the future of retail

BRICK AND MORTAR STORES:

NICE OR NEED TO HAVE?Marketplace Insights

March 2016

PAGE 1

WE WONDERED:

At the start of 2016, the world’s largest company by revenue,

Walmart, announced that it would close 269 locations around the

world. With today’s tremendous increase of online stores and the

closing of traditional retail spaces, we wondered whether or not

the age of the brick and mortar was dead.

As the expectation of convenience increases within the shopping

space and consumers of all ages begin to feel more comfortable

shopping online, do brick and mortar stores still matter? Are they

in jeopardy of becoming extinct due to cost-efficient online

marketplaces?

And while some stores are closing their doors, the country’s

largest Internet-based retailer, Amazon, opened it’s first brick and

mortar store in it’s home city of Seattle late in 2015.

In order to find out more, we surveyed 844 consumers and

conducted 82 in-depth conversations with consumers ranging in

age from 15 to 65+.

HERE’S WHAT WE LEARNED…

ARE STORES

GOING EXTINCT?

?

STORES ARE HERE TO STAY.

74%

40%

Believe it’s important for brands to have a physical store

vs. online only. This sentiment is strongest among

Millennials and Gen Z.

Still make most of their purchases in-store (vs. 26%

mostly purchasing online)

80% 82%

69%65%

GE

N Z

MIL

LE

NIA

L

GE

N X

BO

OM

ER

Net importance of having a physical

store:

N = 844

The Store Experience is good for me for returns and actually

seeing and touching the products, other than that I would be

all for online shopping. – Male, Millennial

Physical stores deliver:

• Trust

• Confidence

• An experience, not just

a product

EXPERIENCING PRODUCTS THROUGH THE SENSES BUILDS TRUST FASTER THAN ONLINE

Especially when purchasing products that consumers wear (clothing, cosmetics, shoes), shoppers want

reassurance of their purchase through touching items and trying them on in the store. Familiarity with a

brand’s fit and styles may result in future online purchases, but the first in-store impression of the brand is

critical for building loyalty.

Yes, shopping in a physical store gives me the ability to actually

touch the product and see if it meets my needs. Shopping in a store

is more of a social event for me. I go with friends and family and

run into other friends. I go to physical stores to get ideas more than

make a purchase. – Male, Gen X

EVERYBODY’S GOT THEIR SOMETHING.

GEN Z SEEKS REASSURANCE AND TRUST THROUGH THE SENSORIAL

Shoppers like trendy fashion stores with good deals. Stores like Charlotte Russe and Forever

21 match their price points and give them an opportunity to try on sizes and styles that are

difficult to figure out online. Favorites like Sephora offer samples and demos to provide

reassurance before purchase. On top of it all, they don’t want to pay for shipping or have to

wait for products to arrive; in-store delivers the immediacy they crave with no added cost.

MILLENNIALS SEEK EFFICIENCY, WITHOUT COMPROMISING ON QUALITY

Launching their careers and possibly balancing young kids, Millennials feel more of a need to

shop. This can get difficult, though, with families and busy schedules. Millennials like big box

stores to save time and increase efficiency. They’re spending a lot of money, and lean on

coupons or rewards to help.

GEN X SEEKS AN ESCAPE AND NEW DISCOVERIES

Gen X-ers are likely nearing the peak of their careers and watching their kids get a little older.

Life is hectic. While they like big box stores to save time, they also want an escape from the

everyday (calm music, coffee, new displays), often looking to stores like Target for this balance.

BOOMERS SEEK COMFORT AND SPACE

When deciding on a store, Boomers need a comfortable shopping experience (low music, light

scents, seats). Whether they’re retired or they’re still employed, Boomers typically have more

fixed incomes or even less household income overall. They’re more price conscious, often

saving for future generations, and they want to see and touch products before buying.

Furthermore, this sensitivity to price makes them resent shipping costs.

What motivates each generation to visit stores?

GEN-Z: TRUST THROUGH EXPERIMENTATION

Charlotte Russe because their clothes are cute and made well … The store feels

open and welcoming. It smells like the perfume they sell and there's a warm

feeling coming from the employees.

MEET JESSICA.

Jessica is a vocational school graduate who is currently an admissions

advisor. When not working, she’s usually with her boyfriend, friends or family.

She likes to go out to eat and to the mall. Her favorite stores are Sephora,

Charlotte Russe and Forever 21.

Jessica thinks Sephora is super fun because she can play with the colors and

textures while trying on different products. She loves to try on all the latest

styles in Charlotte Russe and Forever 21. These stores have young and

trendy clothes that Jessica fell in love with after spending awhile in the

dressing room checking out the fit.

Jessica is just starting out her career and has to budget her spending (even

though she loves to shop and stay in style). That’s another reason she loves

these stores the most – the deals! While Jessica may do some shopping

online (if she can get free shipping), most of her purchases are at the mall

where she can be sure the clothes or cosmetics are just right for her before

spending her hard earned money.

PAGE 5

[Forever21] offers a wide variety of clothing for good

prices … they have nice boots and classic sneakers

which are usually on sale. Their staff is pretty nice too.

MILLENNIAL: ALL ABOUT EFFICIENCY

BestBuy has great customer service & for me at least it's

easy to find what I'm looking for. Also, they don't overprice

their items. They also have a good return policy.

MEET JOSE.Jose is an engineer who likes to go to the gym and stay fit and active when

he’s not working. Jose and his wife have two children, ages 2 and 4, and one

on the way. Since Jose’s wife also works full time, they typically shop on

Saturdays with the kids. Sometimes they all go to Costco, and other times

Jose takes one child to Best Buy, Footlocker or GameStop to buy specialty

items while his wife and the other baby are at Target buying household and

grocery items.

Jose loves Costco for the variety of products and feels savvy when he can buy

in bulk. He also loves Best Buy, Footlocker and GameStop for the quality

products and excellent customer service to help him find the right product

quickly when he isn’t sure.

Jose’s main goal is to shop quickly and efficiently before the kids are tired.

But, he will not compromise on quality products to fit his needs for a quick

shopping trip. With three kids, he needs to use his money wisely now in order

to save for the future.

PAGE 6

Life is all about convenience and everyone is always in a hurry. If I cant find things

at a store, or it takes too long, or even too long to check out, I would rather go

somewhere I can get in and out quicker, even if it is a little more expensive.

Store experience is huge…I have younger

kids who are loud and get bored easy. I

need that experience. I don’t need [to get]

stressed out more than I already am.

GEN-X: SEEKING A PLEASANT ESCAPE

[To improve store experience:] Music is calming/soothing and has a tendency to make people stay in the store longer,

therefore, spending more $; pleasant smells throughout the store - nobody wants to shop or even be in a stinky environment;

associates available if needed - questions can arise at anytime during shopping; clear pricing on merchandise/price scanners

in lots of areas - nobody wants to waste time guessing at the price of items.

MEET ANGELA.Angela is the manager of the Human Resource department for a large corporation.

She and her husband work long hours through the week, but manage to keep up

with her middle and high school kids’ activities each night. At the end of the work

week, they are exhausted. On Saturday mornings, Angela’s husband has soccer

practice duty while she sneaks away to do the family shopping.

Angela’s favorite store is Target. She feels as though it’s an escape from her busy

week. Her first stop is the Starbucks just inside the door. She can sip her latte while

shopping as she begins by browsing the dollar section at the front. She loves

browsing the aisles to find the new trendy items of the week and even tries on and

purchases clothes for herself or for her kids. The relaxing music and homey smells

of coffee, popcorn and candles put her in a good mood. Her last stop is the grocery

section where she can pick up everything her busy family needs for the week

ahead (even fresh organic produce).

Angela values this time as a quick escape to refresh for a few hours (while also

taking care of family errands). Kohl’s and JCPenney are two other shops where

she can have a bit of time to herself.

PAGE 7

I love to shop in Target and Whole Foods just because they have fast check out and they have a

wide variety of organic groceries … Target is very organized and clean. If I’m standing in the store

right now I would imagine it being cozy and has a warm ambience and smells nice like scented

candles but not so strong that it hurts my nose, but just right that it will make me feel good

shopping.

BOOMER: PRIORITIZES COMFORT AND SPACE

[Factors of a positive store experience:] The openness of the store, the lighting needs to be true to color, fitting room needs to

have a seat and a place to hang your clothes (the seat needs to be secure and solid enough for older people to sit). Check out

should be easy and you shouldn't have to search for it. Sizes in departments should be plainly marked so I'm not searching

for x large department.

MEET MARY.Mary is recently retired and anxiously waiting for her husband to do the same so

they can begin traveling. Since leaving the workforce, their combined income has

decreased substantially. And with a new grandbaby, their financial advisor

recommended they start a college fund for their grandchildren and a travel fund for

their retirement. This means Mary has to budget wisely when it comes to shopping.

Mary typically shops during the week while her husband is working. She enjoys

going to Bed Bath & Beyond, Hobby Lobby, Walmart, Kohl’s and the mall.

Mary’s favorite store in the mall is JCPenney. Not only can she can park close to

the entrance, but it has wide aisles, clear signs, organized departments, bright

lighting to easily view the products, and a comfortable dressing room. She also

loves the great deals she finds on her clothes and household items.

In general, Mary values a safe, comfortable store with quality products at valued

prices so that she can focus on saving for her future with her family.

PAGE 8

My favorite store to shop at is JCPenney. They have some really good bargains if you take the time to look

hard enough, and their products are high quality … they have been around a long time and are still here today

in spite of the big box stores. It is clean and the products aren't laid out in straight isles like other stores, but in

groups and sections. It doesn't have the “food smell" like the big box stores - it smells like clothes.

SHAPING THE EXPERIENCE

PAGE 9

Now that we know brick and mortar stores are critical, how

do we go about creating the ideal experience for customers?

WHEN DOES IT MATTER?

SHOPPERS CARE LESS ABOUT EXPERIENCE WHEN:

• They’re not in a hurry or looking for something specific (just

browsing)

• They just need an ‘emergency’ item (as long as they can find it

quickly and checkout is fast)

• The item needed is only available at one particular store (no

competition or choice of stores to shop)

STORE EXPERIENCE IS IMPORTANT WHEN:

• Buying high priced items

• Buying specialty items (like a prom dress)

• Buying items they need help deciding on, trying out or

understanding (i.e. electronics)

• In a hurry (especially around holiday times)

• Visiting the store for the first time

PAGE

10

When buying an outfit/dress for an

important event like prom.

– Female, Gen Z

It is important because if it is your first time there and

you had a good experience you will go back. If you

didn't, you will not return.

– Female, Millennial

It always matters except in cases of emergency. If

I need milk for my family at midnight then I will go

to the closest place so I can get it done quickly.

– Male, Gen X

When shopping for store specific items. If

something is only available at one particular store,

the experience itself means less.

– Male, Boomer

When I need to physically try on clothes,

shoes etc. to make sure they fit.

– Male, Millennial

It matters less when someone is just browsing

because they are not looking for something

specifically.

– Female, Gen Z

DEFINING THE IDEAL EXPERIENCE

CONVENIENCE STORE ENVIRONMENTPRODUCT INTERACTIONCUSTOMER SERVICE

When imagining their ultimate in-store experience, consumers look to four major categories:

88%VARIETY OF PRODUCTS

*Percentages represent importance of factors when shopping in-store. N=844

CONVENIENCE 86%

EASE OF FINDING PRODUCTS 86%

CUSTOMER SERVICE 81%

EASE OF RETURN 74%

QUALITY OF PRODUCTS 74%

STORE AMBIANCE 65%

VALUES & MORALS 64%

UNIQUENESS OF PRODUCTS 51%

STORE CLIENTELE 51%

One of the most critical in-store touchpoints influencing purchase behavior and loyalty is customer service. A

store can meet shoppers’ criteria by offering desirable, well-priced, quality products, but a poor customer service

experience can trump all else – and may result in shoppers walking away from a purchase, or worse, avoiding the

store the next time. At the very least, shoppers want to feel respected and welcome, but stores that go above and

beyond to gain loyalty offer that extra touch of personalized care, treating shoppers like a trusted friend.

MAKE IT PERSONAL

• Store employees are a reflection of

the company, and should embody

the brand’s values and personality

• While product knowledge is

expected, superior customer service

comes when employees have

personal, first-hand experience with

the products they sell

• Know the product selection and

store well enough to offer details and

advice

• Great retail employees listen to

shoppers’ needs and offer real

advice and personalized

recommendations without

pressuring shoppers to buy

• Those that truly go above and

beyond in generating loyalty

remember shoppers’ names and

shopping preferences

• At a minimum, retail employees

should make shoppers feel welcome

(via a friendly smile and greeting

when they walk in) – like they are

excited by, rather than bothered by,

shoppers

• Retail employees must be available

when help is needed (particularly at

busy/peak times), without invading

personal space. Shoppers also

appreciate when staff walk with them

to help locate a product

BE HELPFUL/RESPECTFUL BE A BRAND AMBASSADOR BE A FRIEND

CUSTOMER SERVICE

I feel like Customer Service IS the store. If you want my

business, then welcome me like a friend. I love it when I

know a few employees and they recognize me. It is so

much more personal and feels good. Makes me return

time and again. – Female, Boomer

The [JCPenney] employees are awesome because they

don't seem to be there just for the job itself, they reach out

to you on more of a personal, loving level … For example,

my husband and I went in to look for wedding rings … The

lady at the counter was so patient in helping us fit and

try/view rings ... Not only did she do her job there, she was

so excited for us and asked us many questions about our

plans for the wedding, where we're having it ... you know,

the more personal questions than just her job ... Long story

short, her husband was a pastor, who ended up marrying

us, and we bought our rings there with her help ... Before

we went to JCP, we went to Kohl's, and the lady there

actually sighed when I asked if I could try on a ring ... I was

excited to go ring shopping, but her actions just brought me

down. – Female, Millennial

CUSTOMER SERVICE

Close-up

experiences with

new styles and

trends

PRODUCT INTERACTION

ENCOURAGES PURCHASEPerhaps brick and mortar’s greatest leverage over other channels, the in-store, first-hand experience helps

consumers feel confident to try and purchase new products.

Shopping in a physical store gives me the ability to actually touch the product and see if it meets my needs.

–Male, Gen X

Loving technology like I do, it's almost like a sense of awe and amazement. Finding something new that you never

knew existed until you walked into the store and saw it with your own eyes. Getting to actually touch and feel these

little technological marvels in the palm of your hand is just awesome.

– Male, Millennial

Straightforward,

reliable return

policies that

mitigate purchase

risk

Plenty of mirrors

and fittings rooms

that are both

comfortable and

accessible

Samples or demos

to decide on right

product

Options to ensure

fit/quality (e.g. fit-

perfecting

technology, access

to touch/feel

products)

Consumers want:

PRODUCT

INTERACTION

CONVENIENCE IS EXPECTED

• Speedy check-out process with ample cashiers or self-checkout

• Employees that can help find items quickly

• Convenient store hours and parking

• Dressing rooms that are spacious and well-maintained

• Wide, clutter-free aisles that allow people to easily move throughout the store

• Clear and easy to read signage

• Products sorted and organized into categories

• Store layout that is convenient and intuitive so consumers can find items and sections quickly and easily

• Electronic order counters

• Kid friendly (carts, etc.)

• Nice carts or totes for carrying products around the store

• Phone charging or reclining chairs for those waiting either on others to shop or for a dressing room to open

NECESSARY: MAKE THINGS QUICK & EASY

Customers of all ages value convenience. While Millennials look for efficiency, Boomers look for stores that are

easy to maneuver. Pairing speed and accessibility with personal touches let consumers know that their time spent

in-store is valuable.

EVEN BETTER? ACCOMMODATE THEIR LIFESTYLE

CONVENIENCE

My perfect shopping trip is to get in, get what I

need, and get out.

–Female, Boomer

Being a mom of 3, getting in and out of the store

easily can be a challenge...so knowing where

products are, or should be laid out in the store

makes the trips with the kids easier, and less

frustrating...it only makes sense to put things that

go together – together.

–Female, Millennial

The ability to go in and get what I need,

without people bothering me or trying to push

products on me. I can go in and get what I

came for, and get out fast.

–Female, Gen Z

CONVENIENCE

ENVIRONMENT IS EVERYTHING

LIGHTING• Bright or natural lighting to see products clearly and make the

store look clean and vibrant.

SOUNDS• Relaxing music that’s not too loud, encourages positive vibes.

FEELING• Emotionally, consumers want to feel good about where they

invest. Supporting a company with poor values and morals

leave consumers feeling guilty.

APPEARANCE• Attractive displays and endcaps to encourage browsing.

• Flowers and/or other welcoming decorations.

• Modern design with a wide, open feeling.

• Mostly natural/neutral colors with areas of pastel/muted, bold

or trendy colors to catch the eye.

SCENT• Clean smell or smells of the perfumes, fabric or food sold.

• No overbearing scents of cologne or perfume.

• When applicable, new product smell (leather gloves, shoes).

[Stores] should be very up to date with an excellent design in all aspects. In other words, modern. It should have

an excellent sound system for music. Big, beautiful dressing rooms and the best racks and mannequins, etc., for

displays. It should be fairly neutral in color except for a few places that should have bold colors to attract

attention. Flowers in a few places would be nice. Artificial is fine. –Female, Millennial

While store environment and the sensory experience don’t make or break the purchase decision, the atmosphere

impacts consumers’ shopping mindset as well as their perceptions of the brand.

STORE ENVIRONMENT

LAYOUT

Larger stores allow for easy navigation. Wide aisles allow customers to

navigate a store that’s usually organized by product type in a more logical

way than smaller stores can pull off. That said, these cavernous spaces

can feel cluttered and dirty if not well maintained on a regular basis.

What makes big box stores different? They have benefits and drawbacks in three categories.

SPOTLIGHT ON BIG BOX STORES

STORE PERSONNEL

The upside is that more employees equates to more hands on deck to

field customer questions, help locate products, and maintain the store. The

downside? Consumers complain that some big box stores have poorly

trained employees that are lacking in product knowledge and fail to

respect customers.

CONVENIENCE

Big box stores are convenient for a plethora of reasons. They carry a

variety of products, preventing customers from having to drive to multiple

stores to get what they need. On the flipside, consumers have a hard time

with inconsistency between stores – they expect a similar experience at

each, and that’s not always what they find in terms of selection, layout,

maintenance, and management. This ultimately causes them to spend

more time shopping than they’d like.

EXAMPLE: TARGET

I love shopping at Target. It's a fun shopping

experience for me because I can stock up on all my

household supplies like toiletries, cleaning supplies,

etc. and then also browse the makeup, clothing,

and home decor. It's really a one-stop shop for me.

And the prices are low enough that I feel okay

buying myself a treat or two every time I go.

– Female, Millennial

I do not like shopping in Target. They are always

very full, and their clothes, and other things are

strewn all over, because people set things down

that they do not want, and the employees do not

put them back. – Female, Gen Z

These three factors (personnel, convenience,

and layout) can vary across stores and lead to

very different perceptions of the same brand.

IMPLICATIONS

PAGE 19

IMPLICATION SUMMARY

EMPLOYEES ARE ESSENTIAL IN BUILDING LOYALTY: INSTITUTE STRINGENT HIRING + TRAINING CRITERIAStore employees are one of the most influential touchpoints in driving purchases and building brand loyalty. Resources should

properly be invested to ensure they’re delivering the expertise shoppers desire in an accessible, helpful and respectful way. Hiring

employees that are passionate about the brand and industry will translate into better attitudes, better service and potentially

increase brand loyalty or sales. In-depth training and employee familiarity with the products equips the team to answer and assist

consumers and show them how the product can fit into their lifestyle.

ENCOURAGE PHYSICAL INTERACTION WITH THE PRODUCTBrick and mortar stores provide consumers the chance to experience and interact with products. By encouraging interaction and

ensuring that nothing impedes their exploration, stores can provide the confidence consumers need to go from browsing to buying.

SMALL PERKS GO A LONG WAY TO IMPROVE EXPERINCE Things like free samples, demos, small snacks/drinks, Wi-Fi, phone charging or even in-store coffee shops or restaurants are great

ways to help customers relax and enjoy themselves. Delivering value-adds in line with the brand help make shopping a rewarding

destination, not just a transaction.

WELCOME MILLENIALS AND GEN-Xers BY OPTIMIZING FOR FAMILY VISITSOffering a fun destination for the kids and a relaxing escape for the parents will keep Millennials and Gen-Xer’s browsing in the

store longer, purchasing more, and returning to the store more often to shop.

DO YOUR HOMEWORK ON STORE ORGANIZATION AND LAYOUTWide aisles with easy navigation through the store and product categories intuitively laid out within departments greatly contribute

to a positive experience and allow consumers to find their products at a relaxed pace. Take advantage of research that’s already

been done to educate yourself on what’s best for each type of store. Conducting shop-a-long studies gives brands the opportunity

to see their store from consumers’ eyes and generate ideas on how to improve layout, organization, and more.

FIND THE LOCATIONS THAT PLEASE AND REPLICATE ELSEWHERE FOR CONSISTENCYConsumers recognize that locations within chain stores are not consistent. These larger brands need to understand what people

love about their top locations and despise about their lower-preforming locations. Ensuring that the winning factors are

implemented across all locations will improve consistency and therefore experience.

THE METHODOLOGY

PROJECT SPECIFICS:iModerate conducted a survey with 844 consumers and followed up with

80 for one-on-one conversations (average duration of 60 minutes).

TARGET CONSUMER CRITERIA:• Age 15+

• Even Mix of:

• Gen Z (15-20)

• Millennials (21-33)

• Gen X (34-50)

• Boomers (51-65+)

• Male/Female

• Shop in-store or online at least monthly.

THOUGHTPATH™:Our qualitative research is based on a cognitive approach called

ThoughtPath. Drawing on theories of cognitive psychology, ThougthtPath

enables our skilled moderators to get into each consumer’s head and

discover what’s most important to them, what’s not, and why.

QUESTIONS? COMMENTS?

SAY HI, WE’D LOVE TO HEAR FROM YOU:

WWW.IMODERATE.COM // (303) 333-7880 // [email protected]

PAGE 22