Clothing retailer Express is using its Madison Avenue store as a tech lab

  • Express is using its store on Madison Avenue in New York as a testing lab for new technology.
  • The retailer is making a bigger push with women's and men's workwear, as the market for casual clothing becomes more competitive.
  • Express could trim back its store count over the next three years as it makes bigger investments online.
Exterior of the Express store on Madison Avenue in New York
Source: Express
Exterior of the Express store on Madison Avenue in New York

Stores are beginning to conform to shoppers' needs and wants.

Express' New York shop on Madison Avenue, serving as a prototype for future expansion plans, has been decked with phone chargers, digital styling screens, lounges, and will hold events every month inspiring young entrepreneurs. Most important for shoppers in a pinch: Express will have a dressing room ready for you with the items you want (based on your selections online) before you arrive at the store.

"Retailing is about relevance. Relevance is about being at the heart of what the customer wants," David Kornberg, president and CEO of Express, told CNBC. "I think we clearly saw there was an opportunity where bricks-and-mortar retailing was moving."

The plan for the Madison Avenue store, he said, is to learn from shoppers' reactions to the more open layout, a different assortment of clothing and new tech, before taking that to other Express locations. The company tapped the New York store for the job because of its proximity to other digitally native brands growing along that corridor — namely Bonobos, Untuckit and Indochino.

One of the charging stations inside the store.
Lauren Thomas | CNBC
One of the charging stations inside the store.

"The store of the future … has to be an experience and a distribution center," Kornberg said. "It makes it an easy and compelling proposition for the customer to come in and spend more time. The store is like a 3-D website for the customer."

The number of retailers pushing this same idea is growing. Also this week, Nordstrom opened a new store in New York with express returns, a tablet for shopping inventory found only online and a digital suit stylist. Zara also rolled out an augmented realty shopping experience in three of its New York stores, marketing its capsule collection of spring-summer apparel.

Express' digital styling screen, which lets shoppers browse curated outfits.
Lauren Thomas | CNBC
Express' digital styling screen, which lets shoppers browse curated outfits.

A key part of the shopping experience for Express is still its breadth of apparel merchandise. In the Madison Avenue store, which is located in midtown Manhattan, one will find more dress pants, buttoned-down blouses, pencil skirts and heels for women, alongside a plentiful selection of suits and ties for men.

Express has increasingly shifted its focus toward being a category leader for women's and men's workwear. The changes come as apparel retailers across the industry are struggling to keep pace with shoppers' demand for fresher inventory quicker than ever before. And the market for casual clothing is viewed as much more competitive.

There's a big space for men's workwear in the store.
Lauren Thomas | CNBC
There's a big space for men's workwear in the store.

Express' strategy in New York aims to solve bigger issues at the mall and to win a race for shoppers' dollars.

"There are some Express locations where they are just not performing," Neil Saunders, managing director at GlobalData Retail, told CNBC. "They are very mall based, so they suffer from that drop in footfall."

Still, Saunders said he's seeing improvements at the company as it reaches a younger demographic online, and there's a niche needed in the market that Express can meet.

"I think their aim ... makes sense. They want to provide an outfit solution for all parts of the day, a solution for when you get to work and then go out in the evening," he said.

The company has been working to clear excess inventory at its stores — a concern on Wall Street — after a disappointing holiday season. Its 2017 results overall came in below analysts' expectations, though the e-commerce business showed signs of progress.

Men can customize their own suits at the store.
Source: Express
Men can customize their own suits at the store.

Enhancing its supply chain, Express recently rolled out its ship-from-store capability, which will be at all of the chain's stores by the end of the second quarter, Kornberg said, including the one on Madison Avenue. This has allowed the company to manage inventory more closely and improve gross margins in turn. Express is also currently testing a buy online, pick up in store option in the Chicago and Columbus, Ohio, markets, the CEO said.

Looking to its real estate, Express has at minimum 50 percent of its leases coming up for renewal over the next three years, giving the retailer the flexibility to either negotiate rents, shorten the term of a lease or shutter stores entirely.

"We should expect a place into the future where we are probably 50-50 in terms of bricks and mortar and e-commerce," Kornberg said. Express ended 2017 with about 24 percent of sales originating online, up from 19 percent the previous year.

Express shares have fallen about 19 percent in the year-to-date period.