The New Shopper Calculus

A white paper on the retail industry,
prepared by Leo Burnett and Arc Worldwide

Introduction
One of the most important questions facing the retail industry in a multi-channel, Internet enabled world is what – if any – is
the role of the physical retail store in a landscape where they are no longer needed for shoppers to make purchases and
retailers to sell products and services.
At Leo Burnett, we felt that this heartland issue merited serious attention. Moreover, we wanted in particular to hear the
shoppers’ perspectives. And so we asked them. Specifically, we asked 2,200 adults across the United States. We asked
them for their perspectives on the following key questions:
What do retailers need to do to keep their stores interesting, relevant and inviting?
What roles does the physical store play for them in the overall shopping process?
How synergistic does the store need to be with other shopping channels?
What stores do shoppers like to visit and why?
What are their expectations for personal service in store and how well are retailers delivering on their expectations?
How do they feel about the role that technology is playing in their experiences of physical stores?
Do they categorize stores into the same functionally-led groupings that the retail industry uses?
How important is price in their choice criteria?

We included in our study 40 of the most important retail brands in America.

7-Eleven CVS Local Grocery Store Target
Abercrombie & Fitch Dollar General Lowe’s Tiffany’s
Apple Favorite Movie Theater McDonald’s Trader Joe’s
AutoZone Foot Locker Neighborhood Markets by Walmart Vacation Hotel
Barnes & Noble Gap Nike Stores Verizon
Bass Pro Hallmark Nordstrom Victoria’s Secret
Bed Bath & Beyond Health Club Pottery Barn Walgreens
Best Buy Home Depot Sears Walmart
Chase Bank IKEA Sports Park or Venue Whole Foods
Costco Kohl’s TJ Maxx Williams Sonoma

We are very pleased to present in this white paper the key findings from our research and our perspectives on their
implications for the retail industry.

Our overarching observation:
Writing the obituary for the retail store is very premature.
However, a new shopper calculus requires retailers to have a new mindset.

Many have argued that technology has chipped away at the this new calculus often demands hands-on experience so
need for physical retail stores. Websites provide shoppers they can be very certain about their choices. This means
with increasingly rich information about products and that technology, rather than existing as a force in its own
employ increasingly sophisticated technology to bring right, enables shoppers to arrive at the store armed with
virtual shopping to life in ways that would appear to rival a information. Some may have already decided (or think they
bricks and mortar experience. This has driven a steady flow have decided) what they are going to buy – the store is
of sales – some might say a torrent - away from the physical merely a final check or pick-up station. In other cases they
store itself and onto the web. In this scenario, the old retail arrive at the store to check things out, but in a critical way
store model is characterized as irretrievably broken. and often on their own terms. They are informed and in
charge and often focused on efficient mission-completion.
Yet when we set out to more deeply explore, from a
shopper’s perspective, this emerging paradigm, we did not For these reasons -- more so than the allure of
find that this holds true. Even with the plethora of online technology on its own -- the paradigm has shifted from
options, most shoppers feel that the physical retail store is the store being in the position of managing shoppers to
still an essential part of their shopping experience. shoppers managing the store.
While it varies by product category, most agree that there is Importantly, the retailer still has opportunities to powerfully
really no substitute for the store itself. It may not always be influence the evaluation and selection process. But they are
perfect, it may not be loved, but it is needed. In many cases, different than in the past when the only goals that the
shoppers feel that there is simply no substitute for seeing, shopper had and that the retailer needed to deliver against
touching and experiencing a product. The web, while often were about having the right product in the right location and
used, is not preferred. at the right price. The new shift is all about “right process,”
meaning the way shoppers are moved through the shopping
In addition, there is much in our research findings to suggest experience from the time they get on a retailer’s website to
that while the migration from stores to online isn’t the time they arrive in that same retailer’s store. Many
completely over, it is slowing. Furthermore, there may be a things that retailers have not previously considered loom
natural bottom beyond which stores will not fall. Reported large in this apparently beguilingly simple process.
spending data from our respondents suggests a leveling off
of the exodus to online. Also, for many shoppers for much We identify 10 dynamics, detailed in this white paper, that
of the time, the store experience is still rated substantially we believe are critical for retailers to understand and
higher than the web experience – despite the growing embrace if they are to succeed in this new environment.
sophistication of web technology.
In the context of these findings, we think it especially Implication:
important to re-think the nature of the paradigm shift that is Learn the new rules.
taking place in the retail sector. While we believe that there
is a shift taking place, it is perhaps not quite the one that has Understanding the changed role of the
been predicted. physical retail store in a multi-channel
Internet enabled world is crucial for all
As a result, we propose a slightly different narrative: retailers. The new retail reality is that “If you
Technology on its own – online, in-store and mobile – is build it, they won’t necessarily come.”
certainly appealing to some shoppers. And for those specific Furthermore, it is shoppers, not retailers, who
shoppers, these enabling technologies have clearly
are in control of the buying journey and these
diminished the role of the retail store. But what’s more
important and often overlooked, is that for most shoppers, shoppers have very clear views of what they
technology on its own is not the solution – its appeal is too want the physical store experience to deliver.
limited. What we believe is really going on is that the
recession coupled with shoppers’ access to technology has
driven the shift. Shoppers have used it to seize power. In
difficult economic times, they are engaging in a more
complicated calculus in which price, quality, convenience
and personal relevance are more carefully weighed. Unless
it is a product or brand they are already quite familiar with,

Key Finding:
A defining feature of the recession is that while price is focal,
shoppers want everything else too.
It is important to first of all have a current perspective on
how shoppers feel that retailers are performing on the so-
called retail basics of right product, right place (location),
right price. Among these basics, it is inevitably price that % Agree Top 3 Box on 10-Point Scale
has gained much attention lately.
It’s worth putting in the effort to find real
Given the recession and its lackluster recovery, it’s not bargains when shopping
surprising that price is focal among today’s shoppers and
2009 2010
that they are willing to invest substantial time to find
bargains as well as substantial time re-thinking exactly what 53% 52%
is right for them. There is no indication in our research that
price sensitivity is lessening as the economic recovery Price is the most important consideration in
proceeds – it is still pervasive, and our data shows there has choosing a brand
been no significant change in the importance shoppers 2009 2010
attach to price by comparison with a year ago. Fully 81% of 36% 36%
shoppers strongly agree that it’s worth the effort to find real
bargains and 70% strongly agree that price is the most
I often switch between buying a couple of
important consideration in choosing a retail brand. A
different brands depending on price
majority also report switching from one retailer to another
based on price. 2009 2010
36% 36%
Despite this, quality of products and quality of store
experience are still important. Nearly two-thirds of
shoppers still strongly agree that quality is the most
important consideration when shopping and three quarters
strongly agree that high quality and excellent service are Implication:
important also. Conversely, less than a third say that they Price competitiveness gets you an
would be willing to sacrifice quality of experience for lower invitation to the party, but price alone
price. won’t get you a dance.
Recession impacted shoppers have become
% Agree Top 3 Box on 10-Point Scale extremely demanding shoppers. They are no
longer prepared to accept the old trade-offs
The most important thing when shopping is to of low price or a quality experience and
find high quality products quality merchandise. In America in 2010, they
61% want it all and they are very intolerant of
retailers who do not deliver on their
When it comes to stores, It’s important to me expectations. Furthermore, retailers must
to go to those that have high quality products understand that they are not just competing
and excellent service against other retailers; they are also
75% competing against the shopper’s option to
defer their purchase or not to spend at all.
I’m willing to sacrifice the quality of the This recession has shown us just how able
shopping experience for lower price shoppers are to exercise their ‘no spend’
option if they feel they need to or if retailers
31%
do not give them sufficient reason to make a
purchase.

Key Finding:
Physical retail stores are still very relevant
for many shoppers and many types of purchases,
but the experience certainly isn’t optimized.
Our research tells us in clear terms that shoppers are often In fact, 55% of shoppers agree strongly that the 10 items
still disappointed in and frustrated by the inability of identified in the survey overall as most important are
retailers to deliver on the ‘Retail 101’ basics of offering the indeed extremely important to them personally., However,
right products in convenient locations at competitive prices. only 43% believe that retailers are doing a good job in
To this, the shoppers we surveyed add a fourth ‘retail basic’ delivering on those attributes. Thus there is a substantial
– a reasonable returns policy. gap between importance and delivery just on the store
basics.
When asked to rank 76 store attributes in order of the
importance that they attach to them, it is these 4 constructs, This highlights the fact that there are clear opportunities for
no matter how expressed, that dominate the top of the retailers to raise their game on the basics. Those who
rankings. By contrast, web and technology items fall much consistently deliver on the fundamentals will have a clear
farther down the list. competitive advantage over the majority who can’t. This
may sound like low hanging fruit, but it is a constant
However, our data also shows that retailers are still not challenge for retailers and, as our research shows, a
getting the basics right – even in the eyes of shoppers who frustration for shoppers that they are still not able to get it
prefer to shop their stores. When we compare what’s mostly right most of the time.
important to shoppers to how retailers are delivering on
these attributes, there is substantial under-delivery. We
found that price suffers most from perceptions of under-
delivery by retailers. In terms of having the right brands
and products, the biggest under-delivery is on having things Importance of top 10 items 55%
in stock. Convenience of store location could also be better.
And stores could also do rather better on their return Delivery of top 10 items 43%
policies, particularly in terms of the timeframe that they will
allow returns.
GAP -12%
Top 10 Store Attributes as Rated by Rating Rank
Shoppers
A store I can trust 7.7 1
Has a great selection of products 7.7 2 Implication:
Has a location that’s really convenient for 7.6 3 It may not be sexy, but there’s work to
me do – and profit to be made – from
They always have the items I want in stock 7.5 4 making the basics better.
Has good value for the money compared 7.5 5
to other stores of its type
Retailers are often still struggling to get the
basics right. Shoppers are noticing and are
Makes shopping quick and easy 7.4 6
expressing their frustrations. It may still be
Has the right mix of products 7.4 7 ‘Retail 101’ but there are clear wins to be had
Has a good range of prices on the items I 7.4 8 by improving customer appeal and retention –
shop for there and therefore profitability.
Has prompt service-I don’t have to go 7.3 9
searching for someone if I have a question
Keeps prices lower than the competition 7.3 10
Has consistent return policy, whether I’ve 7.3 10
shopped online or in the store
Mean Score on Importance (scale 1-10) and importance rank out of 76 items

Key Finding:
Shoppers are largely unimpressed with in-store service.
It’s not just the delivery that’s weak – it’s the service proposition itself.

For many shoppers, good service used to mean a smiling This means that staff need to be more attuned to a shopper
staff member. Shoppers’ expectations, however, have who arrives at the store already armed with information.
changed and service now means much more than staff who They need to know their merchandise to a level of detail
are just being friendly but doing little else. that adds to the shopper’s (often very high) knowledge
when they enter the store. They need also to understand
Our research shows that many retailers are still caught up in when to interact with the shopper and when they want to be
the old definition of service and too often believe that left alone to explore and move through the store or the
service means a person in store who acknowledges the merchandise category at their own pace and without
customer’s presence. Shoppers are clear that they want interruption.
much more than this. They’re looking for real help to make
better informed decisions. They’re seeking a lot of Importantly, effective service doesn’t necessarily have to
information about products in the store as well as include a person. Effective service can also include
salespeople who are in tune with when they’re needed and informative displays, signage, or interactive technology in
when they aren’t. store. However, as we highlight later on in this paper,
technology that empowers shoppers to get help completely
For American shoppers today, In-store service has been re- on their own also has the potential to create a division
cast to be much more about real effectiveness than about between shoppers and the retail store.
acknowledgement.

Implication:
Store Attributes as Rated by Shoppers Rating Rank Reframe service from staff ‘just being
Has prompt service-I don’t have to go 7.3 9 there’ to service being truly effective
searching for someone if I have a and delivered by both staff and the
question
store environment.
Has sales people who really know the 7.0 16
merchandise Shoppers regard service as of key importance
Make it easy to get the information I need 7.0 18 in their choice of retailer. However, ‘good’ or
about a product right there in the store ‘high quality’ service is a very nuanced and
Has figured out at which points in the 6.7 22 multi-faceted attribute in the minds of the
store experience the quality of service shopper. Few retailers understand this and
matters the most
fewer still are able to satisfactorily deliver it.
Has figured out how much or how little 6.7 24 There is great competitive advantage to be
interaction I want to have with the sales
staff, and has gotten it just right
secured by those who do.
Mean Score on Importance (scale 1-10) and importance rank out of 76 items

Key Finding:
Shoppers organize stores in terms of the experiences they want to have,
not just the merchandise they want to buy.

In order to understand shoppers’ perceptions of retail stores, “Strong Value,” and “Right Brands and Products” – all
we asked them to rate the 40 retailers included in our factors that are about getting there, finding what you want,
research on a variety of attributes. hopefully at a good price, and getting it done. By contrast,
items anchoring the browsing end of this scale are from the
We were then able to map the attributes and the 40 retail factor “Experiential Environment,” and to some extent from
brands into a two-dimensional space based on shoppers’ the factor “Engaging Ideas” – both factors that are more
perceptions as expressed through the data. As such, this about immersing yourself in the store, being entertained and
analysis reflects how consumers mentally organize the retail engaged, browsing, and ideating.
world.
We call the second dimension “Self Directed vs. Retailer
When placed into the correspondence analysis map, the Guided.” It reflects the degree to which shoppers are
items (shown summarized by their overall factor locations) handling the shopping process more or less on their own, in
reveal that today’s shoppers organize the retail space in a self-directed manner versus letting the store, its display of
which they operate very differently than the way that products and its employees play a role in guiding the
retailers do. Whereas retailers tend to focus more on the purchase process. Again, as can be seen from the map, the
types of products being sold, the shoppers’ world is defined items at the self-directed side are from the various
by two dimensions that are largely to do with how they technology factors – “rEtail Integration,” “Cell Phone
shop, and less to do with what they are shopping for. Friendly,” Reasonable Returns,” and “Technology
Empowered” – all factors that are about using the web site
The first dimension is one we call “Buying vs. Browsing.”
or other technologies to do research, order, search in-store,
In other words, are shoppers in the store primarily to “close
all without the help of service personal. By contrast, the
the sale” or are they there to look around, gather ideas,
items at the retailer guided side of the map are anchored by
immerse in a theme, and maybe purchase something? As
can be seen from the map, the items at the buying end are factors that are all about needing the store itself and its
personnel – “Physical Over Virtual,” and “Effective
from the factors “Convenience,”
Service.”

Implication:
Knowing what’s important is the essential
first step to knowing where to improve.
Shoppers don’t view the retail world through
the same lens as retailers. Shoppers organize
their stores of interest according to the
experience they want to have as well as the
merchandise they want to purchase. A
shopper-centric perspective is required for
retailers to better deliver on the experiences
desired by their shoppers.

Key Finding:
The way that shoppers cluster stores is very different
from the way that retailers do.
In addition to running the data through correspondence analysis to understand how the attributes and stores defined the space,
we cluster analyzed stores on their attribute profiles. Stores with similar profiles to one another, but different from other
stores, clustered together. Six clusters of stores emerged, each representing a different store archetype, as perceived by
shoppers. These clusters are quite different from how the retail industry groups stores.

Price Led Stores All About Ease
Best Buy For Price Led stores, low prices are All About Ease stores offer convenient
7-Eleven
central and self-service options can locations, where it’s all about getting
Walmart McDonald’s
be a means to that end. These products you need in a timely manner. It
CVS stores are also perceived as offering Dollar General may include self-service check-out.
convenience and good return They don’t tend to have good return
Neighborhood Local Grocery
policies. However, the store policies or offer inspirational ideas or
Markets by environment tends to lack inspiration Store displays, but it doesn’t really matter.
Walmart and the service can be lackluster. They have high average store
Chase Bank
Sears For these stores, the in-store penetration and the highest shopping
experience doesn’t offer much that frequency. Web penetration is low and
TJ Maxx consumers can’t find online. these stores are primarily encountered
Target physically and frequently.

All About Atmosphere Ideas Led
Stores in the All About Atmosphere Compared to All About Atmosphere,
Tiffany’s Whole Foods
group have created an extraordinary stores in Ideas Led haven’t created the
Williams Sonoma in-store experience, often with a Hallmark/Gold same sort of experiential environment.
Barnes & Noble special theme, where consumers are Crown However, they tend to have a greater
more likely to think it’s fun to go selection of products that are displayed
Pottery Barn Trader Joe’s
even if they don’t buy anything. in a highly appealing way. They also
Bass Pro These stores don’t tend to sell a wide offer fresh ideas of products to buy—
array of products and their prices are often these are unique products for that
Nordstrom generally thought to be high. particular store.
Abercrombie &
Fitch
Price Plus Efficient Errands
Stores in Price Plus offer a good Efficient Errands stores offer convenient
Kohl’s Lowe’s
value on items they sell and are an locations to get products you need with
Bed Bath & interesting place to shop, but not as Gap decent service. Sales people have
Beyond exciting or inspiring as Ideas Led or Walgreens reasonable merchandise knowledge and
All About Atmosphere. They these stores make it fairly easy to get
Costco Footlocker
frequently add new merchandise and product information. However, they
Nike Stores are stores where consumers like to Home Depot don’t offer an interesting or exciting
take their time and look around. environment or inspirational ideas. They
They tend to offer a more seamless AutoZone are seen mainly as places go pick up
shopping and returning experience Verizon things you already know you want.
between online and in-store.

Implication:
Understand which retailers you’re really being judged against.
Truly customer-centric retailing demands that retailers look at their own bricks and mortar
stores and those of their competitors through the eyes of the shopper. The conventional
retailer-derived sub-segments are not relevant in a shopper-centric model.

Key Finding:
There are 2 clear ways to win in store-based retailing:
excel within your archetype or break with conventions
and create something truly new.

Path #1: Delivering better on shoppers’ expectations Path #2: Break out of the norms of the store archetype
within the store archetype in which you operate
Several notably successful retailers have moved
Each of our shopper-defined store type clusters (or deliberately, decisively and very successfully beyond the
‘archetypes’) has a set of attributes that distinguishes it from concept of playing to type and have effectively created
the others in terms of what shoppers perceive the archetype fusions of store archetypes that lead to unique retail
to be centrally about. Some of these definitional attributes offerings. Thus, launching a relevant fusion physical store
are also highly important for the store to deliver on. format can also be a path by which retailers can achieve
great differentiation and relevance.
Depending on the archetype, delivery on these important,
definitional attributes is often perceived by the shopper to In our survey of 40 retail businesses, three in particular
be sub-par. By improving delivery specifically on stand out as having decisively broken out of the conventions
important, definitional attributes, a store can more of their categories: IKEA, Apple and Victoria’s Secret.
effectively compete and deliver what shoppers seek from a
particular archetype. Moreover, retailers can also avoid • Victoria’s Secret combines elements from three
over-investing in attributes that are perceived by shoppers as store archetypes: Efficient Errands, Ideas Led, and
low-order or largely unimportant and, accordingly, will not All About Atmosphere. So even in convenient,
deliver either a satisfactory return on investment or “errand-running” mall locations, Victoria’s
meaningful competitive advantage. Secret’s colorful environment inspires shoppers via
its unique atmosphere and its delivery of
For example, keeping prices low, being convenient, and interesting and stimulating ideas.
having reasonable return policies are what cause Price Led
stores to group together. Additionally, these attributes are • IKEA, like Victoria’s Secret, combines elements
also of high order importance to shoppers of these types of from Ideas Led and All About Atmosphere with
stores. However, all three are under-delivered on by the Price Plus. It delivers good value yet at the same
Price Led group of stores included in our research. Clearly, time avoids the “price only” trap by offering
this is a very significant problem given that it is precisely inspirational displays in a fun and engaging
for these attributes that shoppers choose to visit these types environment.
of stores. Furthermore, in our survey we are able to
construct highly nuanced and detailed pictures of the exact • Apple also combines elements from Ideas Led and
dimensions on which stores are perceived to be under- All About Atmosphere, but this time combines
performing on attributes of high importance to their target them with a variety of Technology strengths.
Thus, they sell and leverage complex technology,
audiences.
with engaging displays and a creative atmosphere.

Implication:
If you’re not winning by the rules, make sure you’re breaking them.
We have identified already that many (arguably most) retailers still have considerable ‘headroom’ to
more effectively engage their target shoppers by delivering better on the norms for their store
cluster type. Doing so is likely to deliver substantial competitive advantage through deeper
customer engagement. The more radical path to greatness in store-based retailing is to create
entirely new formats that break out of category conventions and deliver unique hybrid experiences.

Key Finding:
Shoppers are promiscuous. They shop around
and their loyalty has to be earned, not bought with a card in their wallets.

The current recession-defined landscape for shoppers and This underscores the need for stores to not just tend to their
retailers has clearly exerted a considerable influence on the loyalty rewards programs, but also to identify the
loyalty that shoppers have to retail brands. dimensions on which they are most vulnerable to
competitors. We have already highlighted the need for
More specifically, one of the very clear findings from our retailers to work harder to deliver on the ‘Retail 101’ basics,
research is that loyalty to retail brands is, for the most part, and we have also noted that all of the store archetypes are
notably weak. As their price sensitivity has increased and under-delivering on at least some of their key definitional
as their dissatisfaction remains relatively high with the features. It is clear then that, for all retailers, a good place
experiences that they often get from retailers, so their to start in the difficult task of building higher levels of
loyalty to retail brands has weakened. shopper loyalty is to examine the degree to which the
business and indeed the individual stores in the business are
Furthermore, loyalty to individual stores is often weak also.
delivering – or not – on the expectations that shoppers have
The shoppers that we surveyed showed generally only
limited levels of store preference. When asked if they for these types of stores.
prefer to go to a store or venue they currently shop versus a
competing one, only half of shoppers indicated a preference
for the store they already shop – in other words, loyalty is
limited even among a store’s current shoppers. Implication:
Understand and work on
How much do you feel you need to go to that the real drivers of shopper loyalty.
particular store or venue versus a competing The deep and long recession and the great
store or venue? fragility of consumer confidence has
fundamentally and permanently changed
Definitely prefer to go to this store or a shoppers’ perceptions of and expectations of
competing store retail businesses. Loyalty has to be truly
52% earned by understanding in detail the
expectations of shoppers and delivering at
Don’t have a strong preference least to those expectations every time that
48% they engage with the business. A loyalty card
alone will not buy loyalty in today’s climate.

Key Finding:
Cutting edge technology is a low order priority for shoppers.
Furthermore, technology is too often undermining, not enhancing
the relationship of shoppers with retail stores.
Technology -- whether web or in-store -- is growing in While there are some shopper segments for whom in-store
scope and influence, but is not universally embraced. It is technology is more important, there are others for whom
still the basics – right product, right price, right location that technological innovation will do little or nothing to attract
matter most to shoppers. Most tellingly, half of the them to or keep them in the store environment. Thus,
shoppers we surveyed agree strongly that cutting edge technology has more of a segmented rather than a mass
technology is not as important as the core aspects of the appeal. In-store technology tends to play to the “tech
store. crowd” as opposed to the average shopper. This means that
stores cannot abandon other core competencies, thinking
that technology will be a substitute. It must be in addition
% Agree Top 3 Box on 10-Point Scale to, or applied in ways that enhance these other
competencies.
Having cutting edge technology in a store isn’t
as important to me as the store having great Finally and very importantly in this area, technology has the
products, great services and a great store power to both enhance and undermine a shopper’s
environment relationship with the store. Our research suggests that it is
currently undermining more than it is enhancing by
48% reducing the emotional engagement that shoppers have with
retailers. Technologies appear often to be putting more
distance between the shopper and the retailer by
Furthermore, shoppers have mixed feelings about encouraging shoppers to work completely independently of
technology in store. In general, of all of the attributes that retailers. This appears to be an unanticipated – and
we measured items relating to technology fall towards the unwelcome – result of the investments that retailers have
bottom of the list in terms of perceived importance. This been making in in-store technologies, with the general
means that stores cannot abandon or give short shrift to objective of delivering better and more consistent service
other core competencies, in the belief that technological with fewer staff. Thus, much of the technology stores are
innovation will be a substitute – customers simply do not putting in place today further undermines the need for the
see it this way. Additionally, when we asked respondents store rather than necessarily enhancing it.
for their attitudes about nine emerging technologies that
stores might offer, all were regarded as of low importance –
at best ‘nice to have’ rather than ‘important to have’. Also Implication:
and tellingly, all of the technology items we measured and Use technologies in store and in the hands
ran through our correspondence analysis fell towards the of shoppers to enhance the relationship
“Self Directed” side of the map. By contrast, items relating between retailer and shopper, not
to having satisfying retail store experiences all mapped on undermine it.
the opposite, “Retailer Guided” side of the map.
Technology has profoundly reshaped retail.
In-store technologies have very often been
seen as the holy grail for retailers to both
lower their operating costs and deliver better
and more consistent service to customers.
The ‘average’ shopper’s perspective is
somewhat different and the unintended
consequence of many of the in-store
applications of technology has been to create
distance between the shopper and the retailer.
This will need to be addressed as a priority if
physical retail stores are to remain, even
increase, their relevance in a multi-channel
landscape.

Key Finding:
Physical stores need to be made relevant with the Internet.
It’s not stores or Internet, it’s stores and Internet.
One question we raised at the outset was how does a store as to what the retailer is all about as well as to provide
“win” versus the Internet. But our research suggests that, in information about its particular offerings. The store should
fact, the question should be reframed to how does a bricks view itself as more of the second act, a middle and end point
and mortar store win with the Internet? To leverage real in the shopping process. Shoppers will enter already armed
power in the new environment, retailers need to think of with information about products. Thus it is the store’s job
themselves as collaborating with the Internet rather than to refine and further illuminate, to make products come
competing against it. This is certainly what shoppers want. more to life, and to make this process smooth and effective.
One of the more highly agreed to statements in the study is
that shoppers want a seamless experience between the One of the great challenges for retailers is to work out not
website and the store, with over 40% agreeing strongly that just how to co-exist with their and their competitors’
it’s very important to have this type of experience. When websites, but rather, how to create a synergistic experience
we look at all agreement (5+ on a ten point scale), the figure that serves the needs of today’s varied shoppers and
jumps to 75%. simultaneously builds loyalty for their brand. For shoppers,
there’s an important interplay between online and in-store.
It’s not either/or.
% Agree Top 3 Box on 10-Point Scale

It’s very important to me that a retailer provide % Agree Top 3 Box on 10-Point Scale
a consistent experience across all of its
channels – the store itself, the website, the For most of the products that I buy, I do most
catalog, its coupons and promotions, etc. of the information gathering online and then
only go to the store at the end to make the
44%
retail purchase
It’s also clear from much of the data that we’ve already 34%
discussed that while the Internet plays a powerful role in
shopping, it is no substitute for the store. Rather, there’s an For most products that I buy, I do little or
important interplay between online and in-store. It’s not none of the information gathering online. I
either/or. Most shoppers have dual strategies, shifting back rely more heavily on just going to stores
and forth between the web and the store depending on the 16%
product, or task, their own time constraints, interests, and
pocketbooks.
More than anything, the Internet is a place where people can Implication:
gather initial information and get ideas about products, but it Shoppers want seamless integration
is not such a good place to actually make their final between the physical and the virtual.
decisions. (Our recent research into the behaviors and
attitudes of the so-called Multi-Channel Shopper discusses
Internal silos cause disconnects and
this in far greater detail). Conversely stores are viewed as a disconnects cause extreme shopper
convenient and timely way to obtain products, as well as frustration.
places to check them out more thoroughly and in person.
Quite reasonably, shoppers expect seamless
When asked where they do their information gathering, integration between a retailer’s online and
shoppers were twice as likely to agree strongly that they offline worlds. Equally understandably, they
started online as they were to agree that they started in are highly intolerant of retailers who are
the store. unable or unwilling to deliver the seamless
experience that they expect. Merely talking
This means that the Internet is really the front door to the
about ‘seamless integration’ is simply not
store. It is the place where shoppers will do their initial
searching and narrowing down. In this role, it’s not enough enough in an environment where shoppers live
to just show shoppers what the store has, at what prices, etc. it every day. Customer-centric retailing
It needs to present the store beautifully and to create a demands channel neutrality.
compelling first impression – to engage and excite shoppers

Key Finding:
Shoppers look to stores to deliver what the web cannot.
When they disappoint, they are relegated to just being pick-up points.

As we’ve discussed already, many shoppers still want to The flip-side of the same coin is the considerable
shop in physical retail stores, but the actual experience opportunity that this insight points to. As we have shown
they’re getting often disappoints them. There’s a clear already, some of the best examples of high performing
opportunity to make stores more interesting and engaging to stores have elements of stimulation and learning in their
shoppers. Currently they’re often seen as primarily pick-up environments that is still far from easy to replicate on the
and collection points. website.
We gave shoppers a checklist containing a variety of retail
attributes and asked them to check all those where they felt Implication:
the store performed better than the website. Factor analysis Dial up the attributes where stores can
of the list reveals six dimensions on which shoppers win over web – stimulation,
evaluate a physical store versus the store’s website. Some of
the benefits the physical store provides versus the website
entertainment, experience and ideas.
are functional, such as getting a product, returning it, saving Shoppers want it and will reward you
money and saving time. Other benefits, such as learning for delivering it.
about brands and products and stimulating and entertaining
There is a clear opportunity for physical retail
me are much more emotional.
stores to play to one of their key strengths
What becomes clear from this analysis is that stores excel at over the Internet and that is by creating more
being pick-up points and time savers, but do relatively engaging, entertaining and ideas-orientated
poorly on dimensions related to stimulation or learning. environments that will persuade the shopper
This is a substantial problem for retailers: If stores really are to want to be in this type of environment and
perceived as performing best at the largely functional tasks to want to make a purchase when they are
of getting and returning merchandise and saving time, then there.
they are essentially functioning as mini-warehouses – but
unfortunately for the retailer with all of the costs associated
with creating and running a retail store!

% who checked that the Average
physical store is better than store
their website for . . .
Getting it 51
Returning it 47
Saving time 42
Stimulating or entertaining me 32
Learning about brands or products 26
Saving money 25

In Summary: The 9 key themes for physical stores

1 Price competitiveness gets you an invitation to the party, but
price alone won’t get you a dance.

2 It may not be sexy, but there’s work to do – and profit to be
made – from making the basics better.

3 Reframe service from staff ‘just being there’ to service being
truly effective and delivered by both staff and the store
environment.

4 Knowing what’s important is the essential first step to knowing
where to improve.

5 If you’re not winning by the rules, make sure you’re breaking
them.

6 Understand and work on the real drivers of shopper loyalty.

7 Use technologies in store and in the hands of shoppers to
enhance the relationship between retailer and shopper, not
undermine it.

8 Shoppers want seamless integration between the physical and
the virtual. Internal silos cause disconnects and disconnects
cause extreme shopper frustration.

9 There is a clear opportunity for physical retail stores to play to
one of their key strengths over the Internet and that is by
creating more engaging, entertaining and ideas-orientated
environments that will persuade the shopper to want to be in
this type of environment and to want to make a purchase when
they are there.

Contact Information
For more information about this study and Leo Burnett and Arc Worldwide’s perspective on and capabilities in the retail
sector, please contact:

Dr Alan Treadgold
Head of Retail Strategy
Leo Burnett Group

Phone – cell: +44 7958694045
Phone – landline: +44 20 7071 1140
Email: alan.treadgold@leoburnett.com

The New Shopper Calculus

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