The online race to physical – Apple’s Ron Johnson on the new role of the store in digital retail

As part of its NRF coverage, Retail Connections headed over to the Innovation Mansion, a luxury destination set in New York’s vibrant SoHo. We found a hotbed for innovative new retail concepts, where D2C brands – that originally existed solely online – are now forging new paths in physical retail.

And who better to have caught up with than Ron Johnson, one of the pioneers in reinvigorating in-store brand engagement during his time leading the Apple store dynasty? He joined Liz Bacelar, CEO of Current Global, to share his thoughts on the race to physical, and why winning in the digital age means investing in bricks-and-mortar.

 

Are Amazon’s days as a retail disruptor numbered?

In a post digital era, when online brands are racing to the physical space faster than the other way around, it means more to be in brick-and-mortar than it means to be digital. Ron discussed the notion of a disruption lifecycle when it came to retail.

Typically, he suggested, disruption in retail has about a 20 year period cycle – in the 60s and 70s, the shopping mall was the latest development in retail, bringing brands together under one roof.  This then led to the rise of the big department stores in the 80s, which were then disrupted by specialist stores in the 90s – we all remember the era of GAP, he joked.

Also at the end of the 90s Amazon invented online shopping with its online book store – but we have hit the 20 year mark of Amazon as a company right now, and this, Ron suggests could mean the online giant is coming to the end of its disruption:

“Physical retail is about to disrupt back the disruptor of online shopping.  Online struggles to do physical well, but suddenly when physical stores can open up online capabilities, and turn the store into the place the customer comes to pick up, this is when they start the disruption process – when suddenly it’s more convenient and faster, and delivers all the things online can deliver and more.”

“Now, we are in a period when physical retail stores have the upper hand – and you see this primarily in the large discounters. Take Target and Walmart in the US as good examples.  Because they figured out BOPIS [buy online, pickup instore], 90% of customers will wind up in store or using the store inventory – and this is something you can see with the rise of D2C brands opening up in physical retail.”

 

Standing out in the D2C crowd

Brands that were created online are now facing up to the need to move into bricks-and-mortar – and the fate of a D2C brand hangs in the balance as to whether they can do physical well and cross the divide in to what is arguably the channel that will determine their longevity and sustained future.  After a few years of establishing their online presence, hitting up Instagram and Facebook with paid for ads and urging customers to click, customers are keen to discover the brand more, and the natural progression to move into physical stores – in a digital world it’s now a race to physical.

When asked who was doing physical retail well, Ron was quick to cite Nike’s New York flagship, which featured on Retail Connections’ recent NRF store tourWhile it opened three years ago, the store continues to find new ways to redefine retail experience and drive in-store brand engagement, as Ron explained:

“The Nike store is the single best execution of a physical retail store I have ever seen. It has its own defined click and collect area, they’ve redefined the retail experience with experiential, and it’s all personalised with the merchandising zoned to suit shoppers’ needs.  To top that, then you go to the top floor, the Jordan floor, and they have playable basket courts kitted out in the store. “

For a brand that epitomises the idea of ‘just doing it’ you can, quite truly do this in the store – an experience you could never replicate online.

Ron also highlighted Showfields, another of the stand out retailers featured on the Retail Connections NRF store tour, which showcases online brands in an immersive experiential retail space fuelled by D2C brands’ pop-ups, as another prime example of how to deliver retail experience that online simply can’t compete with.

“It’s all about how I can do retail right in a digital, physical world. You have to think of them both [online and offline] together,” Ron suggests.

 

Compete on engagement not experiences

With recent research from RetailEXPO’s latest report revealing that 64% of UK shoppers would buy elsewhere if a retailer didn’t provide an exciting or engaging shopping environment, it’s understandable why we’re seeing a trend towards experiential retail.  Brands are looking to add experiences into their stores to deliver CX.

But according to Ron, shoppers don’t need or want experiences – they want engagement, which is something they can’t get online.

“People want a place where they can get engagement – and build relationships with the brand.  People want to connect.  The world is all about relationships, which need to be built with the customer on a physical, emotional platform – it’s a heart thing, which can’t develop online.”

 

Shaking off the Amazon fear-factor

Retailers and D2C brands need to address their paranoid obsession with the Amazon effect, Ron suggests, as Amazon doesn’t impact the results physical stores can deliver.  Pointing to the continued growth of US bricks-and-mortar retailers, such as Target and Walmart, who are growing faster than Amazon, Ron explained how D2C brands, including Nike, are leading the charge in taking on the online behemoth, one in-store experience at a time.

Nike’s first move when moving into D2C, for example, was to take the brand off the Amazon platform entirely – rather than seeing it as another sales channel by having its product listed on Amazon, Nike saw this as fuelling a competitor, who would only ever compete on price and not on brand immersion or experience, resulting in a race to the bottom and a pressure to discount.  Nike wanted to compete on experience as a premium brand – and by putting this experience in-store, encouraging its customers to engage with and love the brand, it was better able to direct its own destiny.

Another example is the Apple store, which has become iconic in status for putting human and product interaction front and centre of its bricks-and-mortar strategy.  Ron, who came up with concept of Apple’s infamous Genius Bar while at the helm of the brand’s store estate, explained how the concept was founded on the fact that bartenders tended to be friendly, so he paired this idea of blending a friendly face with tech expertise and product know-how to deliver unrivalled CX by connecting people and product.

The Apple Genius Bar was created to restore relationships – when you went into a store with a problem it was there to rebuild trust in the brand. When you went into store on a voyage of discovery, you were supported by experts in achieving that via engagement with real people and deepening your relationship.

“You build a business and a brand one customer at a time, and to do that you need to understand how to deliver against the lifecycle of relationships,” he concluded.

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