Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate Introduction

Each month brings with it another new dominant headline on how one of our most frequent experiences – buying groceries – will be forever changed. Curbside pickup. Driverless cars delivering to our homes. Automatic checkouts.

The technological rush shows a willingness by the largest chains to ensure they outmaneuver upstarts and avoid suffering the same decline of the department store. Consider this. Annual U.S. department store sales peaked in 2000 at just over $232 billion. They’ve been falling ever since, and 2017 saw only $150 billion in sales, the lowest in at least 25 years. Over that time, many leading brands – Boston, Bonwit Teller, Burdines, The Bon-Ton, and B. Altman’s just to name a few B’s – have been absorbed or simply vanished, and the shake-out is far from over. In 1992, department stores accounted for the fourth-largest share of total sales. Today, they have fallen to 12th.

What’s behind the precipitous drop? One explanation is a change in shoppers’ behavior. Those who once appreciated the wide selection of brands available at department stores now opt for the convenience and even greater selection offered online. While this has certainly been a factor, it isn’t the full story, though. Similarly situated retailers such as specialty and general merchandise stores haven’t experienced the same kinds of sales impacts.

The fact is department stores failed to adapt and evolve their merchandising and real-estate strategies with the times and with shoppers. What used to be destinations for retail and socializing – fun places to shop with memorable and unique design features – became utilitarian and generic. Because they ignored customers’ needs and failed to invest in spaces, amenities and the overall brand experience, department stores simply lost their appeal – and relevance.

Roche Bros West Roxbury, MA. Image source: BHDP 2 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 3 Grocers Seeing a Different consumer expectations, expand Kind of Shopper their offerings, redefine convenience and deliver a relevant As department stores have faded, – even engaging – shopping the grocery category has remained experience. the second-largest share of retail sales over the last 25 years with And, unlike their department store revenue nearly doubling over that brethren, grocery stores have time from $337 billion to $639 responded in bold and unique ways:

• Aldi will open inside 10 Kohl’s stores around the country. While this is hardly the first pairing of food and , it is certainly a departure from the norm.

• is launching a Brothers Marketplace Medfield, MA. Image source: BHDP restaurant chain called Kitchen 1883, both within stores What Macy’s Can Teach Consider the following: and as standalone locations. It has also The above are major, strategic Merchandising: Everything starts purchased a sales investments and suggest that with a store’s product assortment analytics company groceries and have and how the various sizes, shapes no intention of standing still – and and packaging of products Kroger’s Kitchen 1883 concept. Image source: https://www.citybeat.com/food-drink/eats-feature/media-gal- and delivery service lery/20994025/kitchen-1883-is--first-venture-in-sitdown-dining tempting the fate of department influence the fixtures on which billion. What happened to to better understand and serve stores. Groceries have continued to they’re presented. For both department stores in the 2000s, its customers. Recently, rumors add home goods, clothing and department stores and grocery however, is now threatening the have also been circulating that personal care items that were once stores, these fixtures have become . Consolidation and the Kroger and Target might merge the purview of department stores. highly specialized. trend toward commoditization are into one super-powered grocery Grocers should look beyond this increasing. New online entrants store. traditional department store Grocery: The four basic loose such as FreshDirect and Peapod are • , America’s biggest merchandise, though, as they can fixture types include cold/frozen entering the space seeking to by sales, acquired learn a lot from how department cases, produce bins, service simplify the shopping experience. e-commerce site Jet.com in stores have historically positioned cases and the versatile metal Amazon’s purchase of Whole Foods 2016 to better fend off Amazon’s that merchandise for sale, gondola. The tall gondola does has also been a major wake-up call, online grocery challenge and everything from the product the bulk of the heavy lifting challenging operators to appeal to urban millennials that displays and lighting to signage and around the perimeters and acknowledge and embrace changing it had been unable to reach. the check-out process. center of the store.

4 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 5 Department stores: Forget just of your show and the store as Grocery: The best that visual Grocery: In most grocery stores, four types of fixtures. the stage set. While grocers can displays get in most grocery high-bay lights placed at Department stores typically use never have the breadth of stores is an organized, stacked, standard 16-foot intervals and upwards of 100 fixture types. fixtures typical for department branded endcap with a large long runs of continuous strip Among the most frequently used stores, they should reconsider price sign. Sometimes, there lights provide basic illumination are racks, hang bars and tables whether a beige metal gondola may be plastic plants hanging with no differentiation. for apparel; tables, cubes, low is the best way to display the off the refrigerated wood gondolas and size-specific vivid colors of apparel and cases. bins for home goods; and beauty products. Spoiler alert: showcases and back islands for It’s not. Department stores: cosmetics. Department stores Visual display: Using your products dedicate space for Advice: Grocers should begin to tell a story is a powerful way to visual displays along treating merchandise as inspire the imagination of with entire budgets architecture, just as department customers. Whether customized at and regional teams of stores have done for years. The the store level or handed down visual merchandisers, product itself is your best from the corporate office, visual who use mannequins, storyteller, and it should be the displays inform shoppers about display tables, first thing a consumer sees, seasonal trends, brand lifestyles or toppers, plinths and unhindered by the design and product benefits – and engender banners. scale of a store’s fixtures. confidence and purpose. Imagine the product as the star Advice: Customers Roche Bros. W. Roxbury, MA. Image source: BHDP expect – and enjoy – having their imaginations Sometimes, track lighting engaged. Grocers should break highlights produce bins while free from traditional boundaries functional can lights are and tell cross-merchandising installed above service counters. stories that combine apparel, home and food. Set aside areas Department stores: Historically, for dedicated displays and department stores have utilized a redefine your show window. sea of fluorescents over the merchandising areas and a Lighting: Great lighting is the best moon-scape of recessed way to catch shoppers’ attention and incandescent lights over aisles sell more product. The best and showcases. Track lighting approach is a layered one. Start with illuminates visual walls and functional lighting that ensures displays, while decorative shoppers can clearly read labels pendants and sconces are used and employees can perform their for architecture and highlighted jobs. Then add more lighting to rooms. spotlight key messaging, displays and architecture.

Brothers Maretplace, Waltham MA. Image source: BHDP 6 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 7 Advice: Start with a base level of Design and architecture plays a lumens to help shoppers read major role in delivering your signage and labels, as well as to brand’s overarching message or simply see the products. Add and minimizing it. What you should do aim spot lighting for apparel and depends on whether you’re trying produce displays to highlight from to make your brand memorable a distance, as well as enhance the and different compared to simply products’ textures by creating being a price leader. deeper shadows. Plan out where to subtract light for dramatic Grocery: It’s tough to tell a contrast. Don’t forget to use any brand story amid a sea of metal available natural daylight, as its gondolas and 15-foot perimeters proven effects include improving with refrigerated cases and mood and lengthening the time coolers. In most grocery stores, people spend in stores. the brand story is relegated to Brothers Marketplace, Waltham, MA. Image source: BHDP signage above cases, the cash Brand expression: Are you trying to register light poles, and a series Graphics/signage: At its core, Department stores: Their spotlight your corporate brand or the of black-and-white historic wayfinding signs are meant to help two-tiered approach to wayfinding branded and private-label products downtown images at the front. guests easily navigate around includes brand signage at the you carry? Are you a “branded stores. It’s critical that there be highest levels then pricing and house” or a “house of brands?” Department stores: Proprietary a graphic hierarchy for key brand product information at the architecture typically frames messages, departments, merchandise level. Temporary each category and brand, letting classifications, promotions, pricing promotional and seasonal shoppers know that the store and policy. Technology and graphics have their home at cross has a wide selection of curated “branded architecture” also plays aisles, on displays and atop merchandise or immersive an important role. cosmetic back islands. “shop-in-shops” of other brands. Grocery: Differentiated Advice: Try this simple test. Advice: Own the envelope. department signage is king, as Take a photo of a typical grocery Before the perimeter fixtures the signage stretches from the department and make a plans are finalized, carve out a top of cases to the underside of horizontal mark at the bottom foot or two where vertical the ceiling and runs from one of the page for each sign or architectural elements can end of the area to the other. message. If the marks create bring aspects of a brand down to Each graphic typically has a nearly continuous line, you customers, so they can literally separate themes with different are asking the guest to absorb engage with the brand. Besides colors, unrelated patterns, too many messages. There just a Starbucks shop imagery and fonts. Aisles are should also be no more than in the coffee aisle, introduce marked with classifications but five vertical information points. highlighted zones within the then confused with multiple Guests will appreciate a aisle that describe special layers of promotions, simplified and consistent signage services, categories and brands. sub-classifications and pricing. hierarchy in which where every message has a place.

Brothers Maretplace, Weston MA. Image source: BHDP 8 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 9 Customer journey: The customer Department stores: Main Planning: For most retailers, Department stores: Traditional journey is the intended story that entrances feature high volume/ merchants wield a lot of power, department stores feature a unfolds as guests walk around and margin products, then guests battling over every square and center core with high-margin experience the store. This starts traverse a series of rooms/ linear foot of space for their businesses on an axis to the with the view from the street and departments. The rooms limit department. It’s usually the last main entrance, then the women’s the entrance, then continues with sight lines to a 30- to 40-foot department merchant to touch the shoe department stretching to vista, allowing a story plan that gets everything they want. the next area. The biggest to be created for each To make the customer journey work, decision has historically been department. Aisles the layout of each category and whether to put the men’s lead in the four service needs to not only make department on the first floor or compass directions business sense but also needs to be relegate it to the second level from one room to the intuitive for guests as they walk with the children’s department other, encouraging through the store. and intimate apparel. guests to wander, browse and discover Grocery: At most supermarkets, Advice: As grocery stores more offerings. there’s no evidence of a journey, continue to expand into apparel, as there’s little obvious beauty and accessories, at what Advice: Identify the connection between the coolers point should there be a high- intended customer and their back-end requirements, margin center core experience? the perimeter-focused service Also, with the link between Roche Bros. Boston, MA. Image source: BHDP journey for each guest offerings, and then the center customer behavior and sales how they walk through the store, profile and how the story of your store aisles with their endcaps becoming better understood, pay for their purchases and exit. brand should unfold. Does the supported by co-op dollars there is now a role for technology It’s everything guests see and aisle vista lead to a set of stock and major brands staking out in determining the most efficient touch along the defined path, doors, or is it purposefully sections of gondola runs. and productive layouts. where each aisle creates vistas centered on a service offering, and focal points that draw guests featured promotion or brand? to the next stage of their journey. Plan the cadence of messages around key moments of pause Grocery: An engaging journey is and physical touch points. Add virtually impossible because of surprise and delight by breaking the walls of continuous cold up the long center store runs. cases and promotional endcaps What if the wine tasting or demo that create vistas more than 100 kitchen was in the center? A feet long with few, if any, focal great story is memorable. points. Guests shop the never- ending outside perimeter and must memorize the maze of gondolas in the center of the store. They’re left on their own to create “journeys” based merely on their shopping needs.

Roche Bros, Boston, MA. Image source: BHDP 10 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 11 Check-outs: The last major staffing efficiencies began Services: While physical stores still offer beauty consultants, touchpoint for the guest experience phasing out multiple can no longer compete with tailors and personal shoppers is at check-out, where a problem- departmental registers in favor online retail for sheer product and are successfully adopting free, positive cashier experience of centralized wrap stations, but selection, the face-to-face in-store pick-up and can reinforce the brand for that also reduced the perception conversations with experts and recommitting to cross-training a consumer. of individual service and the services they provide is sales staff. category expertise. the greatest differentiator for Grocery: It’s taken more than 30 years for just one-third of Advice: Maintain a variety of bricks-and-mortar grocery shoppers to adopt self- ways to check guests out retail. Whether the checkout kiosks. Now without reducing the perception tailor or butcher, the technology is being tested for of service, as there is no personal connection automatic checkout that would one-size-fits-all solution for builds a level of trust. As eliminate the need for long, how individuals want to check grocers adopt more of regimented lines of registers out. Certainly, younger shoppers the traditional and cashiers. are more likely to adopt new department store technology, but it’s important to categories, what Department stores: More than maintain traditional check-out services will migrate 30 years ago, stores seeking methods for older guests. over as well?

Grocery: Many grocers began as the local butcher

or neighborhood Roche Bros. W. Roxbury, MA. Image source: BHDP produce wagon, embracing the importance of Advice: As grocers continue community and family. Today, to expand their beauty and Kroger’s Kitchen 1883 concept. Image source: https://www.citybeat.com/food-drink/eats-feature/media-gal- each grocer must find a balance personal care sections, adding lery/20994025/kitchen-1883-is-krogers-first-venture-in-sitdown-dining between services and the consulting services may be the commodities in the center of next logical step. For food, what the store. in recent about party planning in addition years have included adding to the already popular catering clinics, catering, delivery and services? Understanding curbside pick-up. customer needs and what the competition is doing will greatly Department stores: Historically, influence what services to add department stores differentiated and their impact on grocers’ themselves by their specialty business models. services and category expertise. Although they have ceded some of this space to competitors, they

Roche Bros, Boston, MA. Image source: BHDP 12 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 13 Brothers Marketplace, Medfield, MA. Image source: BHDP

Amenities: Customer amenities are sense of security and an the memorable extra steps that a organized wall system to retailer takes to understand and compare clothing options.

deliver on the needs of each guest. Roche Bros, W. Roxbury, MA. Image source: BHDP If done right, they bring true Advice: With grocery stores moments of surprise and delight. adding more apparel, there’s a role for a better fitting room Grocery: It’s long been as basic experience. And as beauty as baggers offering to load products become more standard, groceries into a shopper’s car. adding testers and mirrors will Grocers have also successfully let shoppers know they’re added other amenities over the making the right choices. years, including sampling stations, wine tastings, cafés Aiming to outwit new competitors, and seating. In-store the largest grocery chains are technologies such as ordering already investing in technological kiosks in the deli have also innovations like curbside pickup, reduced wait times. automatic checkout and delivery services to provide better service to Department stores: Mirrors on customers and simplify the shopping every column and tester bottles experience. But as they evolve with in cosmetics are a given in most this focus on technology, they should department stores. Restaurants not overlook the many easy and and cafés have started to make relatively low-cost physical tweaks their way back into the stores as that can be made in stores to well. The key amenity for all incorporate the best of the long guests is a clean and well-lit successful run once enjoyed by fitting room that provides a department stores.

Brothers Marketplace, Waltham, MA. Image source: BHDP

14 Grocery - The New Department Store: 10 Lessons to Avoid the Same Fate | 15 About BHDP:

BHDP Architecture, an award-win- ning international firm, headquar- tered in Cincinnati, Ohio, with offices in Columbus, Ohio, Raleigh, North Carolina, Atlanta, Georgia, and Pittsburgh, Pennsylvania was founded in 1937. Today, the firm is recognized for intelligent, innovative and inspiring solutions in architec- ture, planning, interior design, project management, and strategic consulting. The firm also offers custom facility management, loca- tion tracking tools and analytic support via AVUITY, its independent technology services consulting practice. Recently named one of the Fastest Growing Architecture and Design Firms of 2015 by Interior Design Magazine, BHDP serves five core markets: Workplace, Retail, Higher , Science and Integrated Industrial Design.

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Brothers Marketplace Weston, MA. Image source: BHDP