Opening a successful shop in 2018: winning on retail experience

There’s no denying that starting a retail business in the UK in 2018 is more difficult than it has ever been before. With major brands like Toys’ R ‘ US and Maplin closing entirely, other brands like House of Fraser and Carphone Warehouse consolidating and two pubs closing every day – you’d be inclined to think the outlook is all doom and gloom. Fortunately, it’s not all bad news as the CBI showed robust retail results for July, fast-fashion retailer H&M plans to open 425 new stores globally and coffee shops are growing 7.3% year-on-year.

Retail and hospitality are trending towards two separate propositions: some companies will win on price, and some will win on experience. Many retailers do not compete on price and do not compete on experience. This failure is one of the key reasons why the middle of the market is being gutted.

If you’re looking to start a retail business in 2018 then focusing on either price or experience will be essential to your success. The Harvard Business Review first identified the trend of experience as the future of retail in 1998. The article starts with a great analogy about the birthday cake – a product that was once made with cheap and accessible ingredients. The post-war convenience revolution introduced pre-mixed cake mix, saving bakers time mixing ingredients. Later on, the popularity of theme parks and restaurant chains let to an economy where companies got paid exponentially more money to handle your child’s entire birthday celebration (…including the cake).

“Economists have typically lumped experiences in with services, but experiences are a distinct economic offering, as different from services as services are from goods.” – HBR, 1998

Experiential retail and hospitality is multidimensional – the product is only a part of the offering. Here are our tips on improving your retail experience:

Getting the basics right

Waitrose consistently wins the Which? survey for best UK supermarket in terms of customer satisfaction, beating out M+S and Sainsburys on appearance, queue-length, availability ease of finding products, and overall quality. Shouldn’t optimising these aspects of your retail experience be the default?

Not always. In fact…not often.

Experiences are multidimensional

When opening an experience-driven shop or restaurant, you need to remember that the experience goes beyond the product. Apple stores (with a rumoured 60% margin on iPhones) add to the customer experience with generous product replacement policies, friendly and knowledgeable staff, training offerings for both inexperienced users and small businesses and a place to charge your phone that often exudes excellent architecture and interior design.

Apple is the most valuable company on Earth, and the Apple store is the highest revenue per sqft retail offering on Earth too. The Apple store is a place to learn, a place to gather and a place to serve.

While the iPhone itself may be an excellent product, the quality of the service that is offered in the Apple store adds inherent value to all Apple products. Compare and contrast this to consumers who import Chinese phone brands such as Xiaomi and Oppo to the UK with absolutely no local customer service framework. As these phones are significantly cheaper but similarly specced to an iPhone, the customer internalises the trade-off: I am willing to take the risk of not having an excellent customer service.

As you can often buy two of these phones for the price of one iPhone, this trade-off is seen as beneficial for some risk-taking consumers. However, most consumers are risk-averse and value the experiential framework of strong customer service, warranties and insurance.

Apple are winning on experience, Xiaomi are winning on price.

While the training Apple puts its staff through, the high-value unit space and extensive shop refits that Apple performs on each unit (not to mention the billions spent on research and development and marketing) are out of reach for most small retailers there are absolutely lessons to be learned from them.

Get your Wi-Fi right

A large proportion of businesses in the retail and hospitality industry offer Wi-Fi, the implementation of it goes from good to shocking. While providing Wi-Fi is seen as being near compulsory in today’s world there is no point in offering Wi-Fi if it’s bad. Either make sure your customer Wi-Fi experience is good (read: fast & secure – you do have separate customer Wi-Fi access right?) or don’t offer it at all.

Trend away from the generic

When the coffee-shop boom of the early 2000s took place, driven by Howard Schultz at Starbucks, the high street became packed with generic coffee shops. The 2010s saw the coffee market diversify into smaller, more niche artisan offerings with a focus on bean quality, roasting technique and the skill levels of the barista. The rise of veganism has seen a boom in plant-based eateries. Greater tolerance of dietary allergies has seen a surge in gluten-free menu items.

The long and short of it: even in a declining market, specific niches are on a long-term growth curve.

Avoid Dark Patterns

In web design, dark patterns are tricks used in websites and apps that make you buy or sign up for things that you don’t want. For example, a company may pre-tick opt-in marketing boxes for email newsletters. This type of design is more common than you’d think in retailing too.

Whether a self-service checkout in a shop interrupts your checkout flow to offer you a giant chocolate bar that’s on offer or whether a popular sports clothing retailer ensures there are no straight lines between the checkout and the exit, dark patterns are common in retail.

Dark patterns are not good for the customer. If your business is stock them high, sell them cheap and every additional upsell or cross-sell contributes to your bottom line then you might be justified in using them. If you want to provide an excellent experience that the customer wishes to repeat, then avoid them at all costs.

Have a strong online presence

It goes without saying that a strong online presence is essential for a modern business, even one that relies on a physical retail space. Businesses with strong online presences perform substantially better than the overall economy. Customers appreciate being able to seamlessly book a table at your restaurant, check or reserve stock and check your opening hours.

Using the web to provide strong social proof for your business (reviews and testimonials) and using social media to amplify key messages and events will be core to your business success in 2018. Above being an avenue for commerce, the internet remains the most valuable research tool for consumers.

Conclusion

Becoming a success in the fields of retail or hospitality is now more difficult than ever, owing to the middle of the market being decimated by online shopping, increased suburbanisation and an uncertain economic outlook. Successful retailers are either winning on price or winning on experience. If you’re looking to start your own shop, cafe or restaurant then keep the importance of great customer experience in mind.

Great customer experience can turn shoppers into evangelists.

If you’re looking to start your own retail or hospitality business, then look no further than our own RMS register. Running easy-to-use Android and with Enterprise level support – the RMS Register is the obvious choice for the retail startup.