Design Thinking in the Times of Retail Slowdown
- May 25, 2018
The granddad of retail, Sears is shutting down stores to redress its falling sales, which are down 45% since 2013. Foot Locker is shutting down 110 stores in 2018, and soon, we might be in a world without Toys”R”Us. In Manhattan, there is only one tiny retail shop that sells drones along Broadway from 57th to 48th Street; the street is otherwise dotted with bank branches, restaurants, theaters, pharmacies and a few tourist shops. And there are empty spaces touting “superb corner retail opportunity” signs.
The “signs” are everywhere. Brick and mortar retail businesses are going under. Shoppers today don’t have incentives to drive to the store, and are happy clicking online deals.
A combination of factors is responsible for this situation, and retail businesses are employing various strategies to reinvent themselves. However, there is no one-size-fits-all solution, and every retailer must find its own transformation journey. Many retailers are turning to Design Thinking as a solution to help rebuild their stores and their brand.
The principles of Design Thinking include analyzing your business to gain insight into building your next great product or service. It is as much about introspection as it is about rolling up your sleeves and getting down to business. It is as much about creating the art of the possible as it is about the art of the doable. It’s about humanizing business potential.
Design Thinking also demands a cultural shift that starts small, grows big, and fundamentally changes the organizational fabric. Design Thinking not only changes the way an organization thinks; it changes the way it conducts business. Every interaction with the customer is rethought, and every process is analyzed in detail. How should the entrance to the store look? How many aisles do we want a shopper to move through until he or she reaches the checkout counter? How should a store employee greet a shopper? Design Thinking provides answers to many of these questions. It allows the enterprise to articulate critical questions to the business and seek the right question, to eventually get the right answer.
Design Thinking at Work
Some retailers are going down the path of Design Thinking and have begun experimenting with new products and changed spaces. Barnes and Noble recently expanded its Barnes and Noble Kitchen concept, which brings a casual-but-upscale dining experience to its bookstores, in Plano, TX. (In fact, the plancha-cooked salmon was among the finest I have enjoyed.) This store covers 10,000 square feet and seats 113 in the full-service restaurant and patio.
This initiative equates two very simple pleasures of life: books and food. While several of Barnes and Noble’s 632 bookstores across the U.S. have Starbucks counters that offer pastries, sandwiches, coffee and free Wi-Fi, the Kitchen, offers a broader menu, freshly-made food and quality of service more likely to increase foot traffic to the store.
Instead of expanding its footprint to increase profits, Target is rethinking its operations and is shrinking its spaces. The company plans to open small-format stores in New York's Upper East Side in a bid to run 130 such stores by the end of next year. This format will help them reimagine the digital and physical experiences of their customers. The company believes that a 40,000 square foot location will be more profitable than its larger 100,000 square foot stores by helping them better interact with their customers.
And, of course, we would be remiss not to mention Apple, the gold standard in retail business. With design deeply embedded in its organization, Apple considers its retail store as its biggest product and is now the world’s most profitable (retail) business. Apple stores get more than one million visitors per day worldwide; their retail stores earn a record $58 per visitor, and their sales per square foot is the highest in the world at $5,546 per square foot, compared to top gasoline retailer Murphy USA at $3,721 and Tiffany & Company’s $2,951. One can buy an Apple product online and pick it up from a local store on the same day and save shipping costs. Consumers can walk into the Apple Genius Bar for issues they tried to resolve online and get immediate and seamless tech support. The tight coupling of online and retail store experience has scored a win-win for the retailer and consumers.
Even as stores are shutting down, retailers will continue to experiment and entice the webroomers, the showroomers, the first-time shoppers and the loyalists. And Design Thinking will be a key enabler in this new venture. Let truth be told — what can be experienced in a store cannot be replicated elsewhere. Humans, after all, are hard wired to experience things, not just look and buy, and the online experience pales in comparison to an immersive experience.
Some of the early experiments of retail brands are positive, and will most certainly translate into higher foot traffic, stronger brand relationships and sales. And, every retail brand will rely on Design Thinking to reinvent its biggest product: the retail store.
Stores are also experimenting with new channels and touchpoints through augmented-reality in a bid to make the in-store retail shopping even more exciting. But that’s another story for another blog post!
Read Jay Monahan’s blog: Design Thinking: Inspiring Innovation through Empathy