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Leveraging Digital Tech to Make Brick and Mortar Retail A Destination
With a growing percentage of retail sales shifting online, brick-and-mortar retailers are adopting novel approaches to enrich the experience of a visit to their stores.
In some cases, stores are using novel technologies to attract new customers. For a limited time, Bloomingdale’s flagship in Manhattan featured a “Clothing-to-Go” window display offering passersby the opportunity to control the color of Ralph Lauren clothing in the display from the sidewalk using touchscreens. Those interested in what they saw—even if they originally had no intention of setting foot in the store—could then either go inside to make the purchase, or send a text to receive a link to a page to buy their selected outfit online.
Other retailers are incorporating technology to enhance the experience for customers already in their stores, not only as a novelty attraction but also to improve customer engagement and increase the data the store can collect about its customers. Rebecca Minkoff’s digitally connected store, developed in collaboration with online giant eBay, allows shoppers to use an interactive mirror/touchscreen on the main floor to flip through lookbooks and, if they enter a phone number, order a drink, or save items that they would like to try on in the dressing room. Once in the dressing room, smart mirrors let the customer continue to play with looks, request additional sizes and styles to try on, and even complete their purchase. Such in-store technological innovations allow for the convenience of online shopping, combined with the immediate gratification of being able to try things on right away. According to Minkoff, this approach pays off—the interactive dressing rooms initially resulted in triple the expected clothing sales and gave the company valuable data about consumer preferences and habits. Other retailers like Bloomingdales, Nordstrom and Neiman Marcus are also experimenting with “smart” fitting rooms.
Apparel isn’t the only industry where retailers are taking advantage of digital innovation. Home improvement giant Lowe’s has collaborated with Microsoft’s HoloLens team on pilot projects that use an augmented reality (“AR”) headset to allow customers to plan big-ticket home renovations. Like other AR systems, HoloLens creates a “blended environment” in which computer-generated objects are overlaid on top of actual ones, enabling the user to see both simultaneously and manipulate certain features. Donning the headset, consumers can browse options for a kitchen upgrade, previewing how new layouts, colors and materials would look when installed in their homes, increasing their confidence and potentially allowing them to make decisions more quickly. Lowe’s can also collect data about what items draw customer’s attention and use that information to design displays or plan for inventory.
Another example of smart technology that blends the convenience of online shopping with the irreplaceable experience of trying something in person is Sephora’s use of in-store “IQ Kiosks.” The Color IQ Kiosk uses a special device to scan and analyze a customer’s skin tone, then uses the data to recommend various products in flattering colors. Since it is unlikely that consumers will want to invest in their own skin-tone scanner for one-time use, the ability to get this information from a visit to the store can be a valuable draw to shoppers. The Fragrance IQ Kiosk mimics an online quiz that asks the customer about their style and preferences and then emails them recommended scents. The Fragrance IQ Kiosk can also immediately puff out a sample of the suggested products, something the Internet on its own has yet to achieve.
While the examples above of flashy new tech are designed to intrigue and draw in customers, there is also potential for leveraging technology on the backend. Geofencing systems, which we have written about in this space previously, combined with electronic shelf tags, offer the potential for dynamic pricing, where a customer walking by a display who has an app installed on his phone may receive a special price offer in real-time based on past purchases and known brand loyalties. Dynamic pricing is already common online, where retailers (and other industries such as airlines) use browser cookies and customer logins to offer personalized deals designed to clinch a sale. In the in-store context, dynamic pricing has the potential to tempt customers into an unplanned purchase, with the added benefit of allowing them to examine the product in person before committing.
Most of these technological innovations are being rolled out slowly in pilot programs for a reason—there are privacy and ease-of-use concerns—not to mention cost issues—that make it prudent for retailers to test and test again before transforming their sales models. But the potential to offer customers unique experiences and information indicates that we can expect to see more digital innovations in stores in the months and years to come.
Julia Twarog is an Associate in the Firm's Real Estate Group. She focuses her practice on acquisitions/dispositions, leasing, joint ventures and financing.
Julia’s clients have included real estate investment funds, domestic and international financial institutions, developers, owners of residential, commercial and mixed-use properties, and companies engaged in mergers and acquisitions involving substantial real estate holdings.