The experience of shopping

Traditional retailers have suffered more than they probably realize at the hands of Amazon and other online companies. As volume trickles from the stores and sales per square foot decline, the response of most retailers is almost automatic: Cut labor, reduce costs, and sacrifice service. But that only exacerbates the problem. With even less service to differentiate the stores, customers focus increasingly on price and convenience, which strengthens the advantages of online retailers.

If traditional retailers hope to survive, they have to turn the one big feature that internet retailers lack—stores—from a liability into an asset. Stores will continue to exist in any foreseeable future—and they can be an effective competitive weapon. Research shows that physical stores boost online purchases: One European retailer, for instance, reports that it captures nearly 5% of online sales in areas near its physical stores, but only 3% outside those areas. Online and offline experiences can be complementary.

The traditional store, however, won’t be sufficient. For too many people, shopping in a store is simply a chore to be endured: If they can find ways to avoid it, they will. But what if visiting a store were exciting, entertaining, emotionally engaging? What if it were as much fun as going to the movies or going out to dinner—and what if you could get the kind of experience with products that is simply unavailable online?

This is hardly beyond the realm of possibility. Jordan’s Furniture, a New England chain, achieves some of the highest furniture sales productivity in the country by using themed “streets” within its stores, a Mardi Gras show, an IMAX 3-D theater, a laser light show, food courts, a city constructed of jellybeans, a motion-simulation ride, a water show, a trapeze school, and special charity events. Cabela’s and Bass Pro Shops not only have some of the highest-­rated websites; they also have some of the most engaging physical stores. These kinds of store experiences are expensive to create. Might digital technology improve the customer experience in stores more cost-effectively?

In fact, it is already doing so. Digital technology can replace lifeless storefront windows with vibrant interactive screens that change with the weather or time of day and are capable of generating recommendations or taking orders when the store is closed. It can allow customers to design products or assemble outfits and display their creations in high-visibility locations like Times Square. It can create engaging games that attract customers, encourage them to stay longer, and reward them for cocreating innovative ideas.

Digital technology—in the form of tablets, for example—can also give sales associates nearly infinite information about customers, describing the way they like to be treated and creating precise models of their homes or body types that enable perfect choices. It can change pricing and promotions accurately and instantaneously. It can provide customized recommendations. Virtual mirrors accelerate and enliven the dressing room experience by connecting customers with trusted friends. Technology can eliminate checkout lines, capture transaction receipts, file rebate claims, and speed returns. It can give a call center operator full access to a customer’s purchase and complaint history.

My objective here is not to enumerate every possible innovation. Rather, it’s to illustrate how the opportunities for digital technology in stores, mobile devices, call centers, and other channels are just as abundant and viable as they are for websites. Moreover—and this is key—retailers in many categories can link these channels and technologies to create an omnichannel experience with stores that is superior to a purely digital retail strategy.

One task is to apply these innovations early enough, frequently enough, and broadly enough to change customer perceptions and behaviors. Adopting successful innovations three years after competitors do is unlikely to generate much buzz or traffic. Of course, many digital innovations will fail, and the effects of others will be hard to quantify. So a second task is to upgrade testing and learning skills to 21st-century levels. It was hard enough to gauge the effects of pricing changes, store-format upgrades, or newspaper versus TV ads in the old world. (Remember John Wanamaker’s famous lament that he knew he was wasting half his advertising budget but didn’t know which half?) An omnichannel world makes those test-and-learn challenges look like child’s play. Retailers must now try to assess the effects of paid search, natural search, e-circulars, digital displays, e-mail campaigns, and other new techniques and third-party innovations such as SCVNGR, a location-based social network game—and must gauge those effects on both physical and digital channels (which include mobile apps as well as the internet).

Leading-edge companies such as PetSmart and the UK pharmacy chain Boots have begun applying science to this task: They are testing digital and physical innovations with clinical-trial-style methodology, using sophisticated software to create control groups and eliminate random variation and other noise. All this is costly, but it’s hard to see how retailers can avoid doing more of it.