Retail is changing. How consumers research products, shop, and buy are changing. Some of this is due to mobile shopping, some is due to consumers’ ready access to product information online, and some is simply due to some retailers cutting back staff—forcing consumers to do their own product information gathering. And shoppers are becoming better informed. According to a 2012 Motorola Holiday Shopping Study, 61% of retail store managers surveyed said they believe Is It Time for You To Reinvent Your Retail Experience?that shoppers are better connected to product information than their in-store associates.
Given this changing retail world, a question retailers need to answer is: do you have a strategy and plan for this evolving marketplace and the experience you deliver to your shoppers in-store and online?
Mobile shopping is growing—Maybe not as fast as some predicted, but it is still growing at a healthy pace. In 2012, according to eMarketer, $25 billion in purchases were made on phones and tablets—up 81% vs. 2011. While mobile sales were just 11% of total ecommerce sales, eMarketer predicts this will reach $87 billion by 2016. According to a recent study from Adobe Systems, 55% of tablet owners use the device for buying products vs. just 28% of smartphone users. And while more was spent on tables ($13.9B) vs. phones ($9.9B), shopping on tablets was more likely to be done at home. According to a 2012 Viacom study, only 36% of tablet owners use their device when shopping in-store.
The use of tablets and smartphones as shopping information and purchase devices will continue to evolve and reshape retail as both manufacturers and retailers develop content, apps, and better ecommerce tools. According to the 2012 Shop.org/Forrester Research State of Retailing Online survey, 51% of the retailers surveyed stated their top priority for 2013 is site optimization, including checkout optimization, user experience, and product detail page enhancements. Additionally, 43% of retailers surveyed stated that mobile and tablets are among their top three priorities for 2013.
Different Brick and Mortar retail strategies are evolving—Retailers need to react to this evolving world. While ecommerce only reaches 5.2% of total retail sales in 2012 (source: US Census Bureau), it is growing at 17.7% per year. Many retailers have concerns about “Showrooming,” where consumers shop at retail and buy online to save money. Given the rapid growth of ecommerce, retailers appear to be adopting one of four strategies to win shoppers and their purchases in their traditional brick and mortar stores.
Multichannel Retailing—Many key retailers, especially the big box stores, are rapidly working to create content heavy marketing experiences that integrate consumer shopping touch points across stores, retailer websites, social media, and email. Macy’s CEO, Terry Lundgren, refers to their efforts as “Omni-channel”—combining multichannel marketing with new capabilities to fulfill purchases across their system from both fulfillment centers and fulfillment stores.
Multichannel retailers are working to make sure that in-store shoppers have an easy shopping experience with ready-access to helpful and knowledgeable sales associates. One retailer in particular working to improve in this area is Best Buy. Best Buy is a frequent stop for consumer showrooming before buying online. They are at risk of losing their business if they cannot solve this problem. Best Buy is working to confront showrooming by creating better in-store experiences that will convert shoppers to buyers. As Best Buy CEO, Hubery Joly, put it recently, “Once customers are in our stores, they’re ours to lose.”
The key to the multichannel retail strategy is to offer the right combination of helpful product information, product availability, and a good price for the shopper who is ready to buy now. In stores, this means knowledgeable store associates who can help the shopper find the right products. Online, it means product selection tools including product reviews, product comparisons, plus upselling and cross-selling recommendations to boost total sales.
Experiential Retailing—These retailers have also chosen to give shoppers a great shopping experience, but the path to loyalty has less to do with product information and availability as it does with the experience itself. These are typically high service retailers that stand out in their category by creating unique and desirable shopping experiences which leave the shopper wanting to shop in that store again. While most retailers are looking to enhance their retail experience, there are those who have chosen to create a real difference. In grocery retailing, smaller retailers like Stew Leonard’s (CT) and Jungle Jim’s (OH) have created highly unique experiences. But bigger chains such as Wegmans, Loblaws, and Publix stand out in their experience and service concepts. Specialty stores such as Starbucks, Sephora, Build-A-Bear, and Bass Pro Shops all provide truly unique experiences. Petco uses puppies and the opportunity to interact with them in store to engage shoppers and create emotional connections.
The challenge and opportunity for retailers choosing this strategy to identify the key experience activities that combined with store merchandising practices will help them stand apart and engage their shoppers.
Lowest Price—This strategy focuses on the price driven shopper. These retailers’ business plan, consumer communication, and merchandising are all focused on offering goods at a low price. The level of sophistication varies from the highly integrated multichannel marketing efforts of Walmart to the much simpler approach of Dollar Stores, DSW, Stein Mart, and Harbor Freight Tools are examples of this strategy. This is not a high service model. Staffing is kept low and shoppers often have to discover products and product information on their own. Shoppers are willing to shop there to save money, trading in service and experience for savings. The key to this strategy is to consistently deliver great prices. These retailers will successfully compete with other business models by continuing to offer low prices every day on popular products.
Walmart got into trouble and started losing shoppers when they redesigned their stores and tried to offer upscale fashions in addition to everyday low prices. They cut back many departments shopped by men to add space to categories that women would shop. The result is they eliminated thousands of low price SKU’s across many categories—and lost the shoppers who came to Walmart to buy them. Walmart has since changed their strategy and has been adding back many of the categories and SKU’s they previously dropped. A renewed focus on offering and communicating low prices across key category has helped them regain shoppers and sales.
Do nothing new—The last group of retailers is noted more for inaction in this new world rather than responding to the changes. They continue to use the same go-to-market strategies that they have for years rather than choosing one of the three strategies above. They are losing shoppers to the tech-savvy multichannel retailers, the much more engaging experiential retailers, or the value of the lowest price retailers. Stuck in the middle without a clear reason for shoppers to go there, their only strategic advantage is often the convenience of a particular store location. Getting lost in the middle of the other competitive winning strategies, these retailers will slowly erode sales and market share. Examples include Sears/Kmart, Sports Authority, Barnes & Noble and The Gap.
Refine Your Experience
Which of these is the best strategy to win in the evolving world of retailing? The best strategy is the one that differentiates a retailer and attracts and keeps loyal shoppers. The first three strategies all offer this opportunity. The winning opportunity is to embrace one strategy and stick to it to create the shopper experience that keeps your shoppers coming back to your store.
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