Retail Strategy

Dubbed “Test City, USA,” our hometown of Columbus, Ohio is a mecca for start-ups and product testing. The demographics here mirror the larger United States, in a nice mid-sized, Midwestern package.

In the northeast quadrant of the city is Easton Town Center, a pioneer in mall design. Since opening in 1999, it has tested the possibilities for open-air retail that includes high-end retailers, department stores, brick-and-mortar direct-to-consumer stores, restaurants, entertainment venues, and more.

Today it continues to innovate with EastonLABS, a 500-square foot retail space that retailers can rent to test new products. The mall has since added Restau/Lab to give restaurants the same opportunity.

Flagship stores also are transforming into dynamic community spaces—hubs of creativity, collaboration, and community engagement. These “open HQs” allow brands to integrate consumer input directly into the design and development process and foster positive customer experiences at the same time.

Companies like HP, Starbucks, Ikea, Sephora, and even Major League Soccer have all launched innovation labs and Open HQs to explore new business models, enhance customer experiences and stay competitive.

Yet the vast majority of innovation labs – a whopping 90% according to one industry report – fail or eventually close, falling short of the success they hoped to accomplish.

Here is what retailers who want to stay ahead of the curve and meet consumer demand for a better experience should know about exploring innovation models and avoiding potential pitfalls.

Engaging the Customer in Innovation

Consumer demand for personalization has only been growing, with 71% expecting businesses to get to know their individual interests. Furthermore, 80% of customers agree that the customer experience is just as important as products and services. Open HQs and creative hubs allow retailers to integrate consumer feedback directly into their processes, fostering a sense of community, and improving customer insights. Retailers are hoping to create a new breed of consumers who are emotionally invested in the brand. And with a staggering 72% of total U.S. retail sales projected to (still) happen in physical stores by 2028, the open HQ model offers customers a place to connect personally, even one-on-one with the brand.

An Evolving, But Not-New Concept

The Genius Bar, where customers receive tech support directly from experts, epitomizes the brand’s commitment to customer engagement and service.

Apple Senior VP of Retail Angela Ahrendts explained that she wanted Apple stores to be a town square, “where the best of Apple comes together and everyone is welcome.”

Several retailers in the United States have introduced an Open HQ model, including Nike’s House of Innovation in New York City. Nike offers personalized experiences where shoppers can test products, provide feedback, and even see prototypes in development. This interactive environment not only enhances the shopping experience, but also allows Nike to gather valuable consumer insights.

Nordstrom’s Innovation Lab has continually learned from trial and error how to refine the lab process and continues to lean in to new technologies that allow customers to personalize products and experience seamless online-to-store integration. Their commitment to experimentation and customer-centric solutions sets them apart.

Walmart’s Intelligent Retail Lab (IRL) is focused on customer experience and efficiency. Residing in a 50,000-square-foot Neighborhood Market store in Long Island, the lab uses thousands of cameras on the ceiling and sensors embedded in shelves to monitor the store in real-time to improve efficiency, keep costs down, and enhance the shopping experience for customers. The cameras can even detect the ripeness of produce based on color alone and alert workers when restocking is needed.

In London, the Samsung KX space in King’s Cross is a striking example of a tech brand embracing the Open HQ model. The venue features a range of experiences, from product demonstrations to workshops and events. Visitors can interact with Samsung products in a relaxed, communal environment, providing feedback directly to designers and developers.

Challenges in Innovation

While the Open HQ and Innovative model offers numerous benefits, it also presents significant challenges. Although many companies have announced new labs, just as many have announced closures.

Earlier this year, Walmart announced the closure of its Store No. 8 innovation hub to cut costs. The retail giant cited the lack of the need for the hub as the reason behind the closure since many of the interactive technology features it was testing are now integrated into several stores.

Ikea’s Space10 lab also shut down last fall after the cofounders stated they had reached all the objectives they had set for the lab. One of the lab’s developments in the decade that it was open was the creation of an augmented reality app that allowed consumers to use their phones to see what a furniture piece would look like in their living spaces.

The very way Open HQs and innovation labs are designed lends itself to challenges. Because innovation is continually evolving, labs will inevitably date themselves and risk becoming obsolete. Because of the costs associated with running Open HQs and innovation labs, retailers may close them more quickly if they fail to produce immediate and tangible results. Look no further than the rule of products. For every one that succeeds, another 10 or more will fail. Retailers must balance the cost of such initiatives with the potential return on investment.

To overcome these challenges, retailers need to adopt a flexible approach. Partnerships with local businesses and community groups can help offset costs and enhance the value of the space. For example, hosting events or workshops in collaboration with local artists or entrepreneurs can attract a diverse range of visitors and foster a sense of community.

The Road Ahead

As retailers continue to experiment with the Open HQ model, the key to success will be adaptability and a genuine commitment to customer engagement. By actively listening to shopper input and incorporating it into their design and development processes, retailers can create a dynamic and personalized shopping environment. This not only enhances the customer experience but also fosters a sense of loyalty and brand advocacy, as customers feel their voices are heard and valued.

The future of retail lies in creating spaces that are not just about selling products, but about building relationships and fostering creativity. Retailers have the opportunity to transform their stores into vibrant community hubs where ideas can flourish, and feedback is actively sought and appreciated. These spaces can host events, workshops, and collaborative projects that engage customers on a deeper level, making the overall experience more meaningful and interactive.

By prioritizing adaptability, embracing innovation, and valuing customer input, retailers can set new standards for what it means to create a truly engaging and dynamic shopping experience.

Imagine a consumer so enamored with a brand that they want to embody it. Isn’t this every retailer’s dream? Enter the creation of branded residences—the next logical step some luxury brands are taking to create a deeper connection with their brand loyalists.

Take the Fendi Chateau Residences in Miami, for example, which feature 58 “flow-through oceanfront residences” featuring interior design by Fendi, white-glove service offered “on an intimate scale,” a spa with European thermal pool, and ultra-luxury concierge services by Fendi Chateau attaché, among other amenities.

Similar branded residences to suit every preference are popping up, and catering to consumers who live and breathe their brands.

Branded Residences Aren’t New – But They’re Hot Now

Branded residences aren’t exactly new. They date all the way back to the 1920s when the Sherry-Netherland became the first branded hotel development to feature fully serviced apartments. The concept gained traction when Four Seasons opened its Boston luxury residences in 1985.

Branded residences are luxury residential properties tied to a brand. Historically, they were only offered by exclusive hoteliers, providing prospective buyers the opportunity to purchase their own beautifully designed residence, either within the hotel itself or in a hotel-owned standalone development.

While hoteliers investing in branded residences was a logical progression, today’s lifestyle, auto, and fashion brands also are getting in the game, leading to a resurgence in these signature homes. In fact, the branded residence sector is up 160% over the past decade, according to London-based commercial real estate brokerage Savills.

“Fashion, a natural extension of one’s lifestyle, seems like an obvious choice for a branded home, and luxury buyers trust that products from fashion houses will retain high-quality details and a refined level of craftsmanship,” writes Emma Reynolds in the Robb Report.

While many high-end fashion brands including Fendi have carved out a niche in the home décor industry, branded residences offer the opportunity for these brands to immerse brand loyalists through touches like customized fabrics and fixtures. These looks not only appear in residents’ homes but throughout the entire building as well.

The Collaboration Behind Branded Residences

Branded residences typically stem from a partnership between a company and a developer in which the brand grants a license to the developer to market and sell residences incorporating its brand. Owners of branded residences are also typically required to pay annual homeowners’ association fees to help maintain the elevated look of the property.

Bentley Residences is an example of one of the newest non-hotel branded residences. Miami, which is known as the “branded residence capital of the world,” is home to these 216 furnished apartments and a host of amenities that rival those found in a five-star resort.

The Waldorf Astoria in New York City is another example of a branded residence, though a co-located type since the construction of 375 residences will sit on top of the hotel space. The residential section, called The Towers, has separate owner entrances and a concierge closet at the entryway of each residence to ensure secure and discreet package delivery.

Want the branded residence experience without the commitment (and cost)? Book a stay at Armani Hotels in Milan or Dubai, the self-described “pinnacle of luxurious living and fine dining” in “an exceptional world of luxury.” Starting at $2,400 a night for a room in Milan, guests can add on one-of-a-kind experiences and services to make their stay at Armani Hotel Milano “more and more exclusive.”

What’s the Draw?

The simple explanation points to modern society’s need for brand familiarity and speaks to the equity that some brands can boast, particularly in the luxury sector.

“We live in a branded world, and buyers of such products seek association with brands they are loyal to and know they can rely on for a premium product,” says Jonathan Nash, a top-producing luxury realtor with Beverly Hills-based Hilton & Hyland.

The allure of branded residences’ elevated level of luxury living appeals to time-starved, affluent, and brand-conscious would-be owners who are attracted to all these properties have to offer, including the exclusive brand experience. After all, these residences not only offer quality design, but security and the highest levels of service. Amenities like valet parking, spa services, dog walking, and even personal concierge services are table stakes.

For examples of unique amenities, look no further than Porsche Design Tower or Bentley Residences, whose auto-centric luxury perks include over-the-top personal car elevators. Major Food Group’s Villa even features a private restaurant and chef-designed kitchens.

The Future of Luxury Branded Residences

Here’s a revealing insight: commercial real estate brokerage Savills estimates that non-hotel brands will account for 20% of the total supply of branded residences by 2030. That’s an increase of 40% from current levels, showing the incredible ongoing transformation and expansion within the branded residences market.

They also predict the demand for branded residences will remain strong in global cities that are hubs for business and education, cultural attractions, and unique experiences. All of those attract the sort of affluence required to live in a branded residence.

In addition to New York, London, and Miami, another hot global market that is predicted to experience a growth in branded residences is Dubai, with 51 operational schemes in the works, according to Savills.

A few of the brands planning on entering the market before 2030 include Dolce & Gabbana, de Grisogono, and Mama Shelter.

Forget the fountain of youth. It’s time to tap into the silver shoppers tsunami. Older consumers are becoming the majority; even youth-focused brands shouldn’t write them off. This demographic wields significant disposable income, making it ripe for savvy retailers who will provide the products and experiences they desire.

If you have any assumptions about Baby Boomers and the way they spend, it’s time to throw them out. While Millennials are the largest generation by population share, Boomers hold 51% of the wealth in the United States. The International Standard Organization estimates that in the US alone, the Boomer generation outspends others by $400 billion annually—and a significant portion of future global income will be concentrated in their hands.

As the population ages, how can retailers anticipate the needs, desires, and evolving spending habits of older consumers? And what do these “Silver Shoppers” mean for your business?

Shifting Perceptions and Redefining ‘Old’

Would you believe that the women in the Sex and the City spinoff, And Just Like That were supposed to be the same age as the women in The Golden Girls? Or that in All in the Family, Edith was only 44 and Archie was 48? This shift in how age is portrayed in pop culture reflects how the concept of “old” age has changed dramatically in the last few decades.

“More senior citizens are more healthy, adventurous, and actively engaged in society than their counterparts were even 10 years ago. Now, researchers say the way aging is measured should change too,” explains Mehran Movassaghi, M.D. in a blog for Pacific Men’s Health.

Baby Boomers are those who were born between 1946 and 1964. More than 20% of the U.S. population fall into this category.

While retirement is often associated with people in this age group, about 40% of people age 55 and older were working or actively looking for work in 2020, according to the U.S. Bureau of Labor Statistics.

This trend of “unretirement” is just one example of how Baby Boomers are bucking what it means to age. A recent Michigan State study found that people say they feel about 20% younger than their actual age. Beginning at age 50, many say they feel about a decade younger.

But how does this redefining of “old” shape the retail market?

Senior Spending Power

According to BCG, there will be more older people than younger people globally in the next couple of decades.

“Aging will transform the demographic structure of every major market, even those with relatively young populations today. In China, for example, the percentage of the population 50 to 70 years old will grow from 26% in 2020 to 30% in 2050. In India, it will increase from 16% in 2020 to 25% over the same period. The size of this opportunity will continue to grow, too: the population of 50- to 70-year-olds in the 12 nations we examined will approach 1.1 billion in 2050.”

This demographic shift offers a significant opportunity to retailers, as the increasing number of older consumers with higher average net worths represents a substantial and growing market segment.

As the population’s average age goes up, retailers and other industries will need to be flexible in how they reach these consumers. Many in this aging cohort are influential, active, and in control of a significant amount of expendable income.

Capture the Boomer Audience

If age is just a number, how does that reflect in the behavior of aging consumers? As it turns out, older consumers are active consumers. Boomers are doing more shopping and scrolling than ever before.

More than half of the Baby Boomer population shops online. Consumer research also found that while most senior populations still prefer to shop in person, there are certain key aspects of online shopping that can be attractive when emphasized, including fast delivery, simple tracking, and secure packaging.

For retailers who recognize the evolving preferences of aging consumers, there’s a significant opportunity to tailor shopping experiences to better cater to this demographic. Here are some tips to capture this dynamic audience that is redefining what it means to age.

1. Meet them where they are.
As Boomers and Gen X age, health and medical care will become a priority. As we recently explored in our article on Medtail, “With an aging Boomer population, increased healthcare demands and shifting consumer preferences, it’s no surprise that repurposing retail space has become a strategic necessity. It has created a dynamic landscape that continues to evolve as both the health care and retail industries face unique challenges.”Retailers, particularly in the Medtail space, can take a tip from CVS, who opened MinuteClinics in many of their locations.“Convenience, accessibility, familiarity, and trust are all elements that retail health clinics and pharmacies can build on in the decades ahead. It’s essential that we make older people feel welcome in retail health clinics and show them that they are interacting with a provider they can trust,” says Creagh Milford, DO, MPH, Senior Vice President of Retail Health, CVS Health.

2. Give them a grocery experience to remember.
Consumer research shows that shoppers between ages 19 and 24 make more than 34% more grocery trips than shoppers ages 75 and older. Because older consumers tend to go to the grocery store less often, each trip becomes more meaningful.Retailers that make in-store conversions to impact the shopping experiences of senior shoppers in a positive way can benefit. For example, varied basket sizes, clear signage, and personalized assistance can offer a better shopping experience for seniors, who are more likely to return when they feel valued and accommodated.Rethinking product offerings to serve the needs of older adults is another way to attract this demographic. From easy-to-open packaging to products designed for accessibility and convenience, adapting offerings to cater to the unique needs and preferences of older adults can enhance their shopping experience and foster loyalty.

3. Make human interaction a priority.
Older consumers tend to prefer the human touch, too. A fitting example of catering to this desire comes in the form of “slow checkout lanes” that have been rolled out in The Netherlands at Jumbo Supermarkets. The slow checkout concept, for shoppers who prefer to chat to a human than scan their own items have been so popular that the chain has promised to open them in 200 additional locations.

4. Integrate technology with accessibility in mind.
Seniors will gladly spend money online, provided you make it easy for them to do so. Ensure that online platforms are user-friendly and accessible, with larger fonts and easy navigation. It’s important for any e-commerce site to be safe and secure since this is a top concern of shopping online for seniors.Retailers should consider offering online shopping with home delivery options for those who may have difficulty visiting physical stores.

5. Offer in-store events or workshops.
Hosting events or workshops tailored to Boomers’ interests, such as cooking demos, gardening classes, and DIY workshops (like Lowe’s DIY-U workshop) is a great way to engage customers in your brand without selling. Those types of activities provide opportunities for social interaction (that we all need) and experiential shopping experiences.

6. Engage in the community.
Consumers in general, but mostly Gen X and Boomers, appreciate businesses that contribute positively to their neighborhoods and support local causes. Engaging with the community through events, sponsorships, or partnerships is a great way to build meaningful relationships.

Become Senior Savvy

In the end, overlooking the opportunity that Silver Shoppers bring to the table can be a huge mistake for your retail business. Industries like apparel, health supplements, skin care brands, alcohol beverages and investment brands are booming thanks to the mature consumer.

This often-overlooked segment of shoppers represents a significant opportunity to retailers. With a better understanding of this demographic, retailers can woo these consumers into loyal shoppers.

In the 2000s, many of us attached miniature loyalty cards to our keychains or stuffed the full-sized versions in our wallets. Loyalty programs have come a long way since then. Today, we simply punch our phone number into a keypad or scan a QR code to instantly access our loyalty accounts and redeem rewards with ease. Companies use “members only” appeal to gain valuable insights into customer behavior by offering rewards for a variety of desired actions, from social media shout outs to exclusive access to events and early product releases.

While loyalty programs once were used to reward customers for spending money at a retailer, today they have evolved to become powerful tools that help businesses grow. That said, loyalty programs have gotten a facelift to appeal to today’s consumer. Conversion specialist Invesp reports that 49% of consumers spend more after joining a loyalty program. The longer the relationship lasts, the more consumers spend. Repeat customers, on average, spend 67% more over three years than they did in the first six months after purchasing from a brand.

A Winning Strategy

Modern loyalty programs are a win-win and prove to be a powerful consumer-centric retail strategy. A PwC survey found that 53% of consumers choose a business to patronize by considering value, and 30% specifically cite benefits, rewards, and privileges as a factor.  On average, a customer in the United States belongs to 17 loyalty programs, eight of which they are active.

According to The Robin Report, investing in a loyalty program is one of the best marketing investments a brand can make.

“The benefits for retailers are substantial: Loyalty customers shop more, spend more, and stay longer. They’re more likely to engage – rating products and advocating for the brand, online and IRL. Moreover, in the current climate of iOS privacy protections and increased privacy legislation, these programs have become the richest source of permission-based consumer data collection, which can then be used to fine-tune program features and communications for maximum impact. Lastly, companies with high loyalty and/or dependable subscriptions get higher valuations on Wall Street.”

Another benefit of loyalty programs for retailers is the influence loyalty programs have on loyalty member purchasing decisions— a whopping 81% of consumers say a loyalty program membership influences their likelihood of making a purchase. Not to mention 59% of loyalty members are more likely to choose the member brand over a competitor.

According to McKinsey, customers who join loyalty programs are 64% more likely to purchase from that company multiple times, 50% more likely to recommend it to a friend, and 31% more likely to pay more to shop with that brand.

A Hidden Data Goldmine

Loyalty programs present a valuable opportunity for businesses to collect first-party data while offering rewards and incentives to their customers. When executed well, data culled from loyalty programs can help brands increase customer lifetime value, drive repeat purchases, and create brand advocates.

Loyalty programs’ influence spans across multiple channels, including online stores, brick-and-mortar locations, mobile apps, and social media platforms. This omni-channel presence provides customers with seamless interactions and more opportunities to earn and redeem rewards.

Just look to beauty retailer Ulta, which identifies loyalty members’ needs and desires through its membership program, across multiple channels. With more than 42 million active members, Ulta revamped its program in 2024 to further enhance the member experience with special birthday offers. Ulta members earn points on purchases, can earn bigger benefits the more they spend by achieving Platinum or Diamond status, and can use their Ulta Beauty Rewards credit cards to earn even more points. Points can be redeemed for purchases and salon services.

Modern Loyalty Programs and Blockchain Technology

Retail loyalty programs are facing a challenge: keeping customers engaged with programs that often feel siloed and offer limited reward options. Blockchain technology offers a potential solution that could revolutionize how brands design and manage loyalty programs.

Imagine a world where loyalty points aren’t just for your store, but can be earned and redeemed across a network of participating retailers. This is the power of blockchain. It allows you to create secure, digital tokens that represent loyalty points. These tokens are:

• Decentralized: No single entity controls the data, reducing operational costs and increasing transparency for both you and brands and shoppers.
• Immutable: Once a transaction is recorded on the blockchain, it cannot be altered, eliminating fraud concerns.
• Interoperable: Customers can use their tokens at any store within the network, unlocking greater value and flexibility for them. This can incentivize them to shop at a wider range of stores, potentially introducing them to new products and brands.

Beyond the customer benefits, blockchain offers significant advantages for retailers:

• Increased engagement: By offering a more versatile rewards system, you’re more likely to keep customers actively participating in your program, leading to repeat purchases.
• Reduced program management costs: The decentralized nature of blockchain can streamline program administration and potentially reduce maintenance fees.
• Valuable customer insights: With customer consent, blockchain allows you to gather valuable data on spending habits across the network, providing insights into broader consumer trends and informing more targeted marketing strategies.

While still in its infancy, blockchain has the potential to be a game-changer for loyalty programs. By offering increased value and flexibility for both brands and customers, blockchain can help you create a more engaging and rewarding loyalty program experience. This can ultimately lead to increased customer retention, brand loyalty, and revenue growth.

Unlocking Stronger Customer Relationships

Loyalty programs are a powerful tool to differentiate and drive repeat business. By aligning rewards with customer preferences, brands can create a seamless and rewarding shopping journey that keeps them coming back for more. Studies show that loyalty program members spend up to 67% more over three years than non-members.