Stick or twist: Is it time for brands to branch out or is hyperdiversification a risky move?

As the high street continues to make its post-Covid comeback, we’re seeing the emergence of more ‘elastic brands’; those stretching across multiple categories or ‘hyperdiversifying’. By offering enhanced services and customer experiences, more brands and retailers are using hyperdiversification to drive footfall to stores and boost engagement in a way that cannot be achieved by e-commerce alone.

And, it’s likely that we’ll see more brands jumping on the bandwagon. In our recent research of marketing agencies and retail brands in the UK, when we asked respondents how they think experiential shopping will influence their brand (or the brands they work with) and their plans, 42% said they’re expecting to see more ‘store within a store’ treatments where part of the brand is created as an experience.

Selfridges is one example of an ‘elastic brand’, with its iconic London store recently becoming a fully licensed wedding venue. The retailer now offers a selection of packages ranging from a small six-person affair to the ‘all-out extraordinary wedding’ experience with 20 guests. These include make-up appointments at its Beauty Concierge, hair styling or men’s grooming at its on-site salon and barbiere, and a private dining experience and wedding reception, with options for entertainment ranging from an intimate VIP screening at The Cinema to a four-hour set from one of Selfridges’ in-house DJs.

John Lewis is another brand with hyperdiversification on its roadmap, having announced a move into residential property management earlier this year. Aiming to ‘raise standards in rental property’ and fulfil both a role as a developer and a commitment to manage the buildings themselves, the John Lewis Partnership has announced plans to build new rental homes over Waitrose stores in Bromley and West Ealing, and a vacant John Lewis warehouse in Reading.

Meanwhile, IKEA is selling renewable energy, while Flannels is offering a fitness facility in its Liverpool flagship and even the opportunity to get ‘tweakments’ in store by a celebrity approved doctor! While it’s interesting to see how these brands are branching out into new service and product categories, moves like these raise the question as to how far brands can stray from their original enterprise, and what’s considered a stretch too far?

Investing in new product and service areas can be risky business, especially against a backdrop of soaring inflation and costs, staff shortages, and a cost of living crisis that will only restrict consumer spending. But, seemingly from these recent examples, there are two key ingredients to making it on the path to hyperdiversification:

1. Relevancy – A brand’s new offering should have some alignment with its existing domain. For example, Selfridges now not only sells or provides everything consumers would need for a wedding, but it can now offer the full experience, while it could be argued that John Lewis is simply building on its heritage in home improvements. This appears key for these brands to be seen as relevant or appropriate competitors in their new spaces.

2. Reputation – The brand needs to be established and trusted in its original area of expertise before it can win customer trust in a new venture. Both Selfridges and John Lewis are already established brands that are widely associated with quality and consumers are likely to trust in their ability to deliver.

Gaming – this area had really increased in size from previous years and the number of younger visitors to the show was testament to the growth in this area. Brands had dedicated large footprints to new MicroLED screens, curved immersive screens and gaming specific lighting set ups, all of which attracted the younger visitors. Interestingly, Lego Technik were in attendance for the first time at the show which seemed to create a huge amount of interest.

Low consumption homes – the green message has seen a shift away from simply talking about sustainability into energy consumption. Given the current world energy crisis, a focus on low energy consumption is a smart move for brands and was a significant focus for many of the large box consumer electronics brands.

Mobility – this area was another growth zone for the show. Everything from e-bikes and scooters to cars were represented here. What was interesting was that the car brands were representing themselves as technology solutions and not simply as cars – a move for the future?

Overall we noticed that there was a definite theme of playful storytelling by brands. They were seeking to envelope the visitors in their worlds using video content, large projection areas and immersive experiences to create a sense of other worldliness. This trend is one that we believe will continue to grow in retail and is already being used successfully by some brands on the high street, indeed Gymshark, until now an online only retailer, is set to open its first immersive experience store in London on 1 October. We are certain more and more brands will follow this experiential retail store blueprint as consumers seek more than just a point of purchase from their brands.

Our main takeaway from IFA is that the future of tech in retail is looking incredibly positive and is helping retail to push the boundaries of what is possible when it comes to the consumer experience. Long may this continue.