Why experience portfolios are the future of retail
Giving consumers control of how they experience brands is more important than ever
Retailers have traditionally focused their portfolio strategies squarely on real estate-driven market opportunities. Under this modus operandi, many brands consider real estate formats at the outset, like whether opening a freestanding store or a mall outpost makes the most sense for a given city.
But when used in isolation, this framework is rapidly becoming antiquated as consumer expectations for physical retail spaces evolve toward memorable experiences and personalized interactions with brands. It’s no longer simply about the size of the box or where it is located. It’s about what story it tells and how the space facilitates that journey.
For this reason, savvy companies are considering experience formats alongside real estate formats in their portfolio strategies and find that it drives revenue growth and brand valuation. By doing so, they create a diverse portfolio of touchpoints that cater to various consumer preferences, ensuring a seamless and engaging customer journey.
We call this an Experience Portfolio approach. It considers consumer needs and desires as a vital addition to conventional real estate-driven decision-making. Companies that use it develop something invaluable: a portfolio of ways to integrate into their customers’ everyday lives that correspond with a dynamic and diverse portfolio of real estate assets.
Starbucks and LEGO see experience-bases boosts
Starbucks is a case in point. The retailer’s revenue growth increased by 11% in 2022 compared to the previous year as the company expanded across the spectrum of the Experience Portfolio formats identified in our framework, meeting its customers virtually everywhere.
In recent years, the coffee retailer launched temporary spaces such as its four-day Strawberry Vinyl House Pop-up in Tokyo, a greenhouse with strawberry walls from which it made and celebrated its newest offering: the Strawberry Frappuccino. It opened partnered format stores, including cobranded locations with Amazon Go integration and shop-in-shop outposts in major grocery stores. It created a lab at its headquarters to test many of its future concepts. It developed self-service locations solely for pick-up, added more of its higher-end Starbucks Reserve Roastery flagships, piloted a fulfillment concept with Alibaba, and opened localized community stores.
Revenue isn’t the only area this strategy bolstered. The brand valuation consultancy Brand Finance, which included Starbucks in its 2023 list of the 25 most valuable brands, said Starbucks’ brand value increased by 17% in 2022. The company plans to continue developing its Experience Portfolio, with plans to add 2,000 net new stores in the U.S. by 2025 across cafes, pick-up locations, drive-thrus, and delivery-only outposts.
LEGO has also succeeded in layering an experience filter onto its real estate strategy. The toymaker’s innovation in the portfolio process was likely a driver of its 12% increase in sales in 2022 compared to the previous year.
In recent years, LEGO’s experience formats have included an outpost in the London Natural History Museum where visitors can purchase products that align with the museum’s themes and participate in weekly challenges and an immersive two-story flagship store in New York where, among other experiences, guests can explore a “Tree of Discovery” constructed out of 880,000 LEGO blocks. The company has played with phygital concepts across its portfolio, including an empty pop-up store in London that contained only a pillar with a Snapchat code, a portal for entry into an augmented reality fashion boutique that debuted the company’s streetwear line.
At JLL Design Solutions, we see creating a portfolio of experiences for customers that represent the brand in different ways as the future of retail planning and where all brands will be heading to survive and thrive in an evolving ecosystem.
The importance of communication
The more varied a portfolio, the more clearly a brand needs to communicate how to navigate it. If that communication is confusing, there’s a high potential for chaos, i.e., customers driving to a location expecting to dine in only to realize they have arrived at a drive-thru-only format.
As retailers diversify their Experience Portfolios, communication strategies must incorporate unified channel thinking to ensure a consistent brand experience across all formats. This involves developing a system of visual communications that clearly signals the differences among formats, eliminating confusion and streamlining the customer journey.
It’s also vital to develop targeted messaging that effectively communicates the value proposition and experience offered by each format, ensuring that customers clearly understand what to expect.
Adopting an Experience Portfolio framework is especially important in the current economic climate. As consumer spending continues to be scrupulous, brands need to stand out from the crowd. Remaining flexible and innovative enough to adapt when consumer needs change is one way to achieve this.
It’s not just about meeting consumers' needs where they are — it’s also about choices. Moving forward, retailers will succeed when they give their customers choices that put them in control of how they wish to experience the brand from day to day.
The most critical question companies can ask themselves to get started: What are the consumer experiences I need to provide, and how does real estate, a key component of the marketing mix, enable those experiences?