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How Immersive Environments Redefine The Modern Retail Experience

Amid plummeting revenues, hopeful retail brands are investing in emerging technologies to try and breathe new life into their shopping experience

Evan F.P.
July 30 2018

Traditional US retailers are in crisis mode.

The first three quarters of 2017 saw the close of over 6,800 stores, more than twice the number scheduled to open. Brick-and-mortar retail dynasties like J.C. Penney and Macy’s are shuttering thousands of locations as profits fall and once-resilient business models are proven unsustainable. Big box chains seem to be getting hit the hardest, with Sears, Target, and Toys ‘R’ Us announcing hundreds of closures, putting thousands of jobs at risk.

It’s all part of an ongoing phenomenon that commercial analysts have dubbed the “retail apocalypse.” The shift has been attributed to a confluence of market trends, including the rise of e-commerce giants like Amazon, which alone accounted for 4% of all US retail sales in 2017. Forward-thinking brands like Walmart made e-commerce investments early enough that they’ve been able to safely navigate the transition into a now largely digital retail world. Others, however, are searching for alternative ways of breathing new life into struggling business models.

Affordable IoT solutions and mobile’s omnipotence have afforded retailers one final chance at redefining the role brick-and-mortar shopping plays in commercial life. Most are looking to prevailing tech trends for inspiration in the development of new, immersive retail experiences that blend the physical and digital worlds. These brands hope to offer convenience and time savings on-par with digital solutions while delivering customers a new and exciting take on traditional commercial pastimes. There’s a lot riding on their success, and at least two major retail brands have started seeing noteworthy returns on their immersive retail investments.

Interactivity has always been essential to experiential toy retailer Build-A-Bear’s unique offering.  But it has taken that philosophy to new heights in recent years, maintaining brand relevance and sustaining profits amidst a declining retail market. The brand’s new “Discovery” store format was at the center of a two-year modernization program that began in 2015. Management consulting firm CapGemeni explains how “this program brought touch and object and gesture recognition into the retail space. Microsoft’s Kinect technology was used for games, enabling customers to interact with the latest products, and touchscreen kiosks were introduced to enhance each step of the toy-making process.” It was a bold choice considering the market climate, but performance numbers suggest the initiative may have paid off.

In a press release, Build-A-Bear explains how its new immersive store formats led to “double-digit growth compared to our heritage stores” and helped the brand make “steady progress toward our stated long-term sales productivity goals as we achieved the highest average transaction value in our history and highest units per transaction since 2008.” The company’s stock value reached a high of $22.58 immediately following project completion, the highest in seven years. It’s a promising sign for the efficacy of immersive retail, but skeptics could fairly point to the fact that the toys market is more conducive to digital integrations than others. A number of high-end fashion brands, however, are betting they’d be wrong.

Recent years have seen luxury clothing retailers like Ralph Lauren and Nordstrom partner with emerging IoT shops like Oak Labs to find creative ways of using immersive technology to augment and improve the shopping experiences. One immersive design tactic starting to gain traction is “smart fitting rooms,” which combine RFID and digital signage to deliver customers the convenience of e-commerce with the immediacy of brick-and-mortar. Customers that bring clothing items into these rooms are presented with an array of pairing options, lighting selections, and alternative colors or cuts that can be delivered by service associates at the push of a button.

Though still in their infancy, these sorts of immersive shopping environments are already generating returns for their investors. By transmuting physical customer behavior into actionable data, retailers are able to cultivate insights that have until now been underexploited. Oak Labs CEO Healy Cypher explains, “I can tell Ralph Lauren, here’s a jacket that goes into the fitting room frequently but has less conversion than other jackets. The merch team should look at this — may be the fit isn’t right but the aesthetic is. Data like that can fundamentally change how retailers run their business.” Few retailers have been willing to share hard numbers, but handbag brand Rebecca Minkoff’s CEO noted in an interview with Digiday that since integrating the fitting rooms, “We’ve seen a huge sales boost in clothing. We’ve made triple the number of clothing sales than we thought we would.”

As exciting as these new solutions are, it’s still unclear as to whether or not that any of these innovative brands have found the silver bullet for their market woes. In the three years since their modernization project, Build-A-Bear’s stock price has fallen to a third of its initial value. Nordstrom and Ralph Lauren, on the other hand, while not at all-time highs, are averaging respectable revenue numbers that suggest shoppers still find value in their products and established shopping experiences. Amidst it all, one thing is clear: modern retailers need to invest in the technology necessary to develop new and exciting shopping experiences for their customers, or risk market irrelevance in the near term.

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Evan F.P.

Evan is a writer, educator and tech marketer. As content director at Fluid PR Group, he helps businesses tell their stories to the world. He lives in Toronto with his wife, their son and an occasionally well-behaved Australian Shepherd named Islay. Follow Evan on Twitter

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