Why Most Retail Stores are Destined to Fail

A large portion of the stores we see today in our cities are very likely going to close in the next few years. In New York, London and other major cities this process has already started and the percentage of closures could be around 80%.
Although the enormous challenges currently facing retail are frightening, they provide some very exciting opportunities through which the next generation of brands can thrive.
Here are four trends in consumer behavior, what they mean for the future of physical stores, and how you can adapt. It’s about experience and individuality.

Retail stores and MP3 music

The shift that happened in the music industry in the last 10-15 years is now happening in retail and the consequences are dramatic. Before Napster, Pandora, and Spotify, musicians were making all their money selling albums. Today they're giving away their music for free. Instead of selling the product, they play live concerts and sell experiences. Retail stores are undergoing a shift of the same proportions and incumbent retail brands are at risk because they have been doing just one thing for the last fifty years: selling a range of products rather than an experience. When I was a kid there were only a few brands. You didn't have many options; if you needed a pair of pants you knew where to go. That was the offer, and you were happy with it. The situation is different today. You have thousands of different options, both in physical stores and in the digital realm. The offer has exploded in a way most of us did not predict and, for the most part and probably because of it, the quality of products has also fallen dramatically. Here’s an example: Imagine that you are going to a large retailer to buy speakers. They are all lined up on a shelf; one is pink, one is black, one is white. You might visually like one better than the other but what about the sound? You can't play anything on the speaker. Even if you could connect your phone to it, the music that comes out is horrible because the space has not been designed to play music. It’s been designed like a warehouse to display as many products as possible. The choice is overwhelming and the experience sucks so you probably end up not buying anything - going home disappointed and exhausted. Now let’s say that you go to a Sonos store instead. There you will find several little spaces designed to feel like the living room in your apartment. You listen to your music and the quality is unbelievable. Why? Because you are surrounded by a small selection of products that are easily personalized to fit you. You have the right materials, a nice chair to sit on, you are playing your own music, and you basically have everything that makes you feel like you are in your home. Sonos understands the importance of the experience. At the end, it doesn’t even matter if you are buying the speaker there, or later at home on your phone or computer. The experience has had an impact on you and you will not forget about it. You can't find that experience in a traditional store selling hundreds of products and that’s why I believe they are on their way out.

The digital and physical process of purchase

The trip to the store in 2017 is now a multi-channel journey that involves both digital (online research and targeted advertising) and physical (being in the store, trying on, and purchasing). The digital: You might find a jacket you like on Instagram. You click on it, then you go to the brand’s website. You spend a few minutes on it and then you move on. A week later an ad pops up on Facebook for that same jacket (Facebook helps the retailer know you were interested in it and sends you personalized ads). You remember what you saw and now the ad takes you to a blog where there are people wearing the jacket - perhaps a celebrity you admire. You think "Well you know what? I like this jacket". But, it’s still not enough to make you buy it. So you find a store nearby, you enter the store and you try it on. The physical: Now the magic happens when you are wearing the jacket. In that moment when you have the suede against your back and the tight fit of the sleeve on your wrist, you are feeling it like a rockstar. You are Bono, you are Beyoncé, and that happens because the store has been designed specifically and in a unique way for it. As a brand, your customers have to have an experience that will blow their minds. The store is still the best place to do that, and if the sale happens online days later it doesn’t matter. When your customers are in the store, they should feel your brand with all their senses. It’s not just the jacket: the music has to be amazing. The floor, the walls, the lighting, the shelves, and the smell should all work together to leave a lasting impression. Again, it’s about the experience.

The physical complements the digital

Up until a couple of years ago, every client was complaining about the internet stealing their market, because they were looking at two separate channels. "I'm selling the TV in the store, but if you buy it on Amazon it's 20% cheaper." How do you compete with that? You can't. The truth is you are not going to be able to sell that TV if you are competing with the market online. The online market will destroy you. But at the same time there are many retailers that were previously only online - who are now opening stores or showrooms (Warby Parker, James Allen, Harry's, Amazon, just to name a few). As they experiment with stores in a small number of cities, they find that their online business is up to four times bigger than in the city that doesn't have a physical store. It actually makes perfect sense. You might have amazing ways to try products on with pictures and virtual reality effects, but touching them in the physical store is a different experience. What this proves to us is that physical stores turn word of mouth into sales, and that consumers respond to physical experiences. Designing experiences, rather than stores with hundreds of products, improves foot traffic and online sales and retail revenue. At Sergio Mannino Studio, we focus on the 'Phygital': the way that the physical experience can complement the digital. Digital word of mouth brings the consumer to your store. Then the physicality of having an amazing experience that only a store can provide will allow the next generation of retailers to thrive.

Consumers are individuals and they want fun

Many large brands make the mistake of replicating the look and feel of small independent stores while still focusing on selling a large range of products. So often they miss the entire point of why customers go to the independent designer. Young consumers shop independent because it's cool, it's a specific experience, and it's not about buying a product - it’s about fun. This is the challenge for large retailers. Millennials - the majority of our consumers - want to have fun. They're not interested in just buying another pair of jeans, or another jacket for the sake of it, or for the sake of the brand. In the 80s and 90s, consumers wanted to wear the Gucci belt and jacket because they wanted brand identity and by buying that, they belonged to a specific group. Now, that ethos is on its way out. Independent designers produce limited quantities of clothing that are beautiful and unique. When you buy their clothing, nobody else has it. It’s about individuality. How do you turn Macy's into Coachella?

Wholesome Cuts is a brand new butcher shop in Williamsburg, NY. Customers can track the "history" of the meat online.

The significance of the product’s history

It is also clear that attitudes towards the environment and social justice have changed the way we relate to brands. At this point, the Made in Italy, Made in the US, or Made in China brands – they have no meaning. You have to be able to enter the store, scan the label and the item – and find out everything about it.

The large brand is not going to tell you anything about the history, but, for example, this small independent fashion designer from New York can write on the website:

“I found the fabric from this particular producer, who sourced the cotton in this region. Here are the pictures of the people who outsourced the cotton. They're dyed in this other town, and here are the pictures of that. I bought that fabric from there, and here’s the person who manufactured the clothing.”

Here are the manufacturers’ stories, here's how much they make. It’s evidence that they're not kids in Indonesia or China being paid a dollar a day; they’re being treated and paid fairly.

This is another reason individuality is important: it opens up a huge market for brands who can explain the exact history of the product and express their uniqueness.
People want to know the whole history of the product.

In conclusion: adaptation

Consumers’ desires are changing, and retail environments have to adapt to this. We need to focus on the consumer’s experience in the atmosphere of a particular brand, in both the physical and the digital. We also need to prioritize our individuality, and the individuality of the consumer.

In doing so, you can have a lasting impact on the people who engage with your brand and their memory will keep the magic alive.

Regardless of the transformations shaping the current climate, clients are already coming to us with very interesting ideas and a clear vision of what they want to achieve. Independent retailers, in particular, are leading the way because they are more agile than the large ones. They approach our studio because they understand that simply selling the product isn't enough anymore. They need our help to make their new location a place that will provide a unique experience and the interiors of the stores are the perfect vehicle to express it and to reflect the brand’s values. At Sergio Mannino Studio, this is our forté.

Sergio Mannino