How Retailers Can Make the Most Out of Their Bricks-and-mortar Stores

We sat down with Jochen Schmidt, Vice President, Distribution and Real Estate, Swarovski to discuss how retail brands can make the most out of their bricks-and-mortar store locations.

How do you maintain flexibility with your retail stores, to allow greater flexibility to follow trends?

I see three dimensions to allow flexibility. One-off development, the concept and the location. A one-off development like a Pop-up or our forerunner stores (test & learn of new elements). Here you are free of any concepts and can try new things, learn from them and re-apply your learning outcomes in the future. The roll-out concept needs to have a high level of standardisation, however, it also needs to be modular to allow to adapt to locations and/or category changes. Last but not least, the right balance of terms and conditions in a contract to allow changes in the distribution portfolio, if needed should be included.

How do you see the future role of real estate playing in the retail industry over the next five years?

With the changes of IFRS, retailers see the impact on their balance sheets and the significance of the risk of bricks-and-mortar distribution. We’re currently holding over 1,300 stores on a global scale and, of course, a high rental value comes with it.

Real Estate is responsible for maintaining a healthy portfolio and maximising the sales and brand impact, by selecting the right locations with the right terms and conditions. The brand (halo) of bricks-and-mortar also has an impact on online sales. So some retail brands are seeing stronger online sales by having a physical presence, but this physical presence needs to be healthy as well.

Another important role of real estate is the link to the landlord. For the major mall landlords, this should be seen as a strategic partnership, with constant exchange to create exciting shopping environments for the overall benefit of the consumer.

What do you think will be the key areas for businesses to focus on generating ROI from their bricks and mortar stores?

Experience and excitement. The level of experience results in increased traffic, dwell time, higher conversion rates and maximises the impact of “Instagrammable moments”, which again creates a brand impact and drives traffic. There is no hard KPI for experience and excitement but all the topics above can be measured.

What is the most important factor to consider when re-purposing or re-designing bricks and mortar retail space to allow greater flexibility to follow trends?

Just create experience and excitement. So easy… It is not. You need to design the model concept where you have the flexibility to change different elements inside the store to respond to changing consumer needs and expectations. This is also important for shifting towards digital communication in-store. We also ensure that flexibility is included during the development of any new store concept.

The excitement and experience can be achieved through communication, the product and presentation as well as the brand aspect. Many brands have all of those elements but they don`t bring it across in the right way.

Keep the concept flexible and modular to bring in new ideas and to give your customers a reason to come back. For example, use communication tools which allows flexibility in what you communicate. Allow VM to be significantly changed more often during the year.

In what ways has your firm gone about reducing investment risks with bricks and mortar locations?

I would categorize the “Investment risk” into the initial investment and the contractual commitment. First, CapEx which is the overall store fit-out cost. Here you need to decide what the right balance of cost and brand experience is right for you.

Second, the contractual commitment with the landlord and how flexible you want to be if something goes wrong. It starts with the rent and ends with a break option and everything in between.

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