Dying or evolving? Exploring the changing face of brick-and-mortar retail

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Katie Cantu: Hi there. I’m Katie Cantu, strategist at Ignite Partnership.

Mike Covert: I’m Mike Covert, founder of Ignite Partnership.

Katie: You’re listening to Technically Human where marketing experts talk about how to find the soul of technology products and services. What really makes humans tick when it comes to tech? Join us on our cultural expedition to find out.

This week on Technically Human, we’re talking about the changing landscape of retail. We hear it every day, “Retail is dead.” But is it really dying, or is the way people are shopping just evolving?

Mike: There’s no doubt that we are in the middle of a major sea change when it comes to brick and mortar. We understand that. Today, we are going to dive into what is actually taking place out there, listing to a variety of experiences that hopefully surprise and delight shoppers to keep them coming back for more versus these headlines that we’re reading, which these are dead spaces waiting to happen.

Katie: And we have the perfect guest here to riff with us today. I want to introduce you guys to Michael Koch, the senior director of retail development for Samsung Electronics America.

So, we’ve worked with Michael for years here at Ignite. And he is probably our most accomplished guest to date. Michael and his team are responsible for the design, and development, and maintenance of over 50,000 retail locations in the United States.

They were also responsible for creating the 55,000-square-foot Samsung 837 flagship store in New York City. You may have heard of it because it’s received worldwide recognition and awards from Forbes and Design Retail as a top experiential location.

Michael’s other noteworthy achievements include Apple’s signature locations in Berlin, Barcelona, and Turin, as well as Guess flagship retail locations in Milan. In addition, he was responsible for the emblematic resorts for the Ritz-Carlton in Florida, San Francisco, and the Cayman Islands. [gasps] Michael, did I miss anything?

Michael Koch: No, I don’t think you missed anything. All I can say is I’d like to meet that guy.

Katie: [laughs]

Michael: I’ve had the privilege working with a lot of great people throughout the world. And, you know, when you build locations throughout the world, you get a lot of different experiences. You’re seeing what’s working versus what might have been tried before. So it’s been a great career across the board.

Mike: Let’s talk about the trophy of 837. How did that experience in that build reflect what you’re seeing from a retail trend standpoint?

Michael: Well, it kind of relates to what the industry is doing. We have to look at what we do every day, how the consumers interact with our products, and then how we can change consistently in order to keep it fresh. A lot of people look at it from that environment of, “Wow, that’s taking a huge risk, putting out a big store that isn’t really a store.”

We call it the Young Store, we don’t sell anything within the location, outside of coffees and maybe some bagels and donuts. Well, when you create something like that in an experiential location, it has to be to the position where you’re actually attracting all of your consumers simultaneously and predicting what they’re going to need.

And then creating a space that’s modular, where you can adapt it in the future, so it’s not dull. As you’ve seen over the last 20, 25 years, a lot of big-box retailers have gotten to a position where they’ve become dull, and they’re trying to innovate and they’re trying to shift. You’re looking at what Target’s doing now, what Walmart’s doing now. I mean, you saw the other day, Walmart is actually selling cars now.

So when you look at the technology experience within Target and how they’re doing it in any department, everybody is moving toward changing how they face their consumer, and more importantly, how their consumers react to their particular products.

From the prediction studies and the traffic flow studies that we did early on, almost two years ago now, the consumer that’s walking in this space is doing exactly what we thought they would do from the moment they would walk in the door.

Katie: Oh, wow.

Mike: Are there any surprises, two years later?

Michael: I’m really surprised at some of the feedback, those people that come to us and say, “I never expected something like that to have that much of an impact.” We created the single biggest mistake in retail.

[laughter]

Michael: And we did it twice. When you take that massive void section out of the middle of that location, when you’re talking about leasable square footage, salable square footage, and then getting rid of it to create that big void for that 90-foot screen, you look at that area and people say, “Nobody would ever do that in New York City.” Well, we did it twice.

And that seems to be the single, greatest attraction when we’re showing Super Bowl events, the World Series, we’re showing various catering and cooking events. People are naturally attracted into that space.

Mike: Katie, what rings true to you?

Katie: What I think is really interesting, and what I saw a lot of in there, is not only are you attracting your Samsung customers and your Samsung audience, you are attracting an entire other level of people who may potentially switch to your brand.

It’s amazing how many iPhones you see walking around in that space, taking pictures and sharing things, using the social media tunnel that’s in there. You’ve really created an impression of the future of technology. It’s very impressive.

For our listeners, we’ll put a link in the podcast transcripts, so you guys can go check out some photos and pictures from there. Hopefully, you’ll get a chance to visit yourself. I’ve been there twice, and what I hear every time from people who I can tell are not, you know, Samsung aficionados is, “Wow, I didn’t know they did this.” Right?

I’d be so intrigued. The strategist in me says, “What’s the outcome of this?” I wish I could follow that person and see if in one month, two months, half a year down the road, if they have made the switch or if they have bought a Samsung product, because I think those things stick in people’s minds, right?

It’s not just all about what the POP says or converting in-store at that time. We know that the sales cycle just looks a lot different these days.

Mike: I think what’s interesting about just listening to you both is the fact that this innovation came from breaking what you would call some cardinal rules of retail—revenue per square foot, traffic flow, inventory control. What other cardinal rules do you see being broken that are going to benefit this idea of retail being an experience, which you both just talked about? Michael?

Michael: Sure. Most retailers can’t commit those mistakes in the first place. You know, Samsung is in a unique position because of who we are and the breadth of the products that we sell. We can do this type of venture and basically take those risks. A lot of retailers can’t as you know.

So when you look at this particular environment, it becomes like you mentioned earlier, Katie, about technology and your phone and all that stuff that we have. It’s about immersion. How do you relate to a product? How does the product relate to another product? And how do both of those relate to your life?

So the one thing that I would say that we did exceptionally well was you put a lot of technology inside of a space, in a very small space. People, when we first started, they thought that it was a big building, and it’s really not.

You take in all of that together and you make it comfortable, where people don’t feel like they’re being intruded on. The technology is there but it’s unintrusive. It’s there for you to learn, it’s there for you to touch. And our sales force that’s there to kind of walk you through the products are there, but they’re not in your way. It’s a unique experience not just from a physical environment, but what the takeaways are.

I use that one picture where you take away somebody that’s standing in the middle of it, right prior to opening. He’s looking around going, “Wow, look at this.” That’s the type of thing we want, but we want it for every single individual. We want every individual to react to the entire environment differently because we want it to be their experience, not Samsung’s experience.

Katie: Who else would you say is doing this well?

Michael: Certainly Target’s out there changing their E&E department. Walmart is changing their E&E department. You got TracFone’s building stores now. AT&T, and Verizon, and Sprint have always done great work. And T-Mobile has as well.

You go into their flagships, it’s all about immersion. How does our experience and our lifestyle—you’re hearing that word a lot, lifestyle—impact what you need out of our product?

You have Amazon selling groceries in a store that looks like a Starbucks, where you don’t actually interact with somebody, you go to a locker and pick up your hot food, you pick up your cold food, and you drive away.

Katie: One of the retailers that we’ve talked about before on this show, and they actually carry some of Samsung’s products, is Pirch.

Mike: Katie, just for our listeners that may not have a Pirch near them, it is a premium retail spot that showcases different rooms in the house, the appliances, and home goods that make a home an experience. They’ve set it up, literally along the compartments and living spaces of a typical home environment.

Katie: That’s right. If you’re in the Dallas area, NorthPark has a location. And it’s awesome. They didn’t take the full leap, necessarily, that 837 did. But, they are providing more of an environment, an experience to hang out.

Mike: How does technology play into that retail experience from what you’re seeing?

Michael: It’s actually making an environment that’s fun again, but it’s actually needed. It’s actually assisting your life. It’s not just about security of your home, etc., it’s about knowing what you need out of anything that you interact with every day. Look at televisions. You pop up the new Samsung QLED TV, and you look at those apps down at the bottom, and it reactively knows what you like to watch.

The little screens down at the bottom say, “Hey, ESPN’s on right now,” or, “Hey, it’s six o’clock at night and the news is on right now on this channel. Just click here.” Now it’s reactive. It’s making things simpler for you. Now, in my case, it’s always the news is on. “Hey, click here.”

Katie: [laughs] Right.

Michael: It’s about your complete life. The internet of things is an infant. Less than 2 percent of the overall retail forces tied in together. So as you start to see that shift of how all of the products are starting to connect together, SmartThings is a tremendous innovation through Samsung.

When you see what SmartThings does for your home, how your connected home isn’t just a catch phrase anymore, where all of your home is connected to everything you are and everything you want, and it’s predictable.

What I would suggest with some of the companies that are out there doing it, the Fords, the Pirchs, the Amazons, is making sure that you don’t alienate the existing customer, because we’re so forward thinking that you can’t just change the industry on a dime.

The industry has to slowly change. We’ve talked about the five generations of consumers that are in the workforce today. Well, they’re also in the buying force today, so you’ve got to make sure you’re comfortable with those people and then obviously looking forward to the future.

Mike: One of my favorite features about 837 is that social media wall, which makes every experience infinitely personalized to the person walking through that. There’s nothing quite like it. I knew what to expect and I was still blown away when I actually got to experience it.

We talked to folks that need retail for their businesses to thrive, and there still seems to be a hesitancy toward allowing an ecosystem into the retail environment that allows for that personalization. The far swing was what we’d call “Minority Report.” How do you see that changing or do you even agree with that hesitancy?

Michael: Oh, it’s definitely there. I mean, you look at some retailers that are successful right now, and some of the ones that aren’t successful that have been struggling. Some of the big-box retailers that failed to morph with technology. You know, the Sears, the J.C. Penney, the Kmarts, those environments are having to adapt just to survive. And then there are the other environments that are adapting to enhance their business.

So when you look at that particular effort, you’ve got to be able to say, “Is what I’m doing on display simply because I’m trying to put products out there?” The days of direct selling have changed. It’s not about, “Hey, here’s a bunch of 100 TVs, let me find one that works for you.”

Now it’s about, “Hey Mike, let’s talk together about what you want out of a product, let’s figure it out.” And then is that environment through a salesperson, or is it done through some sort of business technology like retail mode or some sort of immersive piece that people can associate with and feel comfortable with?

The tunnel we hear about a lot at 837, we do. But the nice part about what the tunnel is, is that particular area of 837 can be transformed. We can put a new modular display in there. We can change the recording studio that’s in there. We built a tremendous amount of infrastructure into that building to make the space change, which inevitably is what our consumer wants.

Do we change it every six months? Do we change it every year, every two months, or whatever? We know that our consumers are a demanding consumer, we don’t want to create a static environment. And a lot of retailers have a lot of static environments right now that has to change.

Mike: Katie, what do you think is holding up the full-bore retail immersion into technology that allows for that personal experience that Michael just talked about?

Katie: I think it’s a beast to tackle, right? There are a lot of interesting stakeholders involved. It’s not only getting a brand buy-off, but getting a major retailer like a Best Buy or a Walmart to say, “Yes, I’m in. Hook in to the backend of my POS system, let’s work on this together.” Right? And that’s a really big leap for them. There are a lot of challenges there.

And one of the things we talk frequently to brands about is in the interim there are ways to get around that, right. We know that we’ve got to crawl before we walk here, and we’re not just going to blink and wake up in “Minority Report.”

There are ways through short-code programs and virtual offers, taking advantage of some of what’s in Zone 3 when we talk about on-device videos and sizzles. They can really create that digital engagement and start to have a two-way conversation with the consumer. It doesn’t necessarily have to take the leap of a retailer getting involved. That’s one step for brands.

As far as when it comes to a retailer and the hesitancy to do that, that is no easy task. It’s similar to what Michael was talking about when we think of the connected home from a consumer’s standpoint. One of the things we’re still encountering, right, is not everything always works together.

We’re making strides in that direction, but I think we’re going to experience something similar from a retailer standpoint which is, it’s hard to get everything to talk to one another. Right? We have a POS system on the backend, we have all of this data, how do we match it up, how do we please brands without favoring one over the other?

And ultimately, how do we provide an end user experience that our consumers are going to be excited about and not threatened about? We’ve talked about this before, there is certainly still a creep factor to some of this, right? I think a lot of people have surrendered some of their privacy concerns, because they see the value that it brings and the personalization it adds to their daily life, but it’s a fine line. You’ve got to be careful to not scare off your customer base there.

Mike: I’m really curious about something. So, you can’t pick up the business page without seeing what the media feels about retail, and its imminent demise. And it’s getting—the drum beats sounds louder and louder.

You can’t really talk to a consumer, especially ones that have already found the magic of subscription and auto delivery, everything from groceries to home goods, without saying, “Why do I really need to walk into a store anymore?”

What does the drum beat sound like from a retail and brand standpoint? How do they really feel about the direction of this industry and the opportunities in front of us?

Michael: I go to as many as three or four trade shows a year. You know, feel the pulse of the people that are out there, see what they’re saying. And that fear is there, the carpenters, the electricians, the builders, the general contractors, “Oh, brick and mortar, is it really dead?” That’s usually one of those sessions that’s in every single trade event I’ve ever been to.

But at the end of those particular events, I walk away going, “It’s not.” Because we’re involving people that are new in the industry, they’re new designers have fresh ideas, you’re dealing with people that have been embedded with the industry for 25, 30 years, and they’re creating innovative ideas. And then you look at the culture by which Americans are. In United States I can say we’re shoppers. We’re shoppers.

I’ve built a retail platform in virtually every country in the world, except for Cuba and I will one day. I will one day.

Mike: You have a better chance now.

Michael: Yes, I do, [laughs] but I will say that the American consumer is different than any other consumer throughout the world. They want personal interaction. They want connection to a product. And that human interaction’s going to be there regardless of technology, regardless of being able to buy it online, which only 30 percent of the people are currently doing, although they do shop a lot online, they’re only buying in limited portions. They still want that personal interaction to give them that attraction, that connection to a given product. Why does this product work for me?

And when you look at retail, I’m excited about it because retail needs to change. And it’s in the middle of that very beginning of changing. To me it’s exciting to see, as my career winds down, I look at it from a perspective of, “What it’s going to be when I finish versus what it was when I first started in ’93.”

Mike: Kind of like Cuba?

Michael: Yes, very much so. Very much so.

Katie: [laughs]

Mike: Katie, what do you think?

Katie: You know, I think Michael hit the nail on the head. I think that, in our experience, what we’re seeing from clients who work at these huge brands, right, I think for the most part we’re not seeing fear, we’re seeing a sense of opportunity. I mean, this is a pivotal moment for brands. They either have to adapt or…

Michael: Perish.

Katie: Right.

Michael: And it’s not just about direct consumers. As you’re seeing how our lifestyles are changing, it’s about business as well. When you look at a 5G network, I mean, trying to explain a 5G network at its bandwidth and how it impacts your personal life, “Oh, I can pull up videos on my phone really quick.” That’s not what it’s about.

When it’s WiFi and you’re dealing with all this wireless coverage on a 5G bandwidth, it’s going to make every piece of Ethernet cable that’s inside your building obsolete. So you’re going to see a lot of changes happening. Not just from an infrastructure, in business, you’re going to see retail changing and how retail to consumer changes.

You’re going to see personal interactivity with how you interact with our products. That’s going to change. The future for retail is exceptionally bright. I don’t think you’ve seen this shift in retail since probably the early ’50s. This is a very exciting time for retail.

I heard one consumer a couple of weeks ago, we were talking about interactivity in people’s approach to a product. And the takeaway I got was this, they honestly felt they wanted to make the product theirs. They said, “I would like this thing to, I wanna make it mine.”

And when you look at that, we take that particular environment, adapt it into a retail experience whether it’s a single fixture, or a table, a store, a building, a car, or whatever, there’s going to be the need for interaction. I don’t think brick and mortar is ever going away. It is going to change though.

Katie: We talk about that a lot as well, which is, especially in the consumer electronics category, of course, people are shopping online. They are buying these things online. But what do we see again and again? They’re walking into a Best Buy to try it out, to test it out, right?

So, the onus really is on a retailer to say, “Hey, there’s a reason to buy it here.” Like, if you want to keep having these experiences, and walking back into our store, and touching and feeling products, and understanding how they work, eventually, hopefully, the consumer will make the transition to purchase in that store. And that’s going to be a hard lesson for some retailers to learn. It already is, right?

Michael: Yeah. When you’re doing a market trends in analysis of what consumers are doing, the next time you’re in a store, I won’t name one specifically, but go into a big-box retailer and just spend five minutes watching your consumer. Obviously, men are very different from women, older are very different from younger, etc.

But just take time to watch what they do. And when you watch what they do, they’re looking for various products for a specific reason, they want to interact with it, they want to play with it, they want to test it, and every now and then they might look around for somebody to talk to.

So you want to be able to say, and then obviously, that key addition with technology is, I want to make sure it’s the right price. I’m going to go find the same product that I just saw near me, and is it the right price? Do I go buy it on whatever network, it could be Amazon or whatever, but people are going to do that in order to shop.

Mike: You brought up a really interesting point that someone made to me the other day about the nature of what marketing is and where it might need to go. Is our job to create memorable impressions, or is our job to help people make the decisions? There’s something to be said for that.

My goal is to help, you said it with TVs earlier, my goal as a brand is to make sure you find the right one. And I’m going to give you resources not marketing impressions to do so, whether it’s in retail, on your phone, or otherwise. And I thought that was pretty provocative as well, because marketing is going to have to change if retail changes, to some degree.

Michael: Very much.

Katie: Yeah. There’s a level of authenticity there, right, that people have the expectation that a brand is going to help them make the right decision, not just sell them something that they don’t need. We’re living in a different age now, right, people expect a little bit more. I don’t think brands can get away with saying one thing and doing another even in a retail space.

Michael: Well you look at technology is cross category if you want to reference the various industries that we interact with. Some of the things that we’re pioneering in technology in retail are then transforming how hospitality is working, you know how the food and beverage industry is working obviously. Look at women’s clothing, how that industry is changing.

You know, so, how do they apply? How does our technology gains, and wins, and losses, and learnings, how does that apply to the other industry? We’re just at the beginning. It’s got so many things that are going to change over the next few years. It’s exciting just to think about what our potential is.

Katie: Absolutely. Well, I feel like we could talk about this for days, but unfortunately, I think we are out of time for today. Thank you so much Michael for coming in, hanging out with us…

Michael: I appreciate. Thank you.

Katie: …riffing on retail, always a good time. To learn a little bit more about the future of retail, take a look at our blog at IgnitePartnership.com. Like I said earlier, we’ll also put a link to Samsung’s 837 space. Definitely check that out if you get a chance. It’s like nothing else I’ve ever experienced at retail.

Mike: Thank you very much. We’ll see you next time.

Michael: Absolutely. Thanks Ignite Partnership.

Mike: Ignite Partnership is the marketing agency for technology companies that want to understand and capitalize on complex buyer journeys. Ignite has brought life to tech since 2009. To find out more, visit IgnitePartnership.com.