For physical stores, these are both the worst of times and the best of times.
There's no denying that e-commerce is rampant, and the wave of store closures is more intense than ever. But this is also an era of survival of the fittest: the rise of the middle class, consumption upgrades, and more brand choices mean only quality brands that are more attentive to consumer needs and experiences can win the competition where consumers vote with their wallets.
So, in what direction are physical stores transforming and upgrading? This article will deeply analyze the topics you care most about, including transformation directions, operational characteristics, and how to excel at experience.
Today, more and more physical stores are playing to their strengths and innovating new paths. In the next five years, real opportunities for physical stores have arrived, and traditional stores will surely win!
Why Physical Stores Won't Die
Turning Point 1: Consumers are changing; culture, innovation, experience, and sentiment matter as much as price.
Turning Point 2: China's consumption potential and future growth mean commercial real estate retail can still make big money.
Turning Point 3: Behind the mass store closures, a wave of local new brands is rising strongly.
Turning Point 4: Global popular online retailers are transforming to open physical stores.
Turning Point 5: The new O2O business model with same products and same prices weakens e-commerce's competitiveness.
Turning Point 6: More international brands are entering Chinese malls, boosting the competitiveness of physical retail.
Turning Point 7: Physical stores are changing; in fierce competition, those that don't advance will retreat.
Turning Point 8: Not only are celebrity stores booming, but the entrepreneurial wave has swept commercial real estate.
Turning Point 9: The government is restricting daigou (cross-border purchasing agents) and discussing further opening up imports to boost domestic demand.
Turning Point 10: E-commerce is impacting China's real economy; vicious competition is not conducive to current development, and change is happening now.
Therefore, diversified physical stores will never die; they will only transform into a business model combining physical stores and the internet. (For example, a hair salon on the 33rd floor, a clothing store on the 28th floor—these are all ways of existing transformed by the online world. Some say physical stores can't survive because rent is too high. If first and second floor rents are expensive, go upstairs.)
In what direction should physical stores transform and upgrade?
The direction of physical store transformation is to transform and upgrade according to our current popular and future lifestyles; you must make your store live in the further future to sustain development.
Many store operators still think in the industrial era, believing "if you open a store, people will come to buy." What capabilities does your store have to attract customers to spend?
So, how do we get customers to come to our stores? That's the key. First, ask yourself:
Question 1: If you were the customer, would you come to your own store to shop?
Question 2: Who are your products for? What kind of people are you targeting?
Question 3: Do we understand the lifestyle of the new generation today?
There's a Chinese saying: "Know yourself and know your enemy, and you'll win every battle." Before transforming, what should we do? — Fully understand your customers. Zhang Xiaolong once said, All product design and development does not come from research, analysis, or discussing competitors, but from your understanding of consumers and deep exploration of their needs.
The new consumer groups (post-80s, post-90s, post-00s) have three major characteristics: online life, expanded horizons, and spiritual needs.
Because of online life, horizons expand, and there are higher demands for product and brand aesthetics, quality, and value for money—definitely not just chasing cheapness. With material abundance, spiritual demands are also high. More people go to the movies now than before; every shopping mall must have a cinema.
The consumption characteristics of post-80s, post-90s, and post-00s all share a feature: interactive experiential marketing. This is also the most fundamental point for physical store transformation in the future: you must add interactive experiential marketing to your store.
Three characteristics of interactive experiential marketing:
Functional experience. Consumers get a real feel for the product through trial and experience. Experience means letting consumers feel it in advance.
Entertainment experience. Incorporate the product's and brand's concepts and traits into entertainment, letting customers experience and feel it through entertainment.
Five-senses experience. Provide consumers with a comprehensive experience of sight, hearing, touch, taste, and smell. It's hard to achieve all five senses fully; the main way is through visuals to impress and move them.
Three operational characteristics of physical store transformation
1
Shift from "product thinking" to "user thinking"
Future physical stores will have two models:
One is multi-category/multi-brand bundling (lifestyle collection stores)
Guangzhou's Fangsuo is a comprehensive bookstore with clothing, books, lectures, films, creative markets, and even exhibitions. This is a way of multi-category bundling.
Japan's Tsutaya Books is not an ordinary bookstore; it sells coffee, cookies, flour, furniture, phones, DVDs, dinners, and more. All of this comes from changes in consumer lifestyles; it targets Japan's middle class, the new consumers of the 70s and 80s.
The second is single-product excellence (selling only one or two products)
For example, Nespresso capsule coffee machines, Japan's Akiyama Mokkou only makes furniture, and Japan's "Shioze Sohonke" (founded in 1349) only sells buns. In Japan, there are many such single-product excellence brands; they know when to stop and don't overreach. The reason for making such a brand is to continuously give customers a good feeling.
2
Increase aesthetic appeal
When we were kids buying stationery, we'd go into a store piled high with goods, and the owner would rummage through boxes to find what you wanted. Was that a good experience? Did that store have aesthetic appeal?
Look at this Nordic stationery store below; you feel refinement and an ultimate experience. Buying one or two items as gifts feels especially good.
3
Enhance experience
What is experience? It's the feeling customers get when they come to the store and participate in the entire consumption, purchase, and trial process.
To a large extent, it's the implementation of user thinking: turning users' needs into demands—putting people first, empathizing, going into their lives, and truly feeling what others feel.
The only thing physical stores can't replace is experience. What should we do?
Experience is related to human feelings and is divided into basic experience and upgraded experience.
1
Basic experience
In current physical stores, we also have examples of basic experience, such as supermarket samples, clothing try-ons, and Starbucks new coffee tastings.
2
Upgraded experience
Features: User thinking runs through the entire brand and the entire terminal store, allowing customers to experience in advance the pleasure of products they haven't bought or are about to buy. This is called experience.
For example, when flying to Japan, some people prefer Cathay Pacific because they have the latest movies and better food. Examples include IKEA, APPLE, Nespresso, and MUJI.
Experience is an act of providing customers with a consumption scenario and letting them experience it in advance.
What kind of store do customers like to shop in?
This store has things I want to buy;
This store has an atmosphere that makes people want to buy;
This store has an atmosphere that makes people feel glad they came, broadening their horizons, increasing their cool factor, and relaxing their mood;
Only this store offers this experience.
In short, a store that makes customers feel comfortable in body and mind will make them want to come back.
Retail isn't complicated; we make it complicated because we often don't think about what customers really want.
Actually, let's put ourselves in the customer's shoes: Does your store have aesthetic appeal? Is your product single-product excellence or diversified? What experience do you use to impress consumers? These are the directions physical stores need to consider for future transformation.
The fundamental reason for brand failure is not technological substitution, but because it gets farther and farther away from customers.
When we don't know what our customers think and want, that's when we get eliminated.
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