“Why would you spend your free time shopping, when you can do it online on your lunch break at work?” asks James Burt, director in the retail team at GVA.
For a growing number of retailers, the answer is to offer customers a unique experience – anything from taking a yoga class in a sportswear store, to seeing your handmade glass vase being blown or trying out a tech retailer’s latest virtual-reality goggles. Most hope this will translate into in-store sales. But some are taking a different tack. They are opening experiential ‘stores’ that sell very few or even no products in a bid to create brand loyalty.
How prevalent will such stores become? And what do landlords need to do to adapt to the new experiential retail landscape?
The retail industry has always offered its customers some form of experiential retail, of course. “We have seen it on a basic level for years – at Christmas, shopping centres would bring in clowns and magicians to help parents keep their kids entertained,” says Burt.
Barr cites The North Face’s Regent Street store, which once housed a simulator in which customers could test out products in different weather conditions, and Vans’ Leeds store, which incorporates a halfpipe for customers to skate on. Burt, meanwhile, highlights Lush’s flagship stores, some of which have in-house spas and listening stations where customers can hear records from the cosmetics brand’s in-house record label.
At the extreme end there is Samsung, which has a store in New York’s Meatpacking district that does not sell a single product. Instead, visitors can try out virtual-reality headsets, attend events at its in-house auditorium and look around its gallery, which hosts regularly refreshed ‘content experiences’ involving art, music and culture.
“You’re going in there to connect with Samsung as a brand,” says Richard Scott, director at Nash Bond. “If they are going to sell as many phones as Apple they need something to sell with – and this gives Samsung an edge.”
In the UK, he says audio brand Sonos’s Seven Dials flagship operates along similar lines, having set up ‘micro apartments’ where customers can sit in an armchair and stream music from their phones – although it does have speakers available to buy.
Experiential stores are a natural fit for premium brands whose products have a performance element that shoppers can test out. “It is probably premium lifestyle retailers and upwards that will do it because they have got the margins – you won’t find it that much among value-led apparel retailers,” says Barr.
Scott says experiential stores are attractive to retailers that trade on quality or heritage. “You can see a pair of Nike trainers in Sports Direct, but the brand cannot get across any concept of their quality – which is something people are willing to pay for,” he says.
The strongest demand for experiential stores has been in central London so far. “It is still focused on flagship or destination locations,” says Matthew Ogg, policy adviser at Revo. “But there will be a trickle-down effect and the next layer will be small towns.”
“A lot of retailers say they are going to do experiences, but then they push the sales element too strongly”
Richard Scott, Nash Bond
However, others are not so sure that the experiential retail concept will translate into secondary locations, where budgets are smaller and footfall lower. “Trying to figure out the direct translation between sales and these experiences is not always easy,” Ogg adds.
There is a danger that customers will experience the store, then buy the product online from a different retailer and at a cheaper price – but some say that doesn’t always matter. “A lot of retailers say they are going to do experiences, but then they push the sales element too strongly,” says Scott. “The ones that succeed are not always looking to drive a super-high profit but achieve a different goal.”
Primarily, this goal is branding or marketing.
Lara Marrero, head of retail at Gensler, which has designed many experiential units, says: “Our clients used to be facilities managers or developers, but now there is a shift toward chief marketing officers looking at how to get people in store. There is less of a focus on capital expenditure and more on activation strategies and flexibility.”
Clearly, a major shift is going on among retailers – one that landlords are becoming increasingly attuned to.
Indeed, many are encouraging retailers to provide experiences to drive footfall. These include Cain Hoy, which is developing a major, mixed-use scheme at Islington Square, that will include 170,000 sq ft of retail and leisure. “We are looking at every potential occupier and asking what they are going to bring to the party to make shoppers come to Islington Square rather than buying from them online,” says Neil Barber, the scheme’s leasing director at Cain Hoy.
‘‘Experiential retail has made things a lot more complicated, but it’s the way things are going”
Neil Barber, Cain Hoy
The scheme will include a boardwalk, a cinema, a gym, public art and a farmers’ market. “Experiential retail has made things a lot more complicated and challenging, but it’s the way things are going. If you don’t offer these things, you’re going to really struggle,” Barber says.
The need to incorporate experiential retail concepts into new schemes is a priority for other developers, too. The recently announced Heart of the City II mixed-use scheme in Sheffield – a joint venture between Queensberry and Sheffield council – may only be in the earliest stages of planning, but experience is already on the developers’ minds.
Its unique selling point will be Leah’s Yard, a courtyard that has been home to artisan designers and makers. Queensberry wants to reinvent this for modern customers. It will also include a food hall, which could be used for retailer events. “We want to create experiences you can’t create in shopping centres – public space that everyone can enjoy,” says Stuart Harris, Queensberry’s commercial director and co-founder.
Queensberry also envisions rock climbing walls and a ‘fourth facade’ on the rooftop, which could include beehives, a herb garden or a public park.
For existing centres, experiential retail can be a good way to fill up excess space – a problem many landlords face. “Our clients are reducing their retail space by an average of 22%, and because they don’t need to fill the space they have with as much stock [due to online shopping], they need to think about how to use it,” says Gensler’s Marrero.
However, landlords not only need to be flexible in the lease terms they offer, but also in the way such space is configured. “Retailers that have flexible space find it easier to keep things fresh, so landlords have to think more carefully about how to use their space,” says Revo’s Ogg, citing high-end cycling brand Rapha’s combination of bicycle shop, clothing shop and café bar at its premises in Soho and Spitalfields. “The space required for that is quite different from the physical space retailers would have needed 10 years ago.”
More and more, new models are likely to hit the high street in the coming months and years that eschew the traditional retail environment in favour of a new format focused on experience.
“You are buying the product, but also the story behind that product, which is something the high street and shopping centres have struggled to provide”
John Milligan, Milligan Retail
One example is Creative Trade, being brought forward by the former Camden Lock Market owner Milligan Retail, which will provide workspace and retail space for independent creative businesses in a handful of UK schemes .
The idea is that customers will be able to see products being made and meet the people who make them. “We are not competing with people who want to go shopping – it is for people who want to feel good about their day,” says John Milligan, chief executive of Milligan Retail. “You are buying the product, but also the story behind that product, which is something the high street and shopping centres have struggled to provide.”
Another such model is Big Box Co, a South African concept based around flexibly leased, modular units aimed at entrepreneurial businesses, including retailers, which is now seeking its first sites in the UK. The company’s ethos is to encourage interaction between businesses and their customers. “We are pack animals and we need connection,” says Big Box Co chief executive Murray Clark. “Shopping centres by their nature are quite clinical and it’s been about fulfilling the needs of retailers, rather than customers.”
Thanks to the rise and rise of experiential retail, a keener focus on customer needs and a departure from the identikit shop or shopping centre could well translate to ringing tills.