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Merchandising in an Experience-Driven World

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Item and price have been the keys to retail success for almost a century. Sell high-demand items at a better price than your competition and you were likely to prosper. But, things have changed — permanently.

 

Joel Alden

Today values have replaced value as the organizing principle of commerce and society. Millennial and Gen Z shoppers value experiences over possessions. And, as routine purchases move online, brick-and-mortar stores need to play a different role and reinvent themselves to engage customers.

In this environment, successful next-generation retail organizations are starting to focus on telling and executing against experiential stories, shifting their business processes and operating models accordingly. After all, consumers derive significant personal value from peer interaction, and nothing connects people better than well-crafted stories.

Experiential stories share several characteristics:

• They engage a specific persona — a targeted set of customers with similar psychographics.
• They tell a story that taps into the values and needs of those targeted personas.
• Expressed through merchandising, they cross over multiple categories to bring a story to life.
• They provide a compelling, differentiated experience in-store and online.
• They offer a consistent voice to the customer, coordinated across all customer touch points and communication vehicles.
• They are not event-centric; instead they are a part of your business model, continuously bringing new stories to ­customers.

This shift in the value creation model will require a fairly radical redefinition of how work gets done within the retailer.
Leading-edge retailers are embracing experiential storytelling strategies as an organizing and operational cornerstone. The days when category strategies guided merchandising and customer strategies guided marketing are long gone. Future-focused retail organizations will align on storytelling strategies to guide the shopper-facing aspects of retail — merchandising, marketing, digital engagement and e-commerce, and store operations.

Storytelling strategies target specific personas. Using personas as a marketing tool dates to the mid-1940s when Seventeen surveyed teenage girls and their mothers, resulting in one of the earliest successful examples of personas, Teena the High School Girl.
Here’s how Seventeen described Teena:

“Teena the High School Girl has a peck of problems. She’s what older folks call an awkward adolescent — too tall, too plump, too shy — a little too much of a lot of little things. But they’re big things to Teena. And though she doesn’t always take her troubles to her mother, Teena writes her favorite magazine for the tip-off on the clothes she wears, the food she eats, the lipstick she wields, the room she bunks in, the budget she keeps, the boy she has a crush on.”

Charisse Jacques

Charisse Jacques

What changed over the 60-plus years since Teena debuted?

Clearly the biggest changes have been the ability to gather large amounts of customer data from a variety of sources; the creation of algorithms to filter that “big data” so behavioral patterns can be isolated; the ability to identify micro-segments, or more finely honed personas, from those patterns; the adoption of multiple personas by single individuals (say on different websites); the variety of media used to communicate, and communicate with, personas; and finally the development of purposefully designed experiences based on stories that resonate with the persona. The use of personas in this way represents the first step towards mass personalization — not just for the purposes of marketing, but also for the purpose of merchandising.

Retail organizations execute their storytelling strategy by creating curated and personalized experiences for each persona. This new way of doing business will be the responsibility of what we are calling the next-generation merchandising organization — a reimagining of the merchandising function that works with internal cross-functional and external partners to create experiences by bringing together innovative portfolios of products and services that make “stories” come alive.

Instead of asking what products they should sell and how they should be merchandised, next generation merchandisers explore what experiences drive value with the targeted persona, what product and services will activate that experience across channels, and what partners they need to engage (which will need to include not only consumer packaged goods but also technology innovators, chefs and restaurants, health care providers, and multiple other nonconventional partners).

Randy Burt

Randy Burt

Some retailers are already elevating their in-store experiences, reconnecting with customers and/or bringing them back into stores with stories tied to experiences. These differ from past examples of cross-merchandising in several ways. Unique products are curated to support the story (e.g., products from a particular country). These products are also used as part of interactive in-store and online experiences to engage the customer (e.g., cooking demonstrations with top chefs and online videos showing the origins of the products), supported by social media’s ability to build community around a story.

Leading-edge retailers are already standing up small, fast-paced teams or a senior lead role to work cross-functionally and with external partners to curate and deliver experiential stories on a regular basis. Aldi has a team providing an “Aldi Finds” treasure hunt experience with curated products available for a limited time. Indigo Stores in Canada has creative teams responsible for changing the look and feel of the stores several times per year. Nordstrom has a creative projects team creating unique in-store experiences.
What’s unique about these examples is that they are permanent resources helping the organization operate in a different way to deliver differentiated experiences 52 weeks a year.

Next-generation merchandisers need to adopt a different mindset, and it may require hiring additional skill sets. While everyone can tell a story, not everyone can create one or tell it effectively. So, one day we may see new merchandising titles such as, “Chief Storytelling Officer.”
As the use of experiential stories become more common, retailers need to push the envelope of change when it comes to the merchandising operating model.

Eric Gervet

Conventional category-centric merchandising and operating models will be replaced by persona-centric and experience-driven models. We see a future where merchandisers are aligned against personas, not categories, and where key merchandising processes, incentives and metrics are tied to storytelling. The future will require more dynamic changes as seasons, events and customer attitudes shift. It will require a more holistic rethink of how the story shows up to the customer.

Now, ask yourself, “Are you really ready for that future?”

Please look for our follow-up article in MMR’s special NACDS August issue, for a perspective on steps to take to go on the journey towards this future state.

Joel Alden, Randy Burt and Eric Gervet are partners in the consumer and retail practice of A.T. Kearney, a global strategy and management consulting firm. Charisse Jacques is a principal in the firm’s consumer and retail practice. They can be reached at Joel.Alden@atkearney.com, Randy.Burt@atkearney.com, Eric.Gervet@atkearney.com and Charisse.Jacques@atkearney.com. The authors would like to thank Ben Jakes, Ashley Rinere and Marieke Witjes, consultants at A.T. Kearney, for their contributions to this article.


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