By Sam Andrews

Low prices alone will not be enough to lure shoppers to physical stores – they want more, says Leo Burnett Retail Strategy Head Dr. Alan Treadgold (pictured).

The retail expert tells Cue Entertainment that research carried out by advertising giant Leo Burnett in 2011 revealed that consumers not only demand keen prices but they want great service and store environments as well.

“Price competitiveness is absolutely mandatory, it is a cost of entry for any retailer but there are other things we look to as contributing a more overall impression of value-for-money as well,” he says.

“Those other attributes vary from category to category but they are certainly to do with the service experience, they are to do with the store experience, they are certainly to do with the ease of delivery and ease of return. Shoppers in that piece of research were quite clear that price competitiveness is absolutely mandatory but there are other drivers of value as well.”

Retailers have become focused excessively on prices to the detriment of their overall proposition, Treadgold says.

“It is a legitimate charge that can be levelled at a lot of retailers and a lot of sectors of retail that they haven’t done anything like as good a job as they should have done to protect their total value equation and they have migrated entirely to price, price, price,” he says.

“Of course, when you have educated shoppers to shop overwhelmingly on the basis of price it is almost impossible to recover that ground. In the entertainment market, it is particularly difficult — borderline impossible — to recover that ground once you have educated shoppers that books, for example, are going to be launched at 50% off their recommended retail price. You can never recover from that position.”

Entertainment retailers have to become more “flexible in their thinking and in their business model”, he says, and he notes that in some cases “they are far too dependent on suppliers pushing new product into the channel rather than consumers pulling product through the channel”.

He says, “Entertainment is migrating very, very quickly online. I can still see a role for physical stores but I think it is going to be a smaller number of better stores — I think we are rather over shopped in entertainment at the moment.

“The defining theme in retail at the moment is absolutely the multi-channel nature of the retail industry. You have got to see yourself going to market, not just through physical stores or online but through a combination of touch points that work best for your consumer. A smaller number of better stores will likely be a part of the mix, an online presence will be mandatory and I think a mobile presence will be mandatory as well.”

Treadgold believes that the UltraViolet initiative that blends digital with physical will help retailers achieve that flexibility: “I think that is very much the model for engaging shoppers now and into the future. The practical consequence is going to be a diminished role for the physical retail store.”

Both entertainment stores and suppliers should assess the impact that Apple has had on retailing, he says: “I think there are lessons to be learned from Apple. It is an extraordinary business and an extraordinary success story and I think the heart of what Apple has been able to do is to continue to be able to command this extraordinary premium for its products through the extraordinary positive associations that brand has with its shoppers. Of course, the heart of the Apple proposition is the fundamental quality of the product and the fundamental control that Apple exercise of the way in which its products are sold. It has genuinely changed the model in the sense of keeping such tight control over its distribution and I think the Apple stores — this small number of very large, iconic flagship stores — is an integral part of that.”

Treadgold says the creators of entertainment products could look again at what Disney did to develop a direct relationship with their customers through its own stores to and through the theme parks.

“There is an interesting proposition there and, of course, the challenge for retailers is that they could be bypassed by the originators of entertainment product. I think that is a very real risk for retailers and it is a very interesting opportunity for the entertainment originators,” he says.

Entertainment creators could treat retail as a marketing channel, as Apple does. “The stores are absolutely part of the marketing of Apple, which largely doesn’t care where you buy your product from so long as it is Apple product you are buying. There are interesting parallels you can extract,” he says.

Entertainment could play an interesting role in the regeneration of the high street by adopting a more innovative and differentiated model. “It is an interesting time to have this conversation, given the Mary Portas paper recently. One thing the high street absolutely needs is new entrants coming into it to make it a more interesting environment than a lot of them are currently,” he says.

“I do think there are possibilities for new entrants with genuinely innovative, genuinely differentiated, genuinely interesting offers to occupy an interesting position on the high street. A couple of examples I look to include the whole pop up space for stores that are there for a couple of weeks, couple of months and then they disappear or are changed. It is like the eBay thing of opening a pop up store in central London that lasted for 12 days or so. That genuinely brings some interest to the brands that are doing it and some interest to the locations where they are operating.”

Treadgold cites the creation of a temporary mall made up of shipping containers at Spitalfields in London as an example of new ways to engage shoppers.

“It has all sorts of quirky brands, as well as some established brands, in a quirky environment. That strikes me as a genuinely interesting way to bring more energy to the brands that are in that location and also to the location itself through the quirkiness of it. I think there is absolutely a role for ideas that live in that world,” he says.

“The Amazon proposition of starting to put some secure kiosks in locations where you can collect your Amazon purchases if that is easier for you than having it delivered to home or office is a potential interesting entrant into some locations as well.

“A couple of years ago, Orange piloted some differentiated stores — there was a store a Milton Keynes that was very youth oriented, it felt more like a nightclub than a retail store. It was a genuinely interesting attempt by a well-established brand to do something rather more interesting with some of their stores. I do think there is an opportunity and, moreover, I think it would be very desirable to see more innovative activity on high streets. The essentially cultural nature of entertainment products also lends itself to being more innovative, to putting more immersive type activities into high streets.”

Treadgold also believes that physical gifts rather than vouchers for items such as digital downloads will retain their importance in retailing.

He says, “I think there is a role for a Groupon voucher or one of those experience club vouchers to have half a day driving racing cars or take a cookery course or whatever but they are very much a minority form of gifting that will continue to be a minority form of gifting.”