LEGAL.FYI: When Clicks Meet Bricks – The Future of Retail

The Future of Retail

In this month’s LEGAL.FYI column, Graeme Bradshaw, partner at Burness Paull, looks at the impact of digital technologies on the retail sector and asks what the future holds for the customer’s experience.

Graeme Bradshaw, Partner, Burness Paull

Graeme Bradshaw, Partner, Burness PaullAs IKEA makes a breakthrough with its augmented reality app, will other stores follow suit? And what will this mean for the bricks and mortar retail spaces?

Augmented reality technology has arrived.  It is increasingly familiar to the public at large due to its use in games like Pokemon Go or Snapchat face filters.  Ikea and Amazon are also adopting apps that allow you to see how future and other items will appear in your home through 3D models that can be viewed via your phone. And crucially when the iPhone X arrived last year its main differentiating new feature was centred on augmented reality – animojis.  With Android devices set to follow suit a clear direction of travel has been set.

While all of this takes place in the virtual world, the story for physical retail space isn’t as gloomy as it might seem.  Inescapably, not everything can be successfully recreated online.  Smart retailers are focusing on the virtues of physical stores and seeing digital applications as an opportunity to enrich the real world customer experience.

Concept Stores

I recently stood in the middle of London’s Regent Street contemplating this very happening.  Regent Street and the areas close by are becoming a launch pad for what’s new in retail.  Across the street stood Arket, a fully formed new concept store from the same stable as H&M and Cos. It’s perfectly fashioned interior reflects a new pinnacle in Scandinavian influenced retail environments.  Think of a museum store room setting and meticulously, nay, obsessively well ordered and stored product lines.  A little austere, a little of the crisp, clean minimalism of a science fiction movie set.  Crucially, the vivid experience of being in such a beautiful and interesting retail space just cannot be replicated online.

Along the same street are examples of tech being used within stores as a draw for customers, or to augment the shopping experience.  From virtual rails and online ordering to screens showing the most pinned outfits on Pinterest, the high street is learning quickly that a joined up online/offline experience can mean consumers spending more time engaging with their brands.  The Apple store is a great example of this.  Whether making a purchase or not, the store invites consumers to spend time with Apple branded goods, rather than those of its competitors.

Real World Experiences

Arket and Apple stores offer something that cannot be experienced online.  This simple core concept is driving the growth of the leisure sector (new cinemas and dining experiences) and the rise of brands becoming retailers.

Microsoft and Dyson are the latest to seek to establish their own High Street store fronts – following Nike, Lego, Mac and others in seeking to showcase their brands and sell direct to customers.  It is what they do online, and so why not carry that through to physical stores and cut out the middle man?  The difference being that in a physical store, a whole other palette of tricks and flicks is available to enhance the consumer’s interaction with the brand.  It is a fresh opportunity to build the brand and engage with customers.

Joined-Up Thinking

To compliment all of this the major landlords are also seeking to collaborate with their occupiers in bringing forward valuable data on customer habits collected from across their shopping centre portfolios.  Connectivity between stores (data shows people who shop ‘here’ also shop ‘there’), click and collect strategies and ease of parking will be as important as the physical space, and may have a bearing on store site selection.

Elsewhere we are constantly seeing fresh engagement with technology across the retail sector.  Recent news that Walmart has acquired a virtual reality start up company to aid the retailer’s use of technology in stores and on line only reaffirms this trend.  Retail is a constantly evolving competitive environment and so the virtues of augmented reality are beginning to be employed in concept creation.  Store designers are using virtual and augmented reality technologies to design retail environments and to optimise shopper experiences.  Approved designs can then be distributed across retail networks at lightning pace.

Offline Experiences

All of this indicates a clear gear shift in the pace of change now affecting physical retail.  Retailers are using physical space to create offline experiences that define their brand, exploit interaction with technology and thus rival what can be achieved online.  Rather than signalling the demise of the high street technologies such as augmented reality can be used to create a stronger offering than ever before.

And a vital consequence of all of this for those investors, developers and (needless to say) occupiers with a stake in retail property, is that the future is still built from bricks, glass and steel.



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