The retail industry is constantly evolving, and keeping up with current trends is crucial for businesses looking to remain competitive. In recent years, there has been a significant shift towards experience-based retail, as well as DTC businesses opening their own brick-and-mortar locations, and even the rise of popularity of the shop-in-shop format for some retailers. Join us as we delve deeper into these trends, looking at the advantages, challenges, and limitations associated with them.

Experience-Based Retail

Experience-based retail is a retail model that emphasizes customer experience over product sales. It's all about creating an immersive and engaging environment that encourages customers to spend more time in the store, resulting in increased brand loyalty and customer engagement. 

Some of the most prominent examples of successful experience-based retail stores include Nike's House of Innovation and Samsung's 837, both of which are designed to showcase the latest products and technologies. In both of these stores, the product is elevated beyond the typical shopping experience and allows visitors to create their own unique and personalized connections to the products they are looking at.

The advantages offered by experience-based retail are numerous. By creating an immersive environment, retailers can increase brand loyalty and customer engagement, resulting in increased sales and revenue. Additionally, experience-based retail can help differentiate these businesses from their competitors, making it easier to stand out in a crowded market.

Brick and Mortar Locations for DTC Businesses

Direct-to-consumer (DTC) businesses have traditionally operated online, but many are now opening brick-and-mortar locations to reach a wider audience. Tuft & Needle and Warby Parker are two great examples of DTC businesses that have successfully expanded into brick-and-mortar retail. This shift of DTC opening retail locations has been building for some time and is one that has been radically accelerated due to the effects of the pandemic and shutdowns on retail. 

The advantages that DTC businesses can expect by opening brick-and-mortar locations include the opportunity for customers to experience products in person, increased brand exposure, and a better ability to collect customer data to inform product creation and marketing.

The Rise of Shops in Shops

Shops-in-shops, also known as store-in-store models, have become increasingly popular in recent years. In these formats, major retailers make space within their stores for another retailer’s products to be carried, often in displays that heavily feature that brand exclusively. 

This has been displayed clearly in a few different stores and styles, with Petco joining Lowes, Ulta joining Target, and Sephora joining Khols in recent years. In each of these, a sizable portion of the store’s real estate is devoted solely to the brand in partnership, and it is clear to customers that this section is distinct from the rest of the surrounding store.

This model provides a mutually-beneficial partnership, where both brands are able to benefit from increased foot traffic and visibility, and it has become an essential element of many successful retail businesses.

Factors to Consider in Today's Market

The retail market is constantly evolving, and there are several factors to consider when trying to remain competitive. Preferred store sizes are shifting, with many retailers downsizing or selecting more modestly sized spaces when compared to the past. Dining is facing many obstacles due to the recent migration of customers to online platforms and a desire for convenience. Additionally, the evolution of technology and increased competition in the e-commerce space is creating challenges for many retail businesses.

Challenges and Limitations

There are, of course, several challenges and limitations to keep in mind when examining these trends. Experience-based retail can be especially costly, and it can be challenging to adequately measure the success of these initiatives in the beginning. These types of retail stores can require a longer time in the market to see considerable returns, especially when the brand is hoping for mass adoption from its customer base.

Additionally, opening brick-and-mortar locations can be risky for brands without a distinct customer base, and it can be challenging to maintain a consistent brand image across online and offline channels. 

Reasons for Success in the Current Market

Despite the challenges present, there are several reasons businesses are seeing success through these methods in the current market. Evolving customer preferences are creating new opportunities for businesses to differentiate themselves from their competitors, while the combination of online and offline retail is becoming increasingly popular. The growth of technology and its integration into modern retail is also providing businesses with new opportunities to engage with their customers and increase sales.