Retail Executive

NOV/DEC 2017

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Back To The Future: The Return Of The Store The BOSS Model of retailing encapsulates four key principles for returning relevancy to the store. D A V I D B E L L Retail Author (Location is [Still] Everything), Professor (Wharton School of Business), & Investor (Idea Farm Ventures) productive stores in the U.S. By some estimates, the sales per square foot are third overall in retail standings behind only those of Apple and Tiffany's. These stores, however, are not your grandfather's stores. The store of old essentially tried to perform the two core functions of retail — the selling experience and the management of inventory and fulfillment — under one roof. The result was often a fairly mediocre in-store experience coupled with stock-outs and other logistical issues. The store of the future is and will be a smaller store that decouples those two functions and places greater em- phasis on customer experience. Consider the customer journey in a Bonobos Guide Shop viz-a-viz that in a de- partment store or branded store. In the Guide Shop, the customer gets a personalized shopping experience. Prod- ucts that are purchased by the customer are fulfilled from a central location and shipped to the place of the custom- er's choosing. My own research shows a dramatic impact of this offline experience for customers. A customer who has had at least one Guide Shop experience, relative to one who is an online-only shopper, buys more per visit, returns less overall, and buys a greater assortment in fu- ture purchases, whether online or offline. So, the new store of today offers customers great ex- periences, integrates technology into those experienc- ore recently, that narrative has evolved into the idea that online will destroy off- line. Stores are a thing of the past. Off- line is dead. And so on. In my estimation, this view that online and offline are naturally direct substitutes, and the corollary that offline is dead, have turned out to be completely and profoundly incorrect. Of course we can't run from the numbers — Credit Suisse estimates that up to 9,000 stores might imminently close, and the U.S. retail mar- ket is clearly over-indexed both in number of stores and in store size. Still, that is only half of the story. DYING AND THRIVING The paradox is that offline retail is both "dead and dying" and "alive and thriving" at the same time. To unpack this a little, let's turn to the new generation of leading-edge retailers termed the digitally native verti- cal brands (DNVBs) by Andy Dunn, Bonobos' CEO, and arguably purveyor of one of the very first DNVBs. Here in the U.S., DNVBs are all adding offline show- rooms and stores and seeing, for the most part, great success. Everyone from Away (luggage, founded 2015) to Warby Parker (eyewear, founded 2010) is getting in on the act. Warby Parker, for example, after starting as on- line-only (WarbyParker.com), now has some of the most M In the early days of retail e-commerce, and until as recently as a few years ago, retail executives, analysts, and academics all viewed online and offline as "competitors." When I started at Wharton during Web 1.0, I came across a leaked letter from the CEO of a major big-box retailer in the Wall Street Journal. The letter contained a thinly veiled threat to the executive counterpart at a major brand, to the effect of: "If you sell your product directly online, we will pull it from our shelves." THE STORE Operations By D. Bell BACK TO THE FUTURE: THE RETURN OF THE STORE RETAILEXECUTIVE.COM NOVEMBER/DECEMBER 2017 26

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