“Experiential” – a meaningless buzzword?

Written By:

Stephen Springham, Knight Frank

01 Feb 2019

5 minutes to read

Categories:

• More of the same from WH Smith. In the 20 weeks to 19 Jan, the company reported a 6% uplift in total sales. At the travel business sales were up by 16%, or by 8% if the contribution from its recently acquired InMotion business is excluded. On a like-for-like basis, sales were up by 3%. Total sales at its high street stores edged down 1%, with like-for-likes falling by 2%.
• Ongoing strong performance from Hotel Chocolat. In the 13-week period to 30 Dec, group revenue increased by 15% year-on-year. Its retail, online and wholesale channels all experienced growth. In the second half of 2018, the business opened 15 new stores, taking its total store estate in the UK to 117.
• Value fashion operator Bonmarché reported a 7.8% decline in like-for-like sales in its third quarter. In the 13 weeks to 29 Dec, online like-for-likes increased by 22.2%, a deceleration on the growth recorded in the first half of the year. In-store like-for-likes were down 11.1% in the period. This performance was “in line with guidance”, this guidance being a profit warning issued a couple of weeks before Christmas.
• At the other end of the fashion spectrum, Burberry posted a 1% uplift in comparable store sales in its third quarter (13 weeks to 29 Dec). However, retail revenue fell by 1% to £711m. Sales in its EMEA region benefited from increased tourist spending but sales in its Americas region were impacted by softer footfall. Sales in its Asia Pacific region were helped by increased spending in China.

Stephen Springham, Head of Retail Research:

“Experiential”. Undoubtedly the buzzword to end all buzzwords in retail at the moment. No commentary or analysis on the high street, informed or otherwise, will fail to drop in the word “experiential” on at least one occasion. The common consensus seems to be that only by being “experiential” will retail survive.

The issue is, no one seems to know what “experiential” actually means. I certainly don’t. And nobody I’ve asked has actually come up with anything beyond the highly abstract. Even a fellow analyst whose every second word is seemingly “experiential” was reduced to silence when asked what that means in reality.

“Experiential”. So what are we talking? Digital screens? Light shows? VR headsets? Dancing troupes? Zip wires? Bungee jumping? Dolphin displays? Performing sea lions? None of the above? I’m still none the wiser.

A very good quote from Revo CEO Ed Cooke on LinkedIn earlier this week seems to echo my bemusement at the over-use of the words “experiential” and “convenience” as catch-all cures for retail’s many ills. “And experience vs convenience, I’m fairly sure none of us favour poor experiences nor seek inconvenience.”

Not as tenuous a link as it may seem, but there were two high profile store closures reported over the last week or so. One – the John Lewis store (trading as Knight & Lee) in Southsea – received extensive media coverage. The other – the Missguided store in Westfield Stratford City – far less, although to my mind was far more newsworthy.

It would be wrong to read too much into the closure of Knight & Lee in Southsea. It was very much a legacy store, a significant outlier to the rest of the John Lewis estate (it covers just 35k sq ft, versus a portfolio average of 150k+ sq ft). Other stores of a similar ilk (Pratts in Streatham, Bon Marche in Brixton, Caleys in Windsor, to name but three off the top of my head) have been slowly weeded out over a number of years, Southsea is the last of that legacy. As it is being sold to a developer, presumably the offer was too good to refuse. But as it was John Lewis, the announcement was afforded disproportionate coverage, with many commentators falling into the trap of interpreting it as a further nail in the coffin for the high street. A blow to Southsea maybe, but hardly a sign of the times.

The closure of the Missguided store in Stratford City (reported in Drapers but unconfirmed by the company itself) is far more significant on many counts. Few stores have ever opened to such a fanfare. In essence, it was almost universally regarded as a ‘store of the future’, the very embodiment of all things “experiential”. A temple of ‘Barbie bling’ (not my words), a centrepiece of a pink sports ‘ute’, ostrich-sized pink flamingos, mannequins with unicorn heads and risqué quips, the store design was met with almost universal acclaim. More than that, it represented the multi-channel dream, an online pure-play opening a physical store, a standard-bearer for the future of retailing.

So why is it closing? For the very simple reason it didn’t make money. Management had previously admitted that the original store was too big, but it now appears that even the scaled down version wasn’t delivering anything like the returns it needed to break even.

We have long argued that the future of retailing is not about stores, nor is about online. It is about both and how they seamlessly interact. And store-based retailers may well be better placed to make the transition to become multi-channel operators than online pure-plays.

Developing online arms has been painful for most store-based operators, but Missguided’s experience suggests that opening stores may prove harder still for online pureplays.

And where does that leave the “experiential” factor? Clearly, it is subordinate to making money and “experiential for experiential’s sake” is a waste of capital. Experience somehow has to translate into spend and there are very fine capex-versus-return balances to be struck.

That said (and my previously flippant remarks aside), it is abundantly apparent that huge proportions of stores and shopping centres across the country have not had the necessary levels of investment over the years and are looking dated and very tired as a result.

And this is one of the factors that is weighing so heavily on overall market performance. Shopping should be a pleasurable experience and in so many cases, it is not.

Forget “experiential”. How about “half-decent”, “invested in”, “not neglected”, “loved” or even just “nice”? Not as catchy as “experiential”, but definitely far more tangible.