Roi on Retail Design

THE ROI ON RETAIL DESIGN

By EWI Worldwide

This research document was prepared by EWI Worldwide’s Angela Schrubbe, Market Intelligence Strategist and Janis Healy, VP of Retail Strategy, with the support of A.R.E. (the Association for Retail Environments)

EWI_ROI_whitePaper.indd 1

1/9/15 3:34 AM

The return on investment of a retail store redesign is a popular topic of discussion. We have seen it discussed in industry publications, on LinkedIn® discussion posts and through first hand experience with new business prospects.

There seems to be a sense of hesitation and uncertainty when it comes to justifying the capital expenditures tied to improving the in-store experience, driving EWI’s desire to further understand the

ROI OF RETAIL DESIGN. MOTIVATION FOR RESEARCH While identifying the need to redefine a brand’s instore environment and experience is straightforward, selling the idea to the executive suite can become challenging. The proposal must include commitment to credible, attainable ROI, a goal that is often a battle with uncertainty. This is driving discussions between retailers and their vendors that revolves not only around identifying the experience goals and execution plan, but also around the results the retailer can expect to gain from the investment.

Retail industry associations, such as A.R.E., have joined the conversation, publishing articles on this topic in their magazines and facilitating forums of industry professionals willing to share their opinions, tips and experiences on the ROI of a store redesign. To further support the retailer’s need for a credible and attainable ROI strategy, EWI saw the opportunity to supplement and enrich the work already completed by doing a deeper dive into the data and share the findings with members of the retail community.

Retail stores are continuing the evolution from purely trans­ actional to including an infusion of experiential encounters.

Transactions can be accomplished without ever entering a store. Put it on sale, online and throw in free shipping and my motivation to visit the store is minimalized.

We know that many consumers research before making their purchases. In the past that meant several visits to the store prior to buying. Now, those research visits are dwindling. Elite Wealth Management released an article in 2014 with some striking information, “in 2010, there were around 34 billion visits to retailers; in 2013, that figure dropped precipitously by almost half to 17.6 billion. Retail visits have fallen by at least 5% every month for the past 2 years.” 1 To combat this alarming decline in the number of store visits, retailers need to motivate consumers to get out of their chairs and come to the store. We need to focus on giving them what they can’t get at home in an environment that entices them to make the journey.

Making those changes requires resources and resources require ROI justification.

“In 2010, there were around 34 billion visits to retailers; in 2013, that figure dropped precipitously by almost half to 17.6 billion. Retail visits have fallen by at least 5% every month for the past 2 years.”

- Elite Wealth Management 02 EWI_ROI_whitePaper.indd 2

1/9/15 3:34 AM

INFLUENCING FACTORS There are a number of influencing factors supporting the need to redesign, which in turn fuels the discussion around ROI. Key influencers include the “Clicks-toBricks” movement, the evolution of a new generation of shoppers and the consumer’s hunger (and expectation) for innovation. These factors demand retail stores realign their store experiences and environments to better serve the shifting mindset, lifestyle and expectations of today’s consumer or suffer the consequences.

The growing “Clicks-to-Bricks” movement is making an impact. This trend is made up of onlineonly retailers who have discovered the value of a brickand-mortar presence, be it pop-ups, mobile tours or long term leased space. The most significant differentiator with these spaces as compared to traditional brick and mortar retail is the model of “transaction optional – experiential mandatory.”

This is the opportunity for the consumer to engage with their favorite e-tailer in a physical environment. These brand loyalists can finally touch and feel the products, try them on, and interact with brand associates face-toface. The value proposition is focused on personalized experiences and one-on-one consultations with a brand they have already come to know and love.

Millennials are coming of age and as a result, are having a significant impact on the retail landscape. In many ways, millennials are a unique generation, craving different retail experiences and establishing a different set of consumer expectations than any other generation.

These expectations are driven by their need to learn, try new things, have new adventures, love those that are close to them, and to create and share experiences together. Millennials also buy into brands emotionally and are loyal to those that are genuine, meaningful and relevant.

As the millennial generation gets older, their buying power will continue to rise and research shows5 they will be the dominant consumer in the economy.

We expect that by 2015 the millennials annual spending will be $2.45 trillion,2 by 2018 they will surpass the baby boomer generation in spending power at $3.39 trillion,2 by 2025 millennials will account for 75% of the global workforce and 36% of the American workforce,3 and by 2030 in the US millennials will outnumber baby boomers 78 million to 56 million.4 Successful retailers will adapt and deliver to the millennial’s expectations, creating experiential spaces, influencing them with a compelling brand story, and facilitating the requirement that they have a voice.

In-store technological innovation integration is driving the discussion around store design and ROI. The world of today’s consumer is filled with technology and it’s no longer a matter of choosing to interact with technology, it’s basic table stakes.

Technology that is used to enhance or enable the experience will reap rewards whereas technology that attempts to be the experience will likely fail (i.e. technology for technology’s sake). Retailers can leverage technology not only to engage the customer, but to learn about their shopping behaviors and preferences. With the right experience design strategy, the information collected proves extremely valuable to a retailer. It allows them to create the most relevant journey for their target consumer, aligning with their lifestyle and appealing to them at the right time, in the right place, in the most appropriate manner.

Armed with this knowledge, first movers with in-store technology have been able to create impactful branded encounters, setting the in-store experience bar high.

As for those brands playing the game of catch up, redesign will be essential and selling the ROI equation becomes vital.

In many ways, millennials are a unique generation, craving different retail experiences and establishing a different set of consumer expectations than any other generation.

03 EWI_ROI_whitePaper.indd 3

1/9/15 3:34 AM

METHODOLOGY OF RESEARCH The research was concentrated on stores with physical remodels affecting a variety of shopper influencing factors. The findings of this research, which are presented throughout this report, were acquired from a variety of public sources. Using reputable and credible resources such as Company Annual Reports, Corporate Earnings Releases, Industry Publications and Research, Agency/ Partner Case Studies and Company Press Releases, the EWI Worldwide Retail Research and Strategy team created a library of 27 ROI case studies. Based on information availability, the branded case studies consist of the following topics:

• Store Design: Details on the new store design concept or format • Motivation: Comments from brand executives or company partners who participated in the redesign discussing the motivations for the redesign • Results: Results from the redesign stores The team cross-referenced the data for various analyses.

Working with A.R.E., we gathered data through a survey of current retailers regarding their motivations, goals, and expectations of a store redesign as well as identifying the various scopes of each project.

RESEARCH FRAMEWORK Before we go into the detailed findings, let us rewind a bit, and break it down. What exactly is ROI? ROI is defined as: (Gain from Investment – Cost of Investment) = ROI (Cost of Investment)

Perfect. That sounds like a simple equation, right?

Think again. In the traditional retail landscape many of the costs and gains of an investment are tangible units; however today, we see a new retail landscape emerging.

This new environment is driven by changing customer expectations, technological innovations and active pursuit to combat declining store visits. To that point, gains are not always tangible, leading to a more difficult and complex calculation of ROI. The costs of investing in a redesign are split between hard and soft. Hard costs are the fees, materials, labor and travel hours that can be attributed directly and solely to the project. Soft costs are part of general operating

overhead and may be tracked or untracked. These include internal resources leveraged for project management, strategy, quality control and overall project facilitation.

Both hard costs and soft costs are identifiable and measurable.

Meanwhile, the gains from an investment are not always tangible but most all are measurable. Some gains can be measured in traditional ways. For example, increases in sales dollars or margins, average transactions rates, ­conversion rates, sales productivity and consumer dwell time. Gains can also be measured in terms of gaining efficiencies and minimizing operational expenses.

Regarding intangible gains, investments can lead to an increase in brand affinity attributes. The measurements can include brand awareness, customer approval, com­ petitive edge/market share, cultural appeal, consumer engagement levels, a differentiated consumer experience and industry innovation leadership.

This new environment is driven by changing customer expectations, technological innovations and active pursuit to combat declining store visits.

To that point, gains are not always tangible, leading to a more difficult and complex calculation of ROI. 04 EWI_ROI_whitePaper.indd 4

1/9/15 3:34 AM

CHART 1 – CONTRIBUTING FACTORS CONTRIBUTING FACTORS

SCOPE

COST VARIABLES

GAINS

– Brand affluence

– Meaningful, customer-centric experiences

– Location and size

– On-the-mark brand projection

– Customer technological expectations and appetite – Budgets

EXPERTISE

– In-house proficiencies vs. outsourcing (i.e. store planning, merchandising, associate ­training)

– Cohesive customer journey – Intuitive product selection – Relevant product curation – Knowledgeable store ­associates

COMPETENCY

EMPOWERMENT

– In-house capabilities and disciplines (i.e. on time, on budget, one and done level of due diligence)

– Accurate design translation

– Internal catalyst driving efficient decisions

– Adherence to timeliness

– Leadership owns their area of expertise

– Competent decisions made

– Trust and respect for others area of ownership

– Synergistic team dynamic

– Efficient execution – Achievement of goals and objective

– Establishment of an ownership based culture – Ability to align key stakeholders to a common goal/mission

INFLUENCE

In chart 1, we identified 5 contributing factors that play a role in an investment. You see differences and variability between the factors when looking at it from the perspective of the cost or gain from the investment.

So, now you might be asking, what’s the point of all of this? The point is that the simple equation above is not so simple after all.

Every brand and retailer is different. Their costs and gains are impacted by varying contributing factors and are dependent upon the internal resources, personnel drive and commitment, company culture, brand reputations and customer expectations of the brand.

– Cohesive design translation – Unified, strategic decisions – Passionate project ambassadors

The research indicated that a targeted strategy with measurable goals and objectives is critical for a successful redesign. These goals and objectives further blur the lines of the simple ROI equation mentioned earlier. Retailers must establish goals early in the process and create in-store touch points for specific measurements to get the best results. The research included focus on identifying brand’s motivations for the redesign. From that, we were able to create a library of goals and their respective metrics.

Their costs and gains are impacted by varying ­contributing factors and are dependent upon the internal resources, personnel drive and commitment, company culture, brand reputations and customer expectations of the brand.

05 EWI_ROI_whitePaper.indd 5

1/9/15 3:34 AM

We see that there are 2 distinct types of goals. There are those that are objective such as growth of overall customer base, increased sales, market share gain and new acquisition of a particular segment.

to acknowledge success as more than just sales. As retail sectors have become more saturated and competitive, brands have needed to find new and innovative ways to appeal to the customer.

There are also subjective goals, such as brand engage­ ment, customer satisfaction, brand awareness, competitive edge and customer experience.

You will see in chart 2, objective goals driven by quanti­ tative metrics as well as subjective goals driven by both quantitative and qualitative metrics. This reinforces the shift we see in the retail landscape. Retail stores are continuing the evolution from purely transactional to including an infusion of experiential encounters.

This supports the concept that success goals and metrics are shifting. Brands and retailers are beginning

CHART 2 – GOALS OBJECTIVE STRATEGIC GOALS

METRICS

– Growth of a targeted customer segment

– Category sales

– Increase share of wallet

– Average transaction dollar amount

– Increase in-store traffic/Increase customer base

– Customer conversion rate – Number of transactions – Unique customers – Return customers

– Overall sales growth

– Comp store sales – Dwell time

– Gaining operational efficiencies

– Category/Service sales

SUBJECTIVE STRATEGIC GOALS

METRICS

– Increase or repositioning of brand awareness

– Public intercept surveys of brand perception**

– Brand engagement

– In-store touch point impressions – Dwell time (thermal mapping) – Associate interactions** – Social media interaction*

– Customer satisfaction

– Customer in-store intercept surveys** – Social media monitoring* – Customer loyalty – Net promoter score – Passive feedback solicitations*

– Competitive edge/Industry leadership/ Competitive differentiation

– Market insights* – Industry reports and rankings** – Benchmarking**

** = qualitative and quantitative metrics * = qualitative metrics

RETAILERS’ MOTIVATION TO REDESIGN When cross analyzing the data by motivation, compelling trends appear. Each brand shared 0-4 motivations for embarking on their store redesign. Chart 3 shows the various categories of each brand’s motivation.

The top 4 most common and publicly discussed store redesign motivations are: • “ Better Customer Experience” (engagement and omni-channel driven), 62.96% listed this as a motivation to redesign

• “ Better Customer Journey” (in-store navigation/ better in-store education/shopping simplification), 40.74% listed this as a motivation to redesign

• “ Gain competitive edge/differentiate within the marketplace,” 59.26% listed this as a motivation to redesign

• “ Appeal more to current customer base,” 33.33% listed this as a motivation to redesign

06 EWI_ROI_whitePaper.indd 6

1/9/15 3:34 AM

CHART 3 – MOTIVATION TO REDESIGN

BRAND REINVENTION/ REDEFINITION

BETTER IN-STORE CUSTOMER SERVICE AND PERSONALI­ ZATION

14.81%

22.22%

NEW ­CUSTOMER ACQUISITION/ NEW TARGET CONSUMER

MORE TARGETED ENVIRONMENT (More appeal, ­enjoyable ­approachable inspiring, etc...)

25.93%

29.63%

APPEAL MORE TO CURRENT CUSTOMER BASE

BETTER ­CUSTOMER JOURNEY (In-store ­navigation/ better in-store education/ shopping ­simplification)

GAIN ­COMPETITIVE EDGE/ DIFFERENTIATE WITHIN THE MARKET PLACE

BETTER ­CUSTOMER EXPERIENCE (Engagement and omni ­ channel driven)

33.33%

40.74%

59.26%

62.96%

When comparing the researched findings against the survey results, we see they are well aligned. Graph 1 reflects the respondent’s biggest motivation to redesign. Similar to the research, “Gain a competitive advantage” and “Create a stronger connection with the current consumer base” come out as the top two motivations.

GRAPH 1

N = 28, skipped by 2 respondents

When looking at the research results, the most popular motivations to redesign are driven by market and consumer forces. The brands aren’t redesigning because they want to, they are redesigning because they feel they have to as the market is telling them in order to be successful they must adapt. We can clearly see parallels between the motivations to redesign and the recent retail trends mentioned at the start of this paper. Retailers recognize the dynamics of changing consumer needs and their expectation for enhanced in-store experiences.

Notice, that the most popular motivations to redesign are driven by subjective goals even though they are recognizing and reporting traditional results associated with objective goals. This again leads us to ascern that the retail landscape is changing and it is advantageous to take a more holistic perspective when redesigning your store. It shows us how the drivers may be more experiential in nature and yet tangible results are consistently reported.

07 EWI_ROI_whitePaper.indd 7

1/9/15 4:09 AM

Let’s take a closer look at our top 4 redesign motivators.

“BETTERING CUSTOMER EXPERIENCE” Defining “experience” is subjective when left up to the interpretation of an audience. In-store technology engagements, human to human interactions and omnichannel initiatives are key motivators for a redesign.

This is not surprising, but it is very telling. It means that the customer experience expectation has shifted to include memorable, meaningful and relevant interactions in-store.

“GAIN A COMPETITIVE EDGE/ DIFFERENTIATE WITHIN THE MARKET PLACE” A redesign can play a key role when working to be the leader in a retail segment, and redesigning your store delivers a competitive edge. This level of differentiation is critical in today’s complex and congested retail land­ scape. The consumer has many choices, both on-line and in the bricks and mortar world. The optimal goal is to be first to mind.

“ENHANCING THE CUSTOMER JOURNEY” Retailers recognize the need to create an engaging customer journey, resulting in a compelling in-store experience. The customer journey is supported by intuitive navigational signage, in-store education and shopping simplification through logical store fixture plans and category adjacencies. Being considerate of the customer’s time, level of confidence and desired level of engagement will ultimately gain their respect and lead to greater brand affinity.

“BETTER APPEAL TO THE CURRENT CUSTOMER BASE” Retailers know that in order to retain their current customer base they need to better align with their dynamic lifestyle and demands. This can take the form of product assortments, services, technological integration and social engagements. Through this, consumers will truly connect and migrate from “customer” to “brand ambassador.”

Chart 4 shows how the case-studies align with the motivational categories.

CHART 4 – CASE STUDIES BY MOTIVATION NEW CUSTOMER ACQUISITION/ NEW TARGET CONSUMER

APPEAL MORE TO CURRENT CUSTOMER BASE

GAIN COMPETITIVE EDGE/ DIFFERENTIATE WITHIN THE MARKET PLACE

BETTER CUSTOMER ­JOURNEY (In-store ­navigation/better in-store education/ shopping ­simplification)

BETTER IN-STORE CUSTOMER SERVICE AND PERSONALIZATION

Ann Summers 36

Aeropostale 44

Aaron Brothers 48

Ann Summers 57

Rodgers Communications 62, 71

La-Z-Boy 38

Build-A-Bear 42

Ann Summers 47

Asian Paints 58

Sephora 63

Pep Boys 34

John Deere 23

Build-A-Bear 53

La-Z-Boy 38

Staples 41

Radio Shack 40

Play N Trade 35,43

Disney Store 54

Michael’s 50

T-Mobile 56 Time Warner Cable 27

Orchard Supply Hardware 51,70

Orchard Supply Hardware 51 Rodgers Communications 59

Select Comfort 45

Pep Boys 46

Staples 41

Restoration ­ Hardware 37 ShopKo

39

Warby Parker 91

Radio Shack Roche Bros

Walgreens

40

25

21

Michael’s

50

BETTER CUSTOMER EXPERIENCE (Engagement and omni channel driven)

Aaron Brothers 48,68

Aeropostale 44

Build-A-Bear 73

Asian Paints 69

La-Z-Boy 64

La-Z-Boy 38

Build-A-Bear 53

Radio Shack 75

Michael’s 50

Disney Store 54

Pep Boys

Orchard Supply Hardware 51

Aaron Brothers 48 Ann Summers 47

65

Play N Trade 35

Pep Boys 46

Select Comfort 55

ShopKo 67

Play-N-Trade 43

Play N Trade 43

Sephora 60

T-Mobile 11

Radio Shack 20

Radio Shack

Staples

75

41

Warby Parker

MORE TARGETED ENVIRONMENT (More appeal, enjoyable approachable inspiring, etc...)

BRAND REINVENTION/ REDEFINITION

85,89

Rodgers Communications 71

Restoration Hardware 49

T-Mobile 56

Select Comfort 72

Roche Brothers 25

Time Warner Cable 61

Sephora 32,60

Select Comfort 55 Sephora

32

Staples 41 T-Mobile 66

Time Warner Cable 27

Time Warner Cable 61

Walgreens 21

Walgreens 74

White House Black Market 52

Warby Parker 87,88,89 White House Black Market 52

08 EWI_ROI_whitePaper.indd 8

1/9/15 3:35 AM

THE MEASURABLE RESULTS EWI Worldwide developed a case-study library of 27 brands. These brands are from varying retail sectors, are of different sizes, and are headquartered across the globe. The research compiled represents redesign projects where information regarding success was publicized. Because let’s be realistic, few publically discuss anything less than success…

See chart 5 for the list of brands researched.

CHART 5 – CASE STUDIES BY BRAND FASHION/ BEAUTY

HOME/ DECOR

SPECIALTY RETAIL

CE/ MOBILE

GENERAL MDSE/ GROCERY

AUTO/ LARGE EQUIP.

Aeropostale

Asian Paints

Aaron Brothers

Carphone Warehouse

Roche Bros

John Deere

Ann Summers

La-Z-Boy

Build-A-Bear

Play N Trade

ShopKo

Pep Boys

Sephora

Orchard Supply Hardware

Disney Store

RadioShack

Walgreens

Warby Parker

Restoration Hardware

Elliot Bay Book Company

Rodgers Communications

White House Black Market

Select Comfort

Michael’s

T-Mobile

Staples

Time Warner Cable

In addition, we partnered with A.R.E. to conduct an online survey. This survey was completed by 28 retailers with varying sales volume and store counts within diverse sectors. See graph 2 for store count breakdown of the A.R.E. survey respondents.

GRAPH 2

N = 28

09 EWI_ROI_whitePaper.indd 9

1/9/15 4:09 AM

We find that ROI results vary greatly by project scope.

CHART 6 – CASE STUDIES BY SCOPE FULL REBRANDING

PHYSICAL REDESIGN WITH DIGITAL ENHANCEMENTS

PHYSICAL REDESIGN ONLY

Ann Summers 17,76,36

Aeropostale 44

Select Comfort 82

Aaron Brothers 68

Roche Bros 25,78

Asian Paints 58

Build-A-Bear 81

Sephora 32

Carphone Warehouse 26

Rodgers Communications 79

Pep Boys 6,65

Disney Store 30,54

Time Warner Cable 27

Elliot Bay Book Company 12

ShopKo 39

RadioShack 84,40

La-Z-Boy 38,64

White House Black Market 83

John Deere 23

Staples 41

T-Mobile 56

Play N Trade 35

Michael’s 77

Walgreens 21, 80

Orchard Supply Hardware 51

Warby Parker 86,87

Restoration Hardware 37

Below is a summary of traditional metrics and results based upon objective goals. These results, as earlier stated, were found through publicly shared information sources.

A FULL BRANDING PROJECT CAN LEAD TO A SALES INCREASE OF 20-35%.

Below is a summary of non-traditional metrics and results based upon subjective goals. These results, as earlier stated, were found through publicly shared information sources.

A FULL BRANDING PROJECT CAN LEAD TO AN IMPROVED EMPLOYEE MORALE.

Beyond annual sales, we also see that a re-branding effort can lead to positive impacts on online purchases, BOPIS sales, accessories sales, pre-tax profit, foot traffic and reductions in inventory loss.

Retailers taking on a full re-branding project also find improved customer feedback about the brand and store, and gain a competitive edge.

Stores that implement new technologies may also see increases in traffic, average transaction dollars, sales/ margin productivity, inventory efficiencies and improved service capacity.

Stores with innovative technology see positive customer feedback and recognize a competitive edge. Brands with in-store technology innovations can become a multichannel and/or omni-channel leaders in their industry.

CHANGING THE PHYSICAL DESIGN OF THE STORE CAN LEAD TO A SALES INCREASE OF 14-95%.

A PHYSICAL REDESIGN CAN HAVE AN IMPACT ON CUSTOMER APPROVAL RATINGS.

WHEN ADDING DIGITAL TECHNOLOGIES TO A REDESIGNED RETAIL SPACE, RETAILERS CAN SEE A SALES INCREASE OF 5-55%.

A physical remodel can also lead to increases in foot traffic, conversion rates, profitability, store dwell time and average transaction dollars.

ADDING DIGITAL TECHNOLOGIES TO A REDESIGNED RETAIL SPACE ELEVATE THE LEVEL OF BRAND AFFINITY.

A physical redesign can lead to a variety of successes.

Even brands that do not release numbers state that they have seen great success with their redesign and it truly has made a difference for their brand positioning.

10 EWI_ROI_whitePaper.indd 10

1/9/15 3:35 AM

We see a similar combination of traditional and non-traditional metrics looking at the online survey data. We inquired about the importance of specific measurements when conducting a redesign.

In Graph 3, three measurements stand out with highest importance: Overall Sales, In-Store Traffic, and Brand

Perception. Of those, overall sales and in-store traffic represent the traditional metrics. Brand perception represents the non-traditional metric as it is driven by a subjective goal. While objective goals of overall sales and in-store traffic continue to be of high importance, subjective goals such as brand perception are undeniably proving to hold significant value.

GRAPH 3

EXTREMELY IMPORTANT VERY IMPORTANT

N = 28, results show top 2 boxes

While objective goals of overall sales and in-store traffic continue to be of high importance, subjective goals such as brand perception are undeniably proving to hold significant value.

11 EWI_ROI_whitePaper.indd 11

1/9/15 4:09 AM

Through the research, it is clear that retailers are evaluating store design based on both traditional and non-traditional success metrics. So you might be thinking, where’s the specific examples that you can use to sell a redesign initiative to the executive team and get the funding required? Here are the facts…

TRADITIONAL MEASUREMENTS Total Sales • Pep Boys saw a comparable stores sales lift of more than 26%.6 • Aaron Brothers saw each of their newly redesigned stored exceeding 20% sales growth over the previous year.7 • Build-A-Bear saw a 30% increase in sales with the first 6 store redesigns over a 3 month period.8 By the completion of the first year of the remodel, they reported consolidated comparable store sales increased by 5.1%, citing the redesign as a major driver of the increase.9 • Michael’s saw over 14% sales increase since launching their new program.10 • The T-Mobile Puerto Rican stores saw a 20% sales increase with their new look.11 • Elliott Bay Book Company saw a 40% increase in sales with their new design.12 • Asian Paints experience store drove customer to near-by dealers increasing sales of paint tins by 35%.13 • Play N Trade saw a sales lift of 54.6% with the new design.14

Aaron Brothers

• Staples saw North American Q4 retail sales increase by 7% over the previous year’s Q4 sales.15 • La-Z-Boy saw an increase in total sales volumes.16 • Ann Summers saw an increase in sales per store and in online sales.17 • After the redesign, Disney Store saw a 20% increase on sales.18 • ShopKo saw a significant increase in sales.19 • RadioShack saw sales growth.20 • Walgreens saw same store sales increase.21 • While less than 20% of Restoration Hardware’s assortment is displayed at its traditional smaller retail stores, he said goods that are showcased in stores experience a 50% to 150% lift across all channels.29 • The Restoration Hardware LA and Houston Design Galleries experienced store demand growth of 90% and 60%, respectively.28 • Warby Parker’s stores sell an average of $3,000 a square foot annually. Comparing this to some of the top publicly traded retailers, Warby Parker is second only to Apple in sales per square foot.85

Restoration Hardware

12 EWI_ROI_whitePaper.indd 12

1/9/15 3:35 AM

Efficiencies/Inventory Levels • T-Mobile US stores saw a 45% reduction in inventory loss.22 • Play N Trade decreased item-to-item showroom cost by 20%.14 • Warby Parker opened stores and was able to cut down significantly on shipping expenses.85 Category or Department Sales • John Deere saw sales for service parts as high as 68%.23 • John Deere saw sales of (non-equipment) merchandise increase 150%.23 • Pep Boys saw sales from service appointments made online, tires purchased online and installed in their service bays, and products purchased online and picked up in store or home delivered grew 152% in Q4 of 2013.24 • Roche Bros. saw some key service offerings increase as much as 95% in sales.25 • T-Mobile Puerto Rican stores saw a 25% increase in accessory sales.11 Store Traffic • Carphone Warehouse saw an increase in store traffic.26, 30 • Asian Paints saw over 17,000 customers in their exper­ ience store and drove traffic to near-by dealer stores.13 • La-Z-Boy saw an increase in store traffic.16 • Disney Store saw a 20% increase in traffic.18 • ShopKo saw a significant increase in store traffic.19

Play N Trade

Store Dwell Time • Aaron Brothers saw an increase in store dwell time.7 Spend • Aaron Brothers saw an increase in store spend per customer. 7 • La-Z-Boy saw an increase in average spend per customer.16 Transaction/Conversion Rates • Aaron Brothers saw an increase in transaction rates.7 • Carphone Warehouse saw an increase in conversion rates.26 Queue/Wait Time • Time Warner Cable’s new design decreased average wait time from 20 to 4 minutes.27 Profitability and Productivity • ShopKo’s redesign lead to an increase in profitability.19 • Disney Store saw a 25% increase in productivity on a sales and margins basis.30 • Ann Summers saw pre-tax profit climb 43% after their rebranding effort.76 • Disney Store saw a 20% increase in profit margins.18 • Warby Parker opened stores and saw they are a meaningful driver in sales and profitability.85

Pep Boys

13 EWI_ROI_whitePaper.indd 13

1/9/15 3:35 AM

NON-TRADITIONAL MEASUREMENTS Employee Morale • T-Mobile’s redesign created renewed excitement within the employees.22 Customer Feedback • Elliott Bay Book Company’s new store space received an approval rating of 94% on Yelp.com.12 • Play N Trade received outstanding customer feedback on the new design from in-store customer intercept surveys.14 • Asian Paints reports that feedback to the store has so far been phenomenally positive.31 Brand Affinity • Over 90% of Disney Store guests in North America and Europe said the new store design has brought them closer to the Disney brand.18 • Warby Parker discusses a key advantage of having stores is the potential for a more personalized customer service.85

General Success • While no sales numbers have been released on the Walgreens stores, the “well experience” stores are making an impact. Executives were quoted saying, “They absolutely make a difference.”21 Competitive Edge/Differentiation • Sephora’s executives discussed their competitive edge, “the enormous success we have had with Scentsa since its earliest days in our stores was a catalyst for the work we have done to use technology to fuel our in-store experience and become a multichannel, digital leader.”32 • Asian Paints executives discuss their point of differentiation, “We feel we’ve created something engaging and inspiring that has redefined not only perceptions of Asian Paints in our market, but the Indian retail landscape in general.”31

CONCLUSION All in all, what we found is no surprise; there is an ROI on store design. The key is to align the goals and objectives with company culture, consumer expectations and competent and ­empowered resources.

We find that ROI is greater when a holistic approach is taken. When the motivators are focused on subjective goals, the scope becomes robust and impacts more customer touch points, resulting in a cohesive in-store experience that inherently reaps tangible results.

In addition, the research shows that strategic, differentiated, in-store brand positioning with clear goals, provides an ironclad framework for success. Creating a relevant space that truly engages with the customers while elevating and building memorable in-store experiences, will set you apart from the competition.

To conclude, the factors influencing an ROI on store design are multi-faceted. There are tangible and intangible gains, measured through traditional and non-traditional metrics, supported by ­objective and subjective goals. The more holistic the approach, the more lucrative the results. ­Success is dependent upon the scope you are willing to embrace, the clarity of the goals identified and the steadfast commitment to achieve the objectives.

14 EWI_ROI_whitePaper.indd 14

1/9/15 3:35 AM

SOURCES/WORKS CITED 1. http://elitewm.com/targets-problems-may-signal-beginning-paradigmshift-retail-industry/ 2. http://www.oracle.com/us/industries/financial-services/gen-y-surveyreport-165297.pdf 3. http://www.forbes.com/sites/danschawbel/2013/12/16/10-waysmillennials-are-creating-the-future-of-work/ 4. https://www.bcgperspectives.com/content/articles/marketing_center_ consumer_customer_insight_how_millennials_changing_marketing_ forever/ 5. http://www.lextant.com/millennials.html 6. http://www.nxtbook.com/nxtbooks/designretail/201402/index.php#/38 7. https://www.chutegerdeman.com/portfoliotype/aaronbrothers/ 8. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9 NDk5NzkxfENoaWxkSUQ9NTM5NjMwfFR5cGU9MQ==&t=1 9. https://materials.proxyvote.com/Approved/120076/20140325/ AR_200753.PDF 10. http://www.interbranddesignforum.com/case-studies/case.php? case=michaels 11. http://newsismybusiness.com/t-mobile-investing-7m-to-expand-salesnetwork-redesign-stores/ 12. http://www.5ivecreative.com/projects/elliott-bay-book-co/ 13. http://www.fitch.com/case-study/mumbai-flagship-store-design/ 14. www.ewiworldwide.com/work/casestudies.aspx?id=192 15. http://staples.newshq.businesswire.com/press-release/staples-increports-best-year-sales-and-earnings-companys-history#axzz38EadeDaw 16. http://www.la-z-boy.com/files/newsreleases/2004/FY04_4Q_8_K.pdf 17. http://www.retail-week.com/companies/ann-summers/ann-summerseyes-wholesale-growth-as-it-reports-profits-jump/5048373.article 18. http://visitoffice.com/work/detail/Disney-Store/ 19. http://www.cdapress.com/news/business/article_2153a9c2-d9c258cb-89b6-9d31dbb779a7.html 20. http://www.prnewswire.com/news-releases/radioshack-reportsfinancial-results-for-fourth-quarter-2013-248343511.html 21. http://www.lansingstatejournal.com/story/money/business/2014/10/12/ walgreens-designs-prove-upgrade-shoppers/17130059/ 22. http://www.retailcustomerexperience.com/photos/t-mobile-globaldesign-concept-redesign/ 23. http://www.interbranddesignforum.com/case-studies/case.php? case=john-deere 24. http://www.pepboys.com/about_pep_boys/media_center/press_ releases/2014/press_release_q4_2014 25. http://www.frch.com/us/portfolio/roche-bros.aspx 26. http://www.ipsos-retailperformance.com/Media/Default/downloads/ CaseStudies/IP021_Ipsos_CS_MASTER_02.07.12_CPW.pdf 27. http://vmsd.com/content/good-timing 28. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9 MTg4OTYzfENoaWxkSUQ9LTF8VHlwZT0z&t=1 29. http://blogs.marketwatch.com/behindthestorefront/2014/03/28/ restoration-hardware-ceo-defies-conventional-wisdom-that-retailstores-are-dead/ 30. http://www.retailcustomerexperience.com/articles/nrf-disney-storeshares-details-about-pos-store-redesigns/ 31. http://www.indiaretailing.com/FoodService/7/23/24/5133 32. http://beautystorebusiness.com/sephora-acquires-scentsa 33. http://www.pepboys.com/about_pep_boys/media_center/press_ releases/2014/press_release_q4_2014 ; 34. http://www.ewiworldwide.com/work/casestudies.aspx?id=203 35. www.ewiworldwide.com/work/casestudies.aspx?id=192 36. http://www.retail-week.com/sectors/fashion/ann-summers-arampant-rebrand/5028031.article 37. http://www.bizjournals.com/atlanta/print-edition/2011/10/28/ restoration-hardware-to-open-design.html?page=all 38. http://jga.com/press/PDFs/Lazboy_RetailDesign.pdf 39. http://www.designretailonline.com/displayanddesignideas/industrynews/Shopko-to-Open-Five--10476.shtml#sthash.4OKK276Y.dpuf 40. http://www.cnet.com/news/radioshack-tries-out-new-concept-store/ 41. http://staples.newshq.businesswire.com/press-release/staples-newstore-format-offers-customers-improved-shopping-experience #axzz374mnchEx 42. http://www.bizjournals.com/stlouis/blog/2013/03/build-a-bearworkshop-ramps-up.html?page=all 43. http://www.retailcustomerexperience.com/articles/isme-09-upstartplay-n-trade-redesigns-its-experience-takes-aim-at-gamestop/ 44. http://www.retailtouchpoints.com/mobile/2019-new-aeropostaleconcept-store-features-mobility-and-interactivity 45. http://www.sleepnumber.com/investor-relations/media-relations/ transforms-mattress-shopping-experience 46. http://digital.retail-merchandiser.com/nxtbooks/phoenix/rm_20140102/ index.php#/62 47. http://www.retail-week.com/new-md-will-kick-start-ann-summersrebrand/5026807.article 48. http://retail-merchandiser.com/index.php/reports/retail-reports/ 1297-aaron-brothers-inc

49. http://www.bizjournals.com/atlanta/print-edition/2011/10/28/restorationhardware-to-open-design.html?page=all 50. http://www.adweek.com/news/advertising-branding/michaels-craftsnext-gen-prototype-105855 51. http://ir.osh.com/phoenix.zhtml?c=250464&p=irol-newsArticle&ID= 1737212&highlight 52. http://vmsd.com/content/black-and-white 53. http://merchandisingmatters.com/2012/09/28/build-bear-workshopunveils-new-interactive-store-design/ 54. http://disneybythenumbers.com/blog/blog_files/060853b84aef3d5cb 8dc390450576ac7-1102.html 55. http://www.startribune.com/business/173823401.html 56. http://www.tmonews.com/2011/09/t-mobile-unveils-new-global-designretail-stores/ 57. http://www.retail-week.com/sectors/fashion/ann-summers-a-rampantrebrand/5028031.article 58. http://www.asianpaints.com:8094/CQ/wordpress/?p=20916 59. http://www.rogers.com/cms/investor_relations/pdfs/2012_AnnualReport.pdf 60. http://www.strategizemagazine.com/index.php/77-demo-category/ 133-sephora 61. http://screenmediadaily.com/customer-experience-takes-center-stagetime-warner-cables-nyc-flagship-store/ 62. http://www.retailcustomerexperience.com/news/canadian-commcompany-rogers-redesigns-stores/ 63. http://www.multivu.com/mnr/58072-sephora-skincare-iq-a-revolutionin-retail-skincare-consultations 64. https://www.toledoblade.com/Retail/2012/03/25/La-Z-Boy-hard-workpays-off-in-turnaround.html 65. http://www.aftermarketnews.com/Item/110862/pep_boys_to_launch_ allnew_automotive_retail_experience.aspx 66. http://www.alldaytech.com/t-mobile-unveils-new-design-for-u-sstores-video/ 67. http://www.prnewswire.com/news-releases/shopko-announces-plansfor-two-new-hometown-stores-235627641.html 68. http://www.chutegerdeman.com/new-aaron-brothers-prototypeinspires-artistic-creation-chute-gerdeman-creates-hip-urbanenvironment/ 69. http://www.asianpaints.com/pdfs/company-info/investors/financial_ results/AR2008-2009.pdf 70. http://www.homechannelnews.com/article/orchard-supply-presidentdescribes-%E2%80%98shining%E2%80%99-future 71. http://www.rogers.com/cms/investor_relations/pdfs/2012_AnnualReport.pdf 72. http://www.sleepnumber.com/investor-relations/media-relations/ mattress-shopping 73. http://risnews.edgl.com/retail-news/Reimagined-Build-A-Bear-StoresProduce-20--Comp-Sales-Increases-in-Q287583 74. http://www.forbes.com/sites/brucejapsen/2013/01/10/walgreen-readyto-blur-retail-channels-in-stores-across-u-s/ 75. http://www.shoppinpal.com/radioshack-attempts-to-revive-brandwith-store-redesign/ 76. http://www.retail-week.com/analysis-ann-summers-retail-weekknowledge-bank-company-profile/5049032.article 77. http://www.retailcustomerexperience.com/articles/michaels-worldslargest-arts-and-crafts-retailer-redesigns-its-in-store-experience/ 78. http://www.retailcustomerexperience.com/photos/roche-brossupermarkets-redesign/ 79. http://redboard.rogers.com/2012/top-eight-enhancements-to-ourrogers-retail-stores/ 80. http://drugtopics.modernmedicine.com/drug-topics/news/modern medicine/modern-medicine-news/walgreens-launches-new-formatseveral-stores?page=full 81. http://smp.newshq.businesswire.com/pages/build-a-bear-workshop-inc 82. http://www.twincities.com/ci_21965959/how-select-comfort-woke-up 83. http://www.wwd.com/fashion-news/fashion-scoops/white-houseblackmarket-to-redesign-retail-spaces-7343171 84. http://www.fastcodesign.com/3029533/with-rebranded-stores-radioshacktries-to-find-its-way-in-a-post-apple-age# 85. http://online.wsj.com/articles/warby-parker-adds-storefronts-to-itssales-strategy-1416251866#livefyre-comment 86. http://www.downtownmagazinenyc.com/warby-parker-eyewear-flagshipstore-soho/ 87. http://www.fastcompany.com/3027847/most-creative-people/warbyparkers-new-store-delivers-your-glasses-via-pneumatic-tube 88. http://www.fastcompany.com/3008182/where-are-they-now/take-lookinside-warby-parkers-new-nyc-flagship-store 89. http://www.mediabistro.com/prnewser/how-warby-parker-createda-unique-customer-experience_b77973 90. http://digiday.com/brands/neustares-warby-parkers-look-modernretail-trends/ 91. http://www.fastcompany.com/3019959/innovation-by-design/ warby-parkers-retail-stores-are-pacing-75-ahead-of-schedule

15 EWI_ROI_whitePaper.indd 15

1/9/15 3:35 AM

ABOUT EWI WORLDWIDE EWI Worldwide is a global live communications company headquartered in Detroit, MI, focusing on retail, digital engagements, exhibits and events. The retail team designs and executes environments for a variety of retail formats, from stand-alone stores to store-within-a-store and pop-up footprints. The team has their finger on the pulse of retail by tracking consumer trends and monitoring market insights. Driven by strategy, the design team takes a holistic approach to every project resulting in the creation of memorable experiences, converting consumers into brand ambassadors. With manufacturing and program management rounding out the offering, EWI is poised to provide single source, end-to-end, turn-key solutions to their clients.

ABOUT A.R.E. (the Association for Retail Environments) A.R.E. is the world’s largest association for businesses in the retail environments industry.

The nonprofit 501(c)(6) association’s mission is to advance the retail environments industry and the success of our members through education, insights, marketing and events. As the pace of change and competition increases exponentially in business today, A.R.E. is taking a leadership role in providing the retail environments industry with game-changing information on topics such as ROI, technology, design and business/consumer trends.

EWI_ROI_whitePaper.indd 16

1/9/15 3:35 AM