Redesigning Retail into a Destination

Naseema Ali, Merja Halme, Banjo Lanre, Shreya Narang and Fahad Zahid
MBA Perspectives
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Key Takeaways
What? Customer engagement comes from a connected interaction of the physical space and social influences.

So what? Retailers can fully immerse their customers into their retail experience by entertaining all five senses.

Now what? Retailers can make changes to their retail environment often, but timing and degree should reflect their objectives.

MBA Perspectives: 'Big Design' is an exclusive AMA series examining customer experience design.

It is no longer enough for traditional brick-and-mortar retailers to compete on price and quality alone, given the proliferation of online shopping and increased availability of options. It is their physical space and customer experiences that must set them apart. Similar to how product packaging is designed to influence a customer's purchase decision, it is as important for retailers to package their stores not only to attract, but most importantly to retain shoppers.
To address these challenges, Lowes Foods, a food retailer in the Carolinas and Virginia states, redefined its customer engagement strategy by “Disneyfying” its retail experience. The grocery chain transformed its stores into a themed entertainment marketplace to become a more emotional and experiential retailer. It disrupted the grocery retailing market by uniquely positioning itself as a destination, appealing to customers’ inner child, where shoppers are entertained during an otherwise mundane, routine activity. As a result, Lowes Foods saw increases in both average basket size and number of transactions (Yates 2014).
According to a definitive article in the Journal of Marketing by Mary Jo Bitner (1992) titled “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” brick-and-mortar is the only retail channel that engages all five senses and creates social experiences through the interaction between employees and customers. Combining these into an entertaining experience, retail stores can successfully engage customers through the following recommendations, leading to greater loyalty, longer visits, and higher spending over the customer's lifetime.
1. Transform Atmospherics: Retailers have control over their physical space, such as layout, lighting, sound, and smell. These atmospheric elements elicit non-verbal cues and emotional and physical responses, which in turn influence the customer's perception, attitude, and actions (Bitner 1992). Lowes Foods, for example, fully leveraged the power of atmospherics through the way it redesigned how customers experience its stores. It created an atmosphere of amusement park meets farmers’ market featuring themed departments such as “Sausageworks” with quirky fixtures and a sausage professor; colorful produce layouts; and filling the space with the smells of freshly prepared foods. 
Shoppers can however, quickly become bored to the same stimuli. Thus, repeated exposure to the same stimuli can diminish affection for the store and lead to switching behavior. This presents a case for changing the stimuli environment as well as changing it frequently. Even a small change can increase the positive feelings for the store (Parsons 2011). It is therefore not enough to only have exciting atmospherics, retail designers also need to change them frequently, however small the change, in order to keep customers coming back.
2. Increase Interactive Social Influences: In a recent study of social interactions in retail stores, Zhang et al. (2014) found that interactive social influences tend to slow shoppers down and encourage longer store visits. In addition, interaction with employees often increases product interaction and purchases. At Lowes Foods, the frontline employees personify characteristics of the physical environment in their interactions with customers. In the “Chicken Kitchen” for instance, employees do a chicken dance; at the community table there is cooking and socializing events; and at the “Pick and Prep” department customers choose their produce and have it prepped to order.

Like Lowes Foods, service organizations can learn from the strategic insights gained by benchmarking the environments designed and managed in other industries and their approach to customer engagement. Testing ideas throughout the process is also important in learning what works for a particular customer base and a retailer’s bottom line. In a world with exhaustive options, evolving tastes and hectic lifestyles (Imlay 2006), redesigning the space into a retail destination is one route to differentiate from the competition and be a memorable experience for customers. It can achieve both marketing objectives such as driving more customers into stores and sales targets by increasing purchases per visit.

Imlay, Thom (2006), “Challenges in Today’s U.S. Supermarket Industry,” Microsoft Developer Network.
Parsons, Andrew G. (2011), “Atmosphere in Fashion Stores: Do You Need to Change?,” Journal of Fashion Marketing and Management, 15 (4), 428-445.
Yates, Kristina (2014), “Retail in the Digital Age: Chicken Dances and More”. CNBC Retail.
Zhang, Xiaoling, Shibo Li, Raymond R. Burke and Alex Leykin (2014), “An Examination of Social Influence on Shopper Behavior Using Video Tracking Data,” Journal of Marketing, 78 (September), 24-41.

The AMA is pleased to partner with Professor Markus Giesler and his MBA students from the Schulich School of Business at York University

Author Bio:

Naseema Ali, Merja Halme, Banjo Lanre, Shreya Narang and Fahad Zahid
Naseema Ali, Merja Halme, Banjo Lanre, Shreya Narang and Fahad Zahid are students in Markus Giesler’s Customer Experience Design MBA elective course at the Schulich School of Business, York University.
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