Features | From Pivot Magazine

Brick-and-mortar retail isn’t dead. It’s just different.

Why more and more brands are investing in physical locations—and letting customers try out their wares 

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Customer trying on red parka in the cold room at Canada's Goose's Montreal storeThe cold room at Canada Goose’s Montreal store (Photograph courtesy of Canada Goose)

At first glance, Lululemon’s new 20,000-square-foot, three-floor flagship store in Chicago’s trendy Lincoln Park neighbourhood looks pretty familiar: racks of rainbow-coloured yoga pants, hoodies and sports bras as far as the eye can see. Up the escalator, though, are a few things you might not expect: the brand’s first restaurant, Fuel, a serene eatery that looks like Gwyneth Paltrow’s living room; a meditation studio outfitted with beanbag chairs; and two workout spaces—one for yoga, one for high-intensity fitness. Forgot your workout gear? 

Not a problem. Visitors can borrow a set of Lulus and return them when they’re finished. Handing back a pair of sweaty stretch pants seems like a notable transgression of the old “you try it, you buy it” business model. But these days, giving customers the chance to experience a product before purchase has emerged as a strategy for driving sales, both in-store and online, and building all-important brand loyalty.

According to retail analytics firm Brightpearl, up to a quarter of retailers are planning to implement some form of “try before you buy.” Many have already started. At the Dyson demo store in Toronto’s Yorkdale Mall, you can scatter Cheerios on the floor and then clean up the mess with their vacuums. (You can also book an appointment for a free blowout with their Supersonic—because if you’re going to drop $500 on a hair dryer, you want to be sure it’s worth it.) Last winter, Canada Goose turned change rooms at several of its major retail locations—including Montreal, New York and Beijing—into “cold rooms,” winter wonderlands where customers can put the brand’s “warmest parka on the planet” claim to the test at -33° C. And Mountain Equipment Co-op’s new flagship location in downtown Toronto features an in-store climbing wall where experts and would-be adventurers can experiment with equipment.

Two students and teacher meditating in yoga class at a Lululemon in ChicagoYoga class at Lululemon in Chicago (Photograph courtesy of Lululemon)

Seeing brands invest heavily in physical locations seems, at first glance, out of step with broader industry trends. Thanks to the online retail revolution, experts have long predicted that physical retail would go the way of the rotary phone. For the most part, they were right: last year smashed 2017’s previous record for retail closures in the U.S. with brands like The Gap, Victoria’s Secret, Payless and Tesla announcing significant closings. “We used to hear all the time, ‘physical retail is dead,’ ” says Craig Patterson, editor in chief of Retail Insider. “But what we’re seeing now is it’s not dead, it’s just different.” 

Experiential retail is the surprising next chapter in the story of bricks and mortar. The millennial desire for instant gratification was easily fulfilled by clicking “buy” on a smartphone, but with Gen Z (between the ages of seven and 22 and making up a quarter of the global population), the pendulum has swung back. “This demographic is looking to form relationships with brands they spend their money on,” Patterson says. And if those experiences happen to be Instagrammable—the Canada Goose cold rooms turned into last winter’s hottest selfie location—all the better. “With big box retail, it was about getting in and getting out,” says Ryan Dostie, CPA and head of the retail and service group at Welch LLP. “Today, younger consumers know they can do that online, so with retail they want an experience.” 

According to Lululemon’s growth plan, the Chicago store is part of the “omni guest experience” strategy—a buzzy retail term that describes how contemporary brands are using e-commerce to leverage in-store visits and vice versa. The company’s ultimate goal is to enhance customer engagement, in part to double digital traffic by 2023. “It’s almost like a hybrid marketing and retail play,” says Patterson. “Yes, they’re happy to sell you a pair of yoga pants, but the larger focus is engaging with core customers and potential new customers.”

It’s a strategy with sound numbers behind it. A 2018 report from the International Council of Shopping Centres, a group that represents malls, reveals that opening a physical location leads to a 27 per cent hike in web traffic for established brands. 

For digital brands opening their first brick-and-mortar store, the spike (37 per cent) is even more dramatic. 

One such venture, the Canadian mattress company Endy, opened the Endy Lodge in Toronto earlier this year after launching as a digital-only brand in 2015. The pop-up location has a cozy Canadiana cabin vibe, and customers are encouraged to not just try out the mattresses, but take a nap. That makes sense, given that statistics from NPD Group show 55 per cent of shoppers see the opportunity to touch and try merchandise as the No. 1 reason to visit a retail location. Meanwhile, 65 per cent of Gen Z shoppers say they prefer feeling something before buying it. 

Dyson's Supersonic hair dryer and attachments on flat surface in front of a mirrorDyson’s demo store offers free blowouts (Photograph courtesy of Dyson)

These stats also explain why e-commerce sites are getting in on the try-before-you-buy trend. The Canadian clothing brand Frank and Oak offers a subscription service. Customers pay a $25 “styling fee,” receive a monthly delivery of multiple wardrobe pieces and keep (and pay for) only the items they want. The eyewear company Warby Parker ships multiple frames to customers before they have to make a commitment. “There is a cost associated with the shipping involved,” says Patterson. “But a lot of companies are finding that it’s worth it.”

At bricks-and-mortar locations, providing an opportunity to test drive means returns are a lot less likely. “If you’re in a Nike store and you’re actually trying running shoes on a basketball court, you’re a lot less likely to want to return them,” says Dostie. “That can lead to a significant cost savings.” Perhaps that’s why another study, conducted in 2018 by CPA Canada, found that despite the December rush, shoppers planned to spend 46 per cent of their holiday shopping budgets in-store.

Kate White, a professor of marketing and behavioural science at the Sauder School of Business at the University of British Columbia, explains that there is an added psychological component to try-before-you-buy. “Whether you’re letting customers try your product in the comfort of their own home or in-store, the point is you’re getting your product in front of them,” says White, who consulted on Lululemon’s Lincoln Park project. It’s the endowment effect at play—a phenomenon wherein we assign greater value to the things we own or have a chance to interact with, compared with identical products that we don’t have that attachment to. Translation: you’ll want that sweaty pair of post-workout yoga pants more than a pair with the tags still on.

COMPANIES WITH PURPOSE

Sight for sore eyes
Since it was founded in 2010, the American eyewear company Warby Parker has built a reputation for giving back. For every pair of glasses it sells, it ensures another pair finds its way to one of the 2.5 billion people in the world who need glasses but can’t access or afford them. Through partners in more than 50 countries, the business donates pairs directly to schoolchildren and trains social entrepreneurs to conduct basic eye exams and sell glasses to their communities at affordable prices.