Retail Renaissance: the resurgence of physical stores

Digital giants Meta (formerly Facebook), Amazon and Google agree. All three have opened new physical stores over the past year. This is not an accident. These companies understand that only through physical real estate can brands offer a true immersive experience to their customers.

The first ever “Meta” store opened this week just outside of San Francisco, California. Store team members are called “experience experts” – that name alone exemplifies the strategy being employed by Facebook. Shoppers are greeted with a range of wearable technology, from smart glasses to oculus headsets. The store is clearly an experience centre to drum up interest in virtual reality and the metaverse.

Google opened its first store 12 months ago in New York City – close to its Chelsea office, which housed 11,000 employees (before the pandemic, anyway). I visited this store in January 2022 and it really felt a lot like an Apple store, where customers can try Google products such as Pixel phones, Chromebooks and other gadgets.

However, unlike Apple, Google makes most of its revenue from advertising (upwards of 80%), so this store is clearly an attempt to allow customers to experience different products, providing an opportunity for Google to learn more about what customers want from hardware devices.

Amazon is much more experienced in opening and running physical stores than either Google or Facebook. Opening its first book shop in 2015, the digital giant has spent the past seven years experimenting with different store formats including bookstores, general merchandise stores, grocery and a series of small popups.

Each format has offered customers different experiences across different product categories, with Amazon constantly learning about shopping preferences, pricing and importantly, profitability.

Amazon shocked the retail industry two months ago by announcing it would close all 68 of its existing books, grocery and other popup stores. Instead, it is throwing its resources behind its new large-format grocery concept, Amazon Fresh. After a period of learning and testing, Amazon has chosen to fish where the fish are: supermarkets.

I visited one of the first Amazon Fresh stores in Los Angeles back in January and was taken aback by the experience. There are no checkouts. Amazon has taken the “just walk out” technology developed in its Amazon Go stores and doubled down. Thousands of cameras hang from the ceilings that are configured to angles which capture every shelf edge and every deli counter item.

As a customer takes a product from the shelf, the technology behind the cameras associates it with that customers account. When finished shopping, the customer does like the sign says, and “just walks out.”

One wonders about the scalability of the model – I counted 210 cameras in the fresh section of the store alone. Nonetheless, one cannot criticise Amazon for not innovating. There are now 30 Amazon Fresh stores on the ground with more to come. And later this year, the company will open its first fashion store, Amazon Style.

The strategy of opening physical stores has been taken up by countless other digital native retailers as they seek a better connection with their customers. Brands like Everlane, Rent the Runway, Allbirds and Warby Parker all began as online-only operations, but have embraced physical stores as an important element of the brand and customer acquisition strategies.

So, what does all this mean for traditional retailers? It certainly doesn’t mean business as usual. The retail landscape has shifted and traditional retailers must innovate. Whilst it is true that 80% of all retail sales still take place in shops, it is also true that three quarters of those in-store purchases involved some aspect of online interaction along the customer journey.

Stores are becoming experience hubs, where customers can touch and feel products and interact with brands. Technology and innovation are key to meeting new customer needs, like seamless click-and-collect and tech-enabled change rooms.

Traditional retailers must embrace technology not just behind the scenes with sleek websites, but also in their stores to drive an elevated customer experience.