By Chase Garbarino, Co-Founder and CEO of HqO
For years, industry watchers and consumers have been saying retail is dead — that is, when it comes to brick-and-mortar stores competing against e-commerce giants such as Amazon. However, that sentiment is not true, and much can be learned from the companies who have come out on top despite investing in physical store locations. In fact, one of the most interesting retail stories comes from a company who went against the grain of the physical-to-digital trend. That company was Warby Parker, and they have since been coined a “click-to-brick success.”
Despite Warby Parker launching as a successful online-only business in 2010, they began to diversify their shopping experiences by opening physical store locations in 2013 — a strategy that was, at the time, seen as controversial. Co-founder Dave Gilboa has confessed that the truth behind this decision resided in collecting better customer data. In-person conversations helped the company learn what their customers liked, wanted, and needed from their brand — all information that would’ve been difficult to obtain through solely relying on online sales.
Warby Parker currently boasts the highest net promoter score in their industry due to the ability to diversify the shopper experience. When you think about it, their story isn’t dissimilar to what is going on in the commercial real estate (CRE) industry. We can draw quite a few parallels between their innovations around the customer experience and the hybrid work models that landlords need to accommodate today. So, how does it all play into the future of the office?
No one would have been able to predict the whirlwind rate of digital adoption before the COVID-19 pandemic disrupted industries across the globe. In CRE alone, we’re now witnessing decades of progress being achieved within a single year. Current day health and safety concerns are accelerating what was once a trend, and have solidified technology as a legitimate building standard.
The simple truth is that there’s no turning back — CRE has changed forever. The value equation for properties everywhere has officially shifted from buildings and location to people. Just as Warby Parker leaned into their customer experience, property owners will now need to do the same. In order to triumph among growing hybrid work models and successfully meet tenants where they are, landlords will need to first understand the true return on investment (ROI) of the physical office, and then create smart spaces where people actually want to work.
With over 8,000 proptech companies in the market, it’s no surprise that digital tenant engagement strategies can seem like a pretty daunting task for property owners. Enter technology partners such as HqO, who can help landlords create end-to-end solutions without the added technical complexity. Access to this technology during a time of significant digital growth gives landlords insight to important data — both in their buildings and at scale — to help them learn more about their building occupants, experience the new value drivers of CRE, and become more responsive to changing tenant needs.
Out with the Old, In with the New
Though tackling new-age obstacles can seem complicated, there is nothing more complicated than property leaders running businesses through time-consuming, antiquated strategies. Three of the most common outdated approaches we’ve seen in the market include investing only in physical amenities and services to differentiate your assets, using little tenant or building data to make decisions, and leveraging disparate, unintegrated building technology systems.
To truly create value, property owners need to find ways to enhance their building’s programming, collect and structure data at the building and portfolio level, and manage technical complexity. Updating your strategy will help you uncover important insights that can lead to an increase in efficiency while generating value for you and your tenants — just as Warby Parker leveraged data to continuously improve their entire business.
Weeding Through the Data
In 2011, Ron Johnson became chief of J.C. Penney and sought to completely re-imagine its department store model. While attempting to transform its store locations into destinations, he traded in their marketable and beloved sales, coupons, and discounts for everyday low pricing. His one oversight? He didn’t base any of the changes on store data, and he didn’t test those changes with customers to adjust based on new data.
This lack of attention yielded staggering, alarming results. In 2012, J.C. Penney sales fell 25% and reported a net loss of almost $800 million. In the following two years, they continued to lose $1.3 billion and $717 million, respectively. Because Johnson didn’t actively seek out data on his customers, he misunderstood what they truly cared about, creating a larger deficit for the company than ever before. However, it’s not enough to just start collecting information on your end-users. How do you know the data you’re gathering is the right, quality data?
CRE landlords often invest in technologies that provide vanity metrics, instead of the quality data they need to understand building occupants. Unlocking actionable data and insights that go beyond the surface-level requires a single platform with rich, API-based integrations to tie together all aspects of the tenant experience. Without this, the technology trail ends abruptly, leaving property owners with no additional information that they can apply to their assets.
In order to access the more granular, meaningful information, you need the right technology partner. Having such significant intelligence on the end-user of your product helps create a better user experience, which in turn increases customer engagement and continues to provide you with more useful data. Once you start collecting and leveraging high-quality information, you’re refining a more strategic, data-driven approach for your assets. The data compounds on itself.
Meet People Where They Are
In November of 2012, Best Buy revamped their customer strategy to enhance their online presence and improve their store locations. Primarily known for physical retail, their business had previously relied on in-person shopping. During the e-commerce boom, they decided to match the prices of one of their biggest competitors: Amazon. After throwing in free delivery services to level the playing field, they also made sure to revamp their entire website, allow for easy and direct store communications, and more.
However, their updates didn’t end there, as it was the physical store locations that gave Best Buy a more competitive advantage once they implemented flexible in-store strategies. They began to integrate technologies such as virtual reality to help users visualize their products in their own homes, and even began a successful in-home adviser program where a Best Buy employee would meet customers at their residence to provide a more personalized experience.
This meant that not only could customers choose between an online or physical shopping experience to fit their lifestyles, but they also benefited from the company’s overall heightened focus on the consumer. The company’s journey of customer enrichment made sure that they addressed key human needs instead of merely selling a product. Each year, Best Buy continues to improve upon and vary their offerings to solve unique customer problems — leading to a sustainable increase in sales through the present day.
For CRE leaders, the resolution remains the same: in order to remain successful, you need to truly invest in your end-users and provide flexible experiences that speak to what they really want. The only way to meet tenants where they are is by creating tech-enabled experiences for the workplace to supplement in-person experiences. Ultimately, owners need to provide spaces that will compete with home work environments and enhance productivity.
Practice for the Future
There’s a lot we can take away from the retail industry in terms of its digital transformation, the various customer experiences, and their adoption of data collection practices. It’s important to note that the CRE market won’t suddenly boast professionals who are automatically tech- and data-oriented. Just like a sport or an instrument, property owners need to develop their tenant engagement skills by familiarizing themselves with tenant experience and building technologies. With fewer people in offices at the moment, there is no better time than the present to get started, practice, and improve such a necessary skill set. To learn more about how you can meet your tenants where they are, schedule an HqOS demo today.