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The evolution of luxury retail stores

21 March 2023

This article first appeared in WARC written by, Steve Lidbury, Executive Creative Director, Imagination London.

When writing about retail, the death of the physical store has been much touted for over a decade. While some high-street retailers have been lost along the way, it is far from dead – changed yes, but not dead. And this is the case across the spectrum, from luxury to budget and everything in between. Of course, physical retail faces challenges; the high cost of real estate and shoppers migrating to digital means retailers must redefine the purpose of their physical retail proposition and brand presence.

This requires a holistic view – centred more on the human perspective than the business perspective. By diving into shifting consumer behaviour, we can identify how retail needs to respond. And there have been profound shifts in how people behave. From world-generated social isolation – working from home, restaurants closed, shops being shut and a greater focus on local environs – to our collective re-emergence and adjustments to more hybrid living. But the central need for human social interaction remains.

Brands need to start by asking: what are the things that create an emotional connection with their audience? Because once an emotional bond has been forged, it’s very hard to break. Establishing an emotional bond through a holistic retail experience – everything from the tone of voice of staff, product selection, services on offer and brand communications – builds a stronger customer relationship. People are then more likely to buy, more likely to recommend and more likely to forgive mistakes – it builds long-term loyalty, which creates lifetime value for both the brand and business.

Many of the elements feeding into the evolution of retail are the same for luxury as for anyone else – but some are specific to the expectations of the high-net-worth shopper. And moving forward, what we consider luxury could change. We need to think beyond interiors and store design to the service experience and not just meet, but exceed, expectations – providing customers with what they want before they know they want it. For instance, in China, being in a beautifully oxygenated store may be seen as a luxury; or, in the UK, Stella McCartney’s store has been sustainably built – from the construction to the air conditioning.

But when considering luxury bricks-and-mortar retail, the starting point is to no longer think about bricks-and-mortar in isolation. It is one part of the retail experience which now includes digital, virtual, metaverse and human. How are all these ‘Experience Realms’ designed and used to work in concert? So much of the world is mobile-first and the next generation of luxury consumers are growing up in both physical and virtual worlds simultaneously.

The evolution of luxury retail can be considered in five approaches.

  1. From hub and spoke to a symbiotic relationship

The old model of physical retail was the hub and spoke – a central flagship hub with smaller retail outlets spreading beyond. But now retailers need to look at their network of physical spaces as a symbiotic ecosystem – not static, changing to different markets and locations based on what that audience wants. Through this lens, businesses can design better, and more unique retail and service experiences.

For instance, we worked with Rolls Royce to create a retail experience beyond its dealerships. Its new model, Dawn, was launched and showcased in luxury mansions around the world – starting in LA. The cars were positioned in £40m houses – the storytelling, the engagement, the messaging and the content were all within the context of these aspirational lifestyle settings. This was replicated around the world before the cars were then brought into the dealership market.

So, new formats of physical retail have different purposes. A different proposition is designed around an innate understanding of the audience mindset, with a focus on how to create value for them. By creating more valuable outcomes for the shopper, it delivers more valuable business outcomes for the retailer.

  1. From omnichannel to monochannel

Businesses may still talk about channels, but Gen Z luxury audiences don't think that way. They are platform- agnostic; they live simultaneously in the physical, digital and virtual worlds. The idea of online and offline is meaningless to these digital natives.

Multichannel progressed to omnichannel, and multichannel was coined by the generation who grew up without a mobile phone – when online meant a desktop at home. Omnichannel centred on adding more to that online world, trying to get consistency across consumer touch points – it was very business-focused.

But today’s luxury audiences live in a monochannel world – a mobile-first mindset. So, luxury retail should be designed for simultaneous physical and digital interactions – and QR codes can help enable that.

For instance, you could have a luxury retail space – with a select range of physical products to maintain that premium, quality presentation but also incorporate a screen where QR codes can give shoppers information and content on a far wider range of products. This would ensure a familiar user experience, whether physical or digital. A monochannel mindset is audience-centric, not business-centric.

  1. From static to rhythmic

Moving from static to rhythmic retail creates flexible shopping to respond to changing business and consumer needs. This is more evident outside of the luxury sphere currently, but it shows where luxury should be heading. When Levi's has a new product innovation, it’ll create a transient space for experimentation – to test the new products with a particular audience before full production.

There were elements of this in how Gucci responded to the lockdown. It quickly launched its virtual service for VIP clients – creating a new physical space with a beautiful product display but designed more like a studio set to be viewed and experienced on-screen. Via a live video call, the host presented products to clients by talking directly into a live, mobile camera. It created more of an intimate moment to nurture a personal relationship not often possible in virtual formats.

Rhythmic retail and rhythmic formats are less static, involving a more dynamic collection of spaces with diverse experiences, ones that often better understand the local audience.

  1. From data collection to the algorithm of value

Great retail relies on data collection, analysis and insight. But too often it’s cynical – purely to garner customer information to help the business sell more products. But customers see through this and are fed up with such overt tactics. Data collection based purely on the business’s benefit creates an adverse relationship. Instead, customer data should be collected for the customer’s benefit, with businesses being clear on how they use it.

For example, Nike’s Melrose Avenue store in LA has been designed based on data gathered through the Nike Run app on the store’s catchment area. Nike’s starting point was to create value for its customers, rather than an explicit commercial advantage.

Defining what value means in a luxury context should revolve around service, engagement with the brand narratives and aspiration. This could manifest in an activation such as an exclusive event, fashion show, or limited product line – through sophisticated data use, the client feels seen, and special and welcomes unique offers. The data is used for a lifestyle connection first, and then if a sale follows, all is well and good. But it was the emotional connection that mattered first and that allowed the brand to create retail formats that are in tune with its audience’s desires and shared affinities.

  1. From collaboration to integration

Brand collaborations are familiar territory, often involving one-off product lines. But for luxury retail, moving from collaboration to integration provides more distinction. For example, Louis Vuitton’s work with the artist Yayoi Kusama has moved more firmly into integration territory. Indeed, the balance of the LV brand and Kusama almost tips in favour of the artist – LV sits within the Kusama world rather than the other way around.

And retail does not mean purely selling spaces. At London Fashion Week, Moncler elevated partnership collaboration with its Art of Genius showcase, where it collaborated with seven different people – each creating their own space in true integration.

Integration is particularly relevant in the luxury market because of the bigger budgets available to brands to support this activity, but it also allows them to extend into areas – such as leisurewear – and reach new audiences.