Analysis

The new old model ... Gabby Brooks poses in the window of Gorman in the Strand Arcade.

The new old model ... Gabby Brooks poses in the window of Gorman in the Strand Arcade. Photo: Ben Rushton

As e-commerce, and technology generally, continues grabbing the headlines, the imagination of shoppers, and retail market share, a lot of retail industry gurus have reached consensus about what store-based retailers and shopping centre operators need to do to shore up their relevance.   

It’s to offer a superior shopping experience. 

Part of a superior shopping experience is service of course, and part of it is the look and feel of physical stores, making them contemporary and experiential not only with whizz-bang technology but with world class visual merchandising, fitouts and design features that make the customer wonder why she ever shopped on the internet at all.

Question is, why are so many retailers still sitting on the fence and not making the badly needed investments in their stores?

Amanda Young is co-owner of Melbourne-based consultancy Storepro with her partner Shane.  Storepro specialises in working with retailers on store concept development, including design and fitout.  Ms. Young is concerned that some of the large Australian chains are not doing more to improve their ability to deliver a great in-store experience.

But she does have an explanation.

She thinks that many retailers in Australia are currently in a state of paralysis when it comes to capital investment on physical stores.  This is partly because of what they see as weak consumer fundamentals and partly uncertainty about what the future holds for physical retail real estate.  Fearful of placing a bad bet, they aren’t doing much of anything at all.

Amanda Young puts it this way: “Since the last Government stimulus package we have seen a gradual decline in new designs and a reluctance to invest in innovative Australian concepts. Many retailers are facing financial uncertainty and uncertainty over e-commerce.  But the more forward- thinking ones recognise that the retail world as we knew it is fundamentally changed forever. It’s not simply online versus physical store; it’s about how the customer experiences your brand at every touch-point and the physical space is as relevant now as it ever was.” 

For a business like Storepro, the reluctance of a large swathe of its most logical customer base to move forward with improving the store experience might ordinarily be worrying.  But Storepro has compensated by working with online retailers on their first concept stores, and by expanding the business in some fresh directions.

The new directions include exploiting a more diverse expertise in retail business, since both Amanda and Shane Young have held senior roles for large Australian retailers.  They have also established a broader geographic presence.  For example, the Youngs have latched on to the fact that US retailers migrating to Asia have a notoriously poor record for understanding and adapting their business model to Asian cultures.

“Our role is evolving as our international clients expanding into Asia find they need more than just language translated.   Assuming that the customer experience is going to be the same in every culture just because the store looks the same is a frequent mistake.  And the importance of technology and interactive media in stores is even more important in countries like Korea, Japan and parts of China. Luckily, we’ve been able to adopt the role of cultural translators after years of experience manufacturing in Asia for retail clients.”

The nature of capital investment by retailers is, of course, no longer what it was.  In mature markets the emphasis has switched quite dramatically in the past few years from new store openings to remodels of existing stores and building e-commerce platforms. 

And the store remodels themselves will increasingly take on a technology component.  So far these technology investments are a small fraction of overall capex, approximately 10 per cent in the US for example.  However, this will change as retail shifts over to the omnichannel model; significant investments will be made to help retailers expand the functionality of their stores from the traditional point-of-sale role to new roles as part-theatre, part-showroom and part-warehouse.

Remodels and new concepts still rely heavily on non-technology elements though.  But currently in Australia, while some retailers are busy creating 21st century stores, many appear to be making do with late 20th century ones. 

Companies like Storepro are brewing the coffee – now the retailers just have to wake up and smell it.

Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com

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