Experiential Retail is Old News
What the U.S. can learn from Asian retail
o A Disney store that caters to adults, featuring interactive mirrors and fixtures subtly adorned with character details.
o Cat cafés where customers can fraternize with feline companions while enjoying a cup of coffee.
o A skatepark perched on top of a shopping mall.
o Department stores with a 2-story basement food market (depachika in Japanese) brimming with a vast array of renowned restaurant, dessert, and niche culinary brands.
o A Muji Café where customers can peruse high quality, “private label” merchandise and/or sit down to grab a healthy bite.
o A stationery store where customers can browse the dizzying range of stationery products from all over the world and delight in their newly purchased journal and fountain pen while sipping on a glass of wine.
These are just a handful of not-so-new Japanese retail concepts that have been in existence for quite some time. In fact, in Japan as well as in other Asian countries, these types of experiential retail stores are not the exception but the norm. In such markets, retail businesses are required participate in a dynamic and perpetual cycle of invention and reinvention to stay competitive.
Given the prevalence of such retail models in the East, can experiential retail really be considered the new face of retail? In the U.S., perhaps. However, experiential retail has a long history in Asia, most notably in Japan, where there is no clear distinction between experiential and traditional retail. Particularly in Japan, providing an experience has always been at the foundation of retail. Why is this the case?
Japanese culture, like that of the majority of Asian countries, places a heavy emphasis on context. In other words, more so than are Western countries such as the U.S., Japan is considered a “high context culture.” That is, any action or event is not viewed independently and separately but is evaluated holistically within the specific situational context. For example, even in a fast food store, providing a decent product at a reasonable price is not enough. Other factors such as how the product is packaged and handled, what type of unique, limited edition products are offered, and what the store looks and feels like are considered equally important. At the same time, a highly differentiated proposition, such as a skatepark on top of a mall, or cats as companions at a cafe, also speaks to the idea of providing a multidimensional experience. The fact is, wherever the customer may be in the world, to her, the experience cannot be limited to what the product tastes like or what the service output is, or how much she had to pay for it. If anything, the perception of the product or service is an amalgamation of the entire consumption experience — from the moment she enters the store, to when she walks out.
Moreover, in a high context culture, having empathy — an intuitive understanding of others’ feelings and needs — is considered paramount, particularly in a service environment. The Japanese philosophy of omotenashi — a holistic form of hospitality that is heavily dependent on the art of anticipation and empathy — and kaizen — the idea of constant improvement — are unconsciously, inevitably embedded in every retail experience in Japan. By reading between the lines and observing the customer’s actions (or perhaps more importantly, non-actions), the host anticipates what the customer needs or wants, and acts accordingly. For example, when it is raining or there is a forecast for rain, it is customary for Japanese retail employees to put a plastic cover over customers’ shopping bags before handing them to the customer. In a similar manner, cafés often have blankets that customers can use in case they feel cold. Such actions may seem subtle, even mundane; however, they matter because they have a significant impact on the customers’ perception of the experience. Ultimately, the true value of experiential retail can only be realized by understanding what customers are actively seeking as well as what they consider to be the pain points — consciously or subconsciously — within a retail experience. Very simply, paying attention to what works and what needs to be changed will enable retail brands to constantly improve and reinvent themselves.
When the retail experience is reimagined from the customers’ perspective, it should not come as a surprise that the conventional American retail model may fall short of what customers are looking for. Customers are not particularly motivated to visit a traditional mall or retail store managed by uninspired employees, and where customer service and unique experiences are not typically the priority. The shortcomings of most retail experiences are especially problematic in an age when customers can choose not to step into a physical store but can instead opt to buy what they need online with just a few clicks. If mall owners want customers to keep coming back, they need to provide more than just a stereotypical department-store-anchored format. The fact is, the combination of a handful of well-known brands like Bath and Body Works, H&M, and Forever 21, and a cookie-cutter food court with Subway and Panda Express is no longer a dynamic enough offering. At the newer malls that are successfully attracting customers, free WiFi and interactive directories are a given. They provide activities and events such as live jazz sessions, yoga classes, and innovative pop-up shops. On-site car wash and valet services are becoming increasingly common. These mall operators understand that experiential retail and service quality are inextricably intertwined.
So what should retail businesses do? There are many valuable lessons that U.S. retail businesses can learn from Japanese and Asian retail that do not require reinventing the wheel. Of course, not all experiential retail concepts that resonate in Japan and other Asian nations will work successfully in the U.S., as some preferences are unique to certain cultures. Moreover, compared to their American counterparts, Asian consumers respond more quickly to new trends given the faster product cycles in the marketplace, and are faster adopters of new technology. However, the fundamental principles of why experience is, and always will be, paramount in retail crosses borders, simply because humans are social, experientially-driven beings. People across the world universally derive pleasure from using their five senses. From this perspective, AI-assisted technologies and digital innovation that resonate with customers’ needs and elevate shoppers’ in-store experience will become increasingly critical to the future of retail.
In China, Alibaba’s FashionAI concept store enhances customers’ experiences with the help of its “smart mirror” technology. Before entering the store, customers sign in using their TaoBao ID. Subsequently, customers can interact with the mirror in a variety of ways, including creating a virtual list of items that they would like in their fitting room and getting styling recommendations. Once they are in the fitting room, they can request different sizes and items through the mirror, eliminating the need for them to step out or to interact with a store employee. Max Factor has also launched a WeLife pilot store powered by WeChat in which customers can scan the merchandise themselves the conventional way or with a facial scan. This system effectively eliminates the checkout process and significantly alters the customers’ perception of the entire shopping experience. Some of the most cutting-edge experience-enhancing retail executions are happening today in China, and are rapidly and significantly changing the way customers shop.
It is important to note that though such innovative experiential retail tools will likely be critical to the future of retail, transforming customers’ perceptions of the retail experience does not necessarily require heavy lifting or costly investments in state-of-the-art technology. In fact, experiential retail does not even have to involve organizing candle-making workshops or yoga classes within a store. The differentiating value of experiential retail starts with providing a positive, memorable experience that customers can never receive at an online store. Employees can effectively manage a customers’ holistic perception of the in-store experience by simply being attentive to the customer within the specific environment. Learning to empathize with and anticipate what customers will appreciate and remember during the entire visit can make a real and meaningful difference.
In this way, employees are a critical component of what makes experiential retail truly unique and impressionable. In fact, according to recent research conducted by Astound Commerce, 64% of consumers cited poor customer service as the primary reason why they would walk out of a store. With that said, retail businesses should reconsider the way employees are compensated, since this structure has a significant and direct impact on customer experience. Commission or tip-based compensation systems incentivize employees to focus on their individual roles as opposed to how they can collectively enhance the customer experience. As a result, the service provided often becomes haphazard and disjointed. In Japan, there is no tipping system, and retail employees orchestrate the customer experience by fluidly playing different roles, and putting on whatever hat is necessary in the moment to serve the customer. For example, if there is no wait staff to be found at a moment when a restaurant patron wants water, the chef will come out of the kitchen to serve this need. In this way, the Japanese retail model ensures that the retail experience is seamless and uninterrupted from the customer’s perspective.
If a customer-centric model is executed thoughtfully and properly, any retail business can elevate the experience it provides, even without investing heavily in additional resources. In reality, simply training employees to empathize with customers and to try to anticipate their needs can go an incredibly long way toward improving the perception of the retailer. The basic but essential fact to remember is that customers are people, and like you and I, are affected by the experiences that they encounter. This matters because a differentiated, positive experience will engender positive word of mouth — and increase the likelihood of repeat visits — by creating a memorable occasion that customers want to share with their friends and family, both online and offline. Indeed, companies large and small can benefit from reexamining how they operate their retail business, focusing on what would enhance the customers’ experience on a more holistic level. After all, experiences never happen in a vacuum but rather are embedded in the larger context of life.