Retail Store Design - Mintel

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UK - JUNE 2007

Strengths

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Innovative designs

There is little doubt that retail designers are becoming more innovative. Increased competitive pressure in the marketplace is creating more need to differentiate and stand out in a sea of retailers which otherwise are beginning to look the same. Innovations range from ideas on the micro-level at the point-of-sale to the full scale store design level.

The most innovative new store designs in the UK tend to come from the mobile phone companies, the high tech businesses and fashion chains, although this is not exclusively the case. Retailers are becoming more experimental and prepared to innovate. Examples in the past two-three years of very innovative store designs which have broken the mould include Apple on Regent Street, the Sony flagship in Kensington and many examples of innovative ideas from fashion and sports brands stores like Niketown and adidas.

Investment in research

Retailers realise that good store design has to work on all levels – consequently there is more and more investment in research before designs are commissioned. Research among consumers looks at their emotions, attitudes and desires. Examples of companies that have invested considerable sums in research include Tesco, which has researched in detail attitudes of customers to its stores. Such research has revealed fascinating insights into better queuing systems, checkouts and customer circulation, as well as in the look and ambience of the stores.

Most retail companies also invest in some ‘test beds’ before they roll out a full store design. Usually one or two typical stores are selected as research areas where ideas can be tested and then the best ideas are rolled out across the chain. Sometimes these stores can be flagships where considerable effort is put into a lot of new ideas and the best of them are taken group wide. Examples of companies that have followed this approach include the mobile phone shops such as Vodafone and Orange.

Consumers are more design-literate

Today’s consumer is more sophisticated than ever in design terms. We are surrounded by high quality design from all sides – this includes graphics on TV, high quality websites and plenty of opportunities for consumers to learn more about how to create their own interior designs or to design the outfits that they wear. TV programmes, including Trinny & Susannah, Grand Designs and TV makeover shows, have encouraged consumers to believe that they are design experts. Consequently, consumers are more likely to respond to ever more sophisticated interior designs at retail stores. This means that retailers must inject more design competence into their store designs, but it also means that they are likely to generate better results from doing so.

The value of incorporating experience

As the nature of shopping begins to change towards an experience-based shopping trip rather than simply a marketplace where goods can be exchanged for money, more and more retailers are recognising the value of incorporating experience areas into their stores. Today’s consumer is there to be wooed, to be given a good time and to be stimulated. Selfridges has taken the lead in incorporating the experience area into its stores with fashion shows and events which embrace the whole store at a time. Other outlets, including mobile phone shops, are creating hang out areas where consumers can participate in the store, join in, put their pictures on the walls or simply spend time relaxing.

Retailers are becoming more interactive and more hands on. Ideas such as Liberty’s cosmetics area where consumers are actively encouraged to sample the products have taken the lead, but many more interactive experiences in stores are now taking shape. Mobile phones are switched on, televisions actually work, Hi-Fis can be touched and the volume altered. This is a strength in today’s store design that will become ever more important as stores need to embrace the experience of retailing for their customers.

More in-store technology

The price of technology has reduced considerably in recent years. The size and shape of technology has also changed so that it is a realistic option to put in flat screen TVs, large video walls or shelf-edge technology that can talk or has visual images. As a result, more retailers are incorporating technology into store designs – it is being used in a variety of ways from improving ambience through to delivering sales messages.

In-store technology is a growing strength in store design at present and is breeding a whole new industry of content delivery. In-store technology will continue to grow in importance and will be used in ever more sophisticated ways. It will give retailers flexibility about how to service their customers’ needs, as well as allowing customers more options in how they shop. Fundamentally, in-store technology can be used to enhance the whole design of the store and is likely to continue to be used further in this creative way.

Growth in large format general stores

As grocery retailers have added more non-foods to their stores, a growing proportion of superstores in the UK are becoming general stores. They carry non-food merchandise without specialising in depth in any particular area. This kind of retailing is opportunistic, selling certain goods to the customers that are attracted to the stores, usually for other reasons.

The growth in large format general stores is a strength for retailing in that it is popular with consumers and is growing market share. But, the down side is that large format general stores are taking away share from specialists who can offer more depth, expertise and greater choice in certain lines. Large format general stores are evolving new kinds of design, which allow flexibility of display and zoning to give customers more direction.

Weaknesses

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High costs of major refurbishments

Although the majority of retailers would like to re-design their stores more often and invest in re-fitting to a higher standard, the costs of major re-fits of retail outlets can be prohibitive. Because the lifespan of store design is reducing in order to alleviate boredom and allow retailers to move on more quickly, retailers are seeking more cost-effective solutions to store re-design. The costs of a luxurious re-fit can be excessive and retailers must generate a return on their investment from store design and interior re-fits. Consequently, the high costs are a negative factor for many retailers, they represent too much risk and retailers cannot usually justify luxurious, high cost interiors. So, the industry must constantly compromise, looking for good looking solutions which will be sufficiently durable, but which can be changed at a reasonable price in the near future.

Time and budget taken to refit large stores

Shop makeovers are costly. The range of refits varies from as low as £50 per sq ft to over £600 or £700 per sq ft. Also, shop refitting takes time and can be disruptive to current trade. Suppliers are getting slicker and better at moving in with a solution and refitting within a rapid time frame. Even so disruption is a realistic down side to store refits and can affect short-term results for business. For instance, John Lewisreported the effects of disruption during its large refits in recent years. Also, the budget to refit a large store can be considerable. If you operate a department store or a major retail space, the refit budget can be prohibitive, consequently refitting a whole store at once might be an unrealistic proposal and therefore the benefits of opening a shiny, bright, new large store may have to be compromised in favour of refitting department by department on a rolling basis.

Growth in online shopping

Online shopping is certainly growing in the UK at the moment. It has its plusses and minuses in the context of store design. Online shopping is popular with consumers and consequently is likely to continue to take market share, but at the same time it takes browsers away from the stores. It reduces foot traffic in the high street and shopping centres, so it reduces the number of opportunities that real shops have to appeal to shoppers walking through the stores and to sell to passing trade.

Little loyalty

Today’s consumer has a lower boredom threshold for shopping than ever before and loyalty levels are reducing. Consumers are fickle and will move from store to store to shop for reasons such as special offers, discounts and price. The Internet encourages more consumers to look around for the lowest prices and so retail loyalty can be reduced. It is a challenge for store design to improve the loyalty of shoppers, tying in multi-channel retail experiences to good design in order to encourage shoppers to return automatically to their store.

Environmental concerns

Today’s consumer is bombarded by a wide range of environmental messages by the media. Environmental concerns affect all sorts of consumerism and consumers are aware of food miles, the costs of operating air conditioning or the potential down side of retailers putting in furniture that may have been made from wood from non-sustainable sources. Tomorrow’s consumer is set to be more environmentally aware, organic and greener. There are already examples of store designs that are taking a greener approach from shopping schemes which propose grass roofs and submerged buildings through to individual shops which use more natural day light or solar panels. There is little doubt that for the future, environmental issues should be incorporated into store designs with designers and retailers looking to boost their environmental credentials.

Specialists losing share

As the large general retailers, especially Tesco, Asda and Argos, continue to grow share of retailing in the UK, specialists are losing out. Consequently, specialised environments which are designed specifically in depth, with wide ranges of merchandise, are becoming fewer compared with general stores which are less product-specific. So, the opportunity to create specialised interiors is reducing in today’s retail climate.