Four Reasons Why Retail Labs are Big Business in 2019

Traditional retail as we know it is dying…

Legacy retailers are going bankrupt; brands keep decreasing their store count; and e-commerce often overshadows physical retail when it comes to speed, selection and innovation.

But it’s not all doom and gloom, especially for retailers who are more curious about the future of retail than afraid of it.

Earlier this year, Bed Bath & Beyond announced it was closing “a minimum” of 40 stores. Such a headline would usually send shivers down an industry analyst or investor’s spine. But the retailer’s latest spate of closures is actually part of a restructuring phase involving a new fleet of Next Generation Lab stores, which will allow the retailer to test new products (or lack thereof), experiment with store layouts (including improved sightlines and better cross-merchandising), and reimagine the customer experience. And so far it’s working (based on early results, sales in the new stores are reportedly 2.2 percent higher than standard BB&B locations).

It’s not the only retailer rethinking the in-store experience and how to provide a better service to its customers. Everyone from 7-Eleven to Walmart is adjusting their approach in an effort to modernize stores. To do so, they’re transforming mostly defunct locations (or creating new ones) to test new ideas and rethink tried-and-true ones.

Here are four reasons why retail labs and experimental concept shops are big business for brick-and-mortar retailers in 2019 and will be for the foreseeable future.

 

Bigger isn’t always better

Big Box stores are disappearing as consumers move towards online for everyday essentials and items that don’t always require a store visit. That’s why retailers are getting leaner, reducing their footprint and moving to small-format stores to cut down on inventory, employees and energy expenditure, and gain new customers. 

Target and IKEA shrunk their size and moved into downtown cores to capitalize on population-dense urban markets with money, limited living spaces and a lack of transportation to pick up large items that would usually require a car. And chains like Macy’s, Bloomingdale’s and Nordstrom are all experimenting with small-format concepts that operate like retail labs to test layout and product selection (the latter of which is going to the extreme of opening inventory-less stores that emphasize services over goods and garments). Even Toys “R” Us plans to rise from the ashes next holiday season in the form of a more boutique 10,000 square foot store that operates like a “little startup.” 

 

Local is the way to go

Many retailers are experimenting with an ever-rotating array of merchandise defined by market preferences and potential sales. That may not sound revolutionary. But by offering a curated collection with a possible expiration date (like Macy’s does with concept shop-within-a-shop Story, which rotates its lineup every two months) and products that are hard to find anywhere else, retailers and brands are enhancing the in-store experience by making their products seem more exclusive, and inspiring consumers to snatch them up immediately.

One of the ways world-renowned retailers and brands are doing it is by customizing their offerings to local markets. 

The North Face’s newest location in Williamsburg, Brooklyn offers a curated selection of goods tied to the interests of residents, and the store’s lineup is altered from one month to the next accordingly. (The store even uses heat mapping to monitor which products and aisles get the most traffic, and presumably refines its merchandising approach based on the results). 

Then there’s Power Store, Foot Locker’s latest concept shop, which offers “exclusive, city-centric products” inspired by nearby Detroit for the sneaker-obsessed. (The 8,500 square foot space is also designed to accommodate in-store activations for the sneakerhead community, proving once again that there’s more to the in-store experience than strictly what you sell.) So far at least a dozen Power Store locations are planned for 2019.

 

Salon at Primark's Birmingham department store

 

Stores at your service

Developing a memorable in-store experience isn’t just about the products you sell, but the atmosphere you create, and one of the ways to do that is by branching off with services aligned with what’s available in your stores. Retailers and brands are using retail labs to test their ideas.

7-Eleven recently opened its first U.S. lab store in Dallas. The state-of-the-art attraction is not only used by the international company to test new products (like freshly baked cookies) and layouts (it sports a craft beer station for the serious hop head) but offers customers an in-store restaurant, patio and indoor dining area, too — now that’s convenient. Primark, similarly, recently opened the world’s largest fashion retail store and filled it with a barbershop and a beauty salon (pictured above) to convince consumers that it’s a go-to destination for more than just fast fashion.

But when it comes to in-store services, CVS Health has seriously upped their game with three new health-focused concept shops in the Houston area (and after a strong first quarter, more are on the way) that look to address chronic and lifestyle-driven sicknesses. In addition to offering standard pharmacy staples like prescriptions and non-perishables, CVS is working to make customers more health-conscious and happy in their day-to-day lives with an expanded health clinic (for general health screenings and lab testing), a wellness room (for yoga and seminars) and specialty staff (including dieticians) that can guide them to healthier choices.

 

It’s time to get tech-savvy

The majority of retailers mentioned so far are experimenting with some technology — be it scan and go, self-checkout or augmented reality — to find new ways of improving the in-store experience. But Walmart is undoubtedly the most ambitious when it comes to technological transformations.

The multinational superstore juggernaut recently opened its first Intelligent Retail Lab in Levittown, New York. It’s unlike any Walmart you’ve seen before, and that’s on purpose (the retailer designed the stunning store to make it pleasing to customers and assuage any fears about artificial intelligence they may have). The 50,000 square-foot location is equipped with AI technology that helps the retailer track inventory, detect spills and monitor the status of food that could spoil, as well as reduce the wait time for shoppers and guarantee online orders are ready for pick up, and that’s supposedly only the beginning. (Similar technological innovations, such as aisle-scanning robots, are rolling out to 300 different locations.)

 

Thinking Outside the Box Pays Off

What’s sold in stores isn’t the only thing that affects a retailer’s bottom line — it’s the experiences it puts forward, the environment it creates and what sets it apart from one store to the next, too.

That’s why retail labs and concept shops are the new testing grounds for today’s retailers. They allow them to gauge the effectiveness of modern merchandising and promotional strategies, solve current problems through technological innovations, anticipate the future needs of customers and rethink the in-store and customer experience as a whole — even if it involves hosting yoga classes or making outdoor gear more hipster-friendly.

Not only is the move to more tech-driven and agile stores gaining a lot of attention from industry insiders and pundits who are fed up with retail’s lack of ingenuity and experimentation, but customers too.

As the saying goes: physical retail isn’t dead, but boring retail is. Retailers and brands who continue to think outside the box in the form of retail labs and other forward-thinking innovations will surely live on.