McKinsey experiment looks to save high street

In a pioneering new initiative, global strategy consultancy McKinsey & Company has announced plans to enter the fashion retail sphere in order to gather data on the current downturn the high street is enduring. McKinsey will sell underwear and make-up, among other products, before crunching the data it collects from this to analyse shopper behaviour.

The UK high street looks set to end the decade on a low note, as recent research revealed retailers are seeing their highest level of store closures in nine years. Averaging 16 closures per day, the UK saw a net loss of over 100 more stores than in the same period of 2018 alone, with worse expected to come for the sector as Brexit looms on the horizon.

On the other side of the Atlantic, conditions have proven similarly adverse for the retail sector, and in a bid to understand why, consulting firm McKinsey & Company is opening a retail store and flogging underwear, make-up and jewellery to customers in a Midwest shopping mall. According to a report by the Financial Times, the MBB strategy firm has opened a store in Mall of America, the US’ largest shopping centre, located in suburban Minneapolis.

McKinsey’s store, and an outlet it also opened in Manhattan this summer, sell beauty products and underwear, and feature an array of unique technologies to enhance consumer experience. Microsoft is among several technology companies involved, enabling both the store and outlet make use of an app to help consumers find their optimal bra size, for example. Meanwhile, the outlet will feature fewer employees to help customers than the store, in order to see the level of aid customers need if they can use such apps.

Praveen Adhi, a McKinsey partner, said, “There is no real way, given the speed at which the technology and analytics is changing, to keep ahead of the trends without getting your hands dirty. This is a large investment for us. The economics of the store itself don’t come close to breaking even. That’s not why we’re doing this.” 

McKinsey does not expect to turn a profit on the experiment – branded Modern Retail Collective – but believes the data collected via the project will help improve its understanding of what works in retail, and will help its clients improve the quality of their advice to clients in the sector. As a result, Mall of America is not charging McKinsey rent for the space, due to its potential benefit for the beleaguered sector. A rotating roster of retailers will share space in the store, and revenues generated from the store will go directly to the retailers, which will pay a fee to offset some of McKinsey’s costs. 

Mall of America has hosted a succession of retail experiments in recent times, as it hopes to find a way for bricks-and-mortar stores to survive in the 21st century. Mall of America also features a theme park, toddler groups and live music concerts. 

Jill Renslow, Senior Vice-President of Business Development at Mall of America, said of the project, “There’s a lot of change in the retail industry. The key is trying new things, taking risks, and learning from it.”