and installed its trademark “Magic Mirrors” in their flagship brick-and-morter store in Westfields, London last year as well.

Cosmetic companies seem to be the one industry re-investing in more physical stores, capitalizing on their potential to establish brand loyalty, rather than seeing them as immense capital expenditures.

This is where the mindset needs to shift – the retailer of the future will have to tighten its relationship with the consumer through innovative brick-and-mortar. VP of Sephora’s Innovation Lab Bridget Dolan emphasizes that, “Consumers are looking for retail stores to be creative spaces. They are looking for experiences. Digital is a critical element in retail — however, it is not just for the sake of adding new, cool technology”. The successful brands are the ones who foster a customer-centric model – understanding the customer journey, and transforming it – making it simpler, quicker, and more exciting – all with the right tech. This is what these retail “stores of the future” aim to do.

So I hope I have convinced you that we haven’t reached doomsday just yet – retail and more specifically brick-and-mortar is alive and well – companies just need to be brave enough to strategically innovate in this space in order to stay afloat.

And with that I leave you with this utterly profound and timely quote:

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Sources:

https://www.cnbc.com/2017/08/03/retails-not-dead-and-physical-stores-still-matter-goldman-says.html

https://www.elcompanies.com/who-we-are

https://www.translatemedia.com/us/blog-usa/cosmetics-industry-embraced-technology/

https://www.alliedmarketresearch.com/cosmetics-market

https://www.sephora.com/color-iq

https://www.lsretail.com/blog/5-innovative-brands-revolutionizing-retail/

https://play.google.com/store/apps/details?id=com.cyberlink.youcammakeup&hl=en

https://www.sephora.com/beauty-workshop

https://www.nytimes.com/2017/05/11/fashion/sephora-beauty-retail-technology.htm

https://www.guided-selling.org/digital-technologies-beauty-sector/

https://itunes.apple.com/us/app/makeup-genius/id871897775?mt=8

https://www.sephora.com/fragrance-finder

 

 

 

9 comments

  1. chloeshepard18 · · Reply

    Loved this!! . I completely agree that retailers need to create an experience for customers in the store. Sephora definitely does a great job of this! Their upgrades in technology make finding new products extremely helpful. I recently read an article that attributed Apple’s success to the same thing. Being able to utilize the products and the experts draws customers in and increases sales.

  2. hacketju · · Reply

    Great post! I found this article to be extremely relatable! Going to the store can be such a hassle or out of the way and making more of an experience would definitely make going worth it. With online ordering becoming increasingly easier, store fronts need to create more of an incentive on coming in. I also really liked your view and optimism regarding physical stores. I feel like you incorporate the point we talked about in class a couple weeks ago: We should be working alongside new technology not against it.

  3. Really interesting post! The new technologies that make up companies are implementing seem like a very innovative application of these technologies even if the technology itself isn’t new. I wonder if the beauty industry is surviving in spite of the general struggle in retail because these are products that people usually need to buy in person. Make up seems to be a difficult product to buy online because while you might know your dress size (and you can always return it if you don’t), you don’t know exactly how that shade of lipstick will look in person (and once you use it you probably can’t exchange it). It’s cool to see how these companies are using their unique position in retail to their advantage.

  4. mattwardbc · · Reply

    Very well written post, great job! I definitely agree with Fassler’s quote, companies need to pivot to provide what their customers are looking for. Obviously, Apple still have a strong retail experience and have capitalized on it even before the e-commerce boom, making it a vital element of their brand and asset to those looking to purchase and service Apple products. Companies need to find ways to make retail installations an asset to consumers in the purchasing process.

  5. whitmcdonald2 · · Reply

    Awesome post Taylor- I’m excited for your presentation! I couldn’t agree more with you. There is something to be said about trying things on, feeling them, sizing things up, etc. I know there are products in place like StitchFix, Amazon Wardrobe, etc that we talked about in class, but I’m still leaning towards the experience. Of course there will be days where I would rather just have things shipped to my door but I will always appreciate a great day walking down Newbury or in Cherry Creek back home because of the experience I get. Some might disagree with me, but I also believe shopping is a social activity too and shopping online doesn’t provide that and these technologies in store will only enhance the great things about a shopping day!

    Also, thanks for this Sephora tips- definitely going to go try it!

  6. Really interesting post! This is definitely something that’s been concerning to me – the last thing I want to see is empty storefronts in my neighborhood and city. It’s interesting to learn about how companies are innovating and getting people to keep coming in. I do love trying things on/checking things out in the store and getting something the same day! But still, companies need to offer more to compete with Amazon Prime/Prime 1-day/Now, and I appreciate the case study of a store I love, Sephora. I’ll admit I’m generally an online shopper for them, but knowing what they offer, it sounds like I need to try a little harder to get to the actual store. Thanks for the tip :)

  7. Hilary_Gould · · Reply

    Great post! One company that I’ve found very interesting to follow (partly because my roommate is working for them) is TJX Companies. It amazes me, but they’re a company who has continued to be crazy successful. The craziest part– they don’t participate in ECommerce for 2 of their main businesses– Marshalls and Home Goods. Their success is another great example for your argument that retail is not dying, it is simply undergoing a transformation. TJX has been so successful because they are a discount model where their inventory is constantly changing and varies store to store. Although they don’t have a high tech experience like Sephora, they’re still providing a valuable experience that brings customers to the store in this digital age.

  8. juliabrodigan · · Reply

    Great Post! I totally agree with you that not all stores will close down, but I do think that a lot of clothing stores are going to shut down to save on rent and focus on their online platform. Personally, I buy about 90% of my clothes online. It is more convenient and there is a greater variety (also- I hate shopping/trying on clothes). But, I do think that a lot of other stores – such as Sephora, CVS, etc – will stay open. I think that it is very important that they stay up to date on technology and adapt their businesses to meet the changing trends of their customers. It will be crucial for their survival.

  9. mgiovanniello · · Reply

    I read your blog on Monday but didn’t get a chance to comment until now – great post! I’m still taken aback at the stat of 85% of all retail transactions still occurring in retail stores. I think the shift to experiential shopping is very beneficial for the customer, and stores will quickly see the value in this model as well. Kudos to Sephora for being an early mover in this regard. Great presentation on Wednesday as well!

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