April 9 2007
By Stevan Buxbaum
From www.chainstoreage.com
Jeans and T-shirts don't seem revolutionary, but they are in the hands of Abercrombie & Fitch CEO Mike Jeffries. He has made Abercrombie into one of retailing’s hottest companies by turning stores into experiences—places where mood is as important as merchandise.
Abercrombie's flagship store in Manhattan has shutters outside where window displays used to be. Inside, music pounds and the lighting focuses on the clothing, not the floors and walls. A glass case separates the customers from the products, which are handed to the shoppers by clerks wearing—what else?—trendy Abercrombie clothes.
Abercrombie is taking chances. In the process, Jeffries is offering an unspoken challenge: If you want to compete with him, you’d better be prepared to spend money and make changes. Retailers that succeed in this environment will put daylight between themselves and the competition by constantly refreshing their stores.
Those that don't will be forced to compete on price, where failure becomes more likely. To illustrate how retailing is changing, compare Abercrombie with The Gap, the one-time champion that has been struggling recently. Even if The Gap got its product mix right—and it is having a hard time doing that—the difference between shopping in the two chains is vast. An Abercrombie visit is like going to a Soho nightclub. Dim lighting and thumping dance music puts customers into the mood to buy expensive jeans.
The stores are fresh, and that makes the merchandise seem fresh. Contrast that with The Gap, whose stores are largely the same as they have been for a decade. Lighting is harsh and the atmosphere utilitarian—shelves and racks filled with clothing just like that at many other stores. Successful retailers know that stores have to become more like theater, a lesson learned by restaurant executives a decade ago. Back then, dining out became more “eatertainment,” as Hard Rock Cafe, Planet Hollywood and House of Blues raised the bar on atmosphere.
Retailers that get it know that by pushing the experiential aspects of stores, they can leave competitors struggling—saying in effect, “Even if you can copy my product, you can't copy my experience.”
Take a closer look at the Abercrombie flagship, starting with the lack of window displays. It knows that shoppers are coming in for the brand and the experience, not because of what’s in the window. The shutters give the stores an exotic feel, like a club in a tropical setting. It’s dark and intimate inside. There is no fluorescent lighting to make customers' faces look pasty; stores are designed to flatter both shoppers and clothing.
Then there's the “jeans bar,” a long glass counter that separates the customer from the merchandise. That runs against the conventional wisdom that customers should feel free to touch the merchandise whenever they like. It forces them to interact with sales people, who embody the Abercrombie ethos—an effective sales technique.
Other retailers also have found success by being different. Prada created a sensation a few years ago when it opened a radical new store in New York’s Soho. It was the first to incorporate gas-filled clear glass doors on dressing rooms that automatically grew opaque when the doors were closed. Merchandise was shown in individual displays, creating a museum-like ambiance. Aeropostale incorporated some of the same high-tone design and feel in its new store at the Woodfield Mall in Schaumburg, Ill.
Before that came lifestyle retailers such as Quiksilver, whose stores looked like surf shacks, and Abercrombie’s Hollister, whose stores look like beach houses. Both tried hard to sell not just casual clothing, but a laid-back West Coast sensibility.
Perhaps the granddaddy of experiential retailing is Ralph Lauren, who created a whole world around his clothing, linens and furniture, all purveyed in a rich country setting.
What do they have in common? Distinct brand personalities, of course, but they have all created unique and unmistakable settings in which to sell products. Companies that don’t do that fade. An example is Lenox china, a great old brand that never succeeded in leveraging itself into anything bigger.
Of course, a retailer might be able to stay in business without changing much. There will always be a demand for low-cost merchandise in bare-bones settings. But those retailers will live in a world in which price is everything and margins are razor-thin. To compete on something other than price, a great shopping experience is going to be essential.
Stevan Buxbaum is executive VP of Buxbaum Group of Calabasas, Calif., one of North America’s largest appraisers and liquidators of retail and wholesale inventories, and a specialist in turnaround investing.
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