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Brands That Excel in Customer Experience Are Winning Big in Brick-and-Mortar Retail

When Toys "R" Us announced last month that it would be closing all of its U.S. stores, some observers immediately jumped to the conclusion that online retail had claimed another legendary brick and mortar brand. Commenting on the story, one bankruptcy lawyer told Business Insider that “Brick-and-mortar stores are just getting bludgeoned to death by e-commerce.” That’s certainly an attention-grabbing quote, but the facts say something different.

In total, 4,850 more stores were opened last year than were closed, according to IHL Group. That includes major chains and retailers; when you factor in small retailers, the net gain was around 10,000.

That’s not to say stores aren’t closing. But, that same IHL report revealed that nearly 28% of store closings last year were tied to five major chains (RadioShack, Payless, Rue21, Sears and Ascena, which operates brands like Ann Taylor and Loft).

And, of course, there’s the matter of Toys "R" Us, but it doesn’t take much digging to discover the root of that retailer’s problem. The company was deep in debt, to the point that it couldn’t afford to invest in improving its stores, which meant it couldn’t offer its customers a unique, modern and engaging in-store experience or drive enough sales to pay off its massive debts.

Customer experience is ultimately at the heart of the Toys "R" Us story, and it’s emblematic of an issue many other large retailers are facing. Overexpansion in the 90s and early 2000s led to a glut of poorly performing retailers with in-store experiences that aren’t fun, educational or engaging for shoppers. At a time when better convenience and price can be found online, there just isn’t a great reason for shoppers to visit these types of stores in the first place. Other companies are getting in front of this problem before it gets worse. Sam’s Club, for example, is closing underperforming stores and refocusing investment on the stores with potential.

Elsewhere, other brands have progressed even further, to the point where they’ve created in-store experiences that are so engaging and unique, that they’re succeeding in the physical environment far beyond what the dire headlines would lead you to believe. These are the brands that are charting the future of physical retail, showing the industry that brick-and-mortar is still a venue where retail business can thrive. Here are a few examples.

Nike Keeps Shoppers Active

Nike is frequently experimenting with its in-store experience. Last month, the company said that it would soon test in-store mobile shopping in two stores, as a path to engaging younger shoppers. It also ran an in-store virtual reality video game, which allowed shoppers to test out sneakers on an in-store treadmill, in several of its Chinese stores earlier this year.

But, its success isn’t just about gadgets. Nike also succeeds on the basics of retail execution and customer engagement. One reporter recently covered her experience walking through a Nike store and an Under Armour store, saying that she found Under Armour’s shop to be “empty,” “repetitive,” “confusing” and “underwhelming.” The Nike store, on the other hand, felt brighter, more contemporary and offered a more upbeat atmosphere, in part because it was simply busier – there were way more shoppers trying out different styles and engaging with in-store activities, like a treadmill and a basketball court to test out shoes. In this case, Nike gave its customers more to do in their stores, and therefore more reason to stay a while and buy something.

Ulta Thrives in a Growing Market

Beauty is a major bright spot in physical retail, and Ulta might be the vertical’s most shining example: the company’s sales grew 22% in the past five years, surging on the back of strong product sales, a popular in-store salon offering, and a growing group of 28 million loyalty club members.

Ulta is not alone. The beauty category is a $130 billion industry in terms of services and sales, and other brands, like Sephora, are also enjoying great success. But, Ulta’s perspective on in-store retail speaks directly to the biggest opportunities across every retail category.

In comments at ShopTalk last month, Ulta CEO, Mary Dillon said her business wants to provide inspiration to its consumers. They have 1,074 stores in the U.S. and they’re focused on convenience, creative brand experiences and customer personalization. Dillon believes that technology is most powerful when it serves people, so she’s looking to find technologies that free store associates’ time to spend with consumers. That’s how the company will continue to stand out in a growing market.

Build-A-Bear Makes Toy Shopping Fun

If Toys "R" Us closed because shoppers would rather buy their toys online, then why is it that another toy store, Build-A-Bear, has seen four straight years of profitability and a 12% growth in its physical store footprint over the past five years?

It’s because Build-A-Bear stores are fun – shoppers come to literally build their own teddy bear, with all the accessories and stuffing you could ever ask for. It’s an engaging, interactive experience for kids and adults alike, and the process of creating your own stuffed animal fosters a strong emotional connection that builds brand affinity and loyalty.

But, the best part of the Build-A-Bear story is that the company hasn’t rested on its laurels. In response to sliding sales a few years ago, new CEO, Sharon Price John oversaw several changes to improve existing store designs and explore new locations in places like movie theaters, cruise ships and vacation resorts.

Every brick-and-mortar store is facing the same external pressures, but they also enjoy one key advantage over e-commerce: today’s consumer is searching for great real-life experiences. These companies demonstrate that with the right ideas and focus, retailers can step up to deliver brand-centric customer experiences.

Gina Ashe is CEO of ThirdChannel.
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