Retail is changing before the world’s eyes, with online sellers presenting serious challenges to businesses with physical storefronts.
Some household names have taken big hits in recent times. Sports Authority liquidated and Payless filed for bankruptcy. Sears has shuttered more than 2,000 stores since 2010 and is about to cut more, and J.C. Penney Co. plans to offer buyouts to 6,000 workers in anticipation of some closures. Almost 60,000 retail jobs have been eliminated in the U.S. since January, and financial services giant Credit Suisse estimates there could be more than 8,600 store closings this year.
With the marketplace buzzing, local business professionals weighed in on what smaller brands should take away to strengthen their operations and offerings.
Stores should craft a specific experience
“I feel that if Costco does not sell it, I don’t need it,” said Scott Seegmiller, a CPA and the CFO of WestCorp Management Group in Las Vegas. “I think that shopping is a pain and things are overpriced.” Amazon Prime on the other hand, Seegmiller contends, “is ingenious. Get it to me quick, easy, one-click ordering, see history, suggest, online reviews. Free books, movies and songs. There is a shift coming. Malls should be turned into escape mazes or call centers.”
However, Seegmiller sees the potential for reinvention, and engaging the customer is key. “Stay relevant, with coupons and incentives to come to the store. Kohl’s does a good job with this. Touch and feel, try it on, get it now.” Marketing can help maintain that constant contact with customers, he added. “Combine consistent marketing with specials and incentives. Easy returns, friendly service, people who can find things and answer a question.”
Patrick Casale, managing partner for the Multicare Group in Las Vegas, agrees that operators of bricks-and-mortar stores need to play up the perks of the in-person experience.
“Customer service is the greatest asset they have,” he insisted. “Price does matter; personalized service matters more. Most people hate dealing with computerized telephone systems that have prompts to get you to the correct area to get questions answered. This makes everyone go nuts when they get the runaround.”
Physical stores also enjoy a logistical advantage, Casale points out. If online orders are incorrect, shoppers are forced to resend the package, “and this creates more down time. Consumers like the feeling of immediate satisfaction.”
It might not be enough just to develop personal relationships with clientele. “Retailers must offer experiences that cannot be found online,” asserted Judy Brower Fancher, CEO of Brower, Miller & Cole, a marketing firm in Newport Beach, Calif. “For apparel retailers, this can include in-store fashion shows, knowledgeable personal shopper-style salespeople, and the ability to ship sizes not available at the store directly to the customer with no shipping fee.”
For owners of shopping centers, Fancher continued, the focus should be on finding tenants that offer services and experiences that range from needs-based — such as hair and nail salons and urgent-care centers — to recreational, such as restaurants. Specifically, she means restaurants that “create a great environment that surpasses having food delivered,” as that industry is under threat from the convenience of apps that allow you to order and pay for food and arrange delivery. Others include retailers who provide entertainment experiences, from fitness classes to upscale bowling alleys, and interactive experiences such as children’s play areas.
Fancher nodded to successful retailer Anthropologie, which she said was thriving “by listening to customers and offering what they want. In addition to women’s apparel, they now also offer home goods and gifts.” By expanding its offerings under a popular brand, Anthropologie is “appealing to a broader base and gaining dollars that have gone to other stores in the past.”
Jeff Neville, vice president at BRP Consulting in Boston, Mass., said expanding inventory could combat the loss of customers with a “constant ability to shop and easily research the lowest price.
“Retailers — especially those with bricks-and-mortar locations — need to further differentiate themselves to entice customers into the store,” he said. “Providing a more personalized experience and offering value-add services can help even small retailers differentiate and compete successfully against companies like Amazon. The best and most powerful way to succeed is through personalization.”
Think Like a Customer, not a web competitor
It’s wise to keep track of what online sellers are good at, but it’s even more important to pinpoint their weaknesses.
“Quit trying to best them at their own game, i.e., head-to-head competition on time and price,” suggested Ryan Mathews, founder of Black Monk Consulting in Eastpointe, Mich. “Start thinking like a customer and begin to imagine what the digital experience isn’t good at.”
For now, bricks-and-mortar retailers enjoy the advantage of being able to create experiences around products, Mathews noted. “That may all change with virtual and augmented reality, of course. But now there’s no way to participate in a cooking class, a wellness experience or other kinds of experiential retail environments other than in a physical store.”
Neville said he believed that talk among some of the media of a “retail apocalypse” was premature at best. “For all the growth online shopping has enjoyed over the past five or so years, more than nine out of 10 purchases still take place in a physical store. The reason is that stores still exert a powerful draw on many shoppers. Millennials love the theater of shopping and the ability to touch, smell and feel. You don’t get the sensory part of shopping from online. Now that millennials outnumber baby boomers, retailers need to adjust their store models to appeal to the expectations of millennials.”
Shopping is innately an experience, Neville notes, so advantages can be gained by refining how it looks and feels. “It is theater, and the customers, associates and the supporting technology must perform as actors. Each has their role, but the stage has to be set properly. It needs to be simple, clean space, easy to navigate and technologically enabled. The content has to be curated much like a play to complement the players and the set.”
Rather than worrying, retailers should be adjusting.
“The problems (online) retailers have created are overpricing and lack of customer service,” Casale said. “Brick-and-mortar needs to work in reverse. Make prices competitive and stop trying to make a score with each sale. Provide quality, consistent service and get to know your customers.”
Mathews concluded: “Digital retailing is going to force brick-and-mortar retailers to change and up their game. And I think it’s fair to say that retailers are going to have to learn how to give control of the shopping experience back to the customer. That said, physical stores aren’t all going away soon — just the ones that insist on taking their customers for granted.”