Seven No-Brainer Strategies To Beat The Retail Store Apocalypse


Contributed by McKinsey & Company | via Forbes |

By Nora Aufreiter, Josh Leibowitz, Philip Dalzell-Payne, Kelly Ungerman

Welcome to the retail store apocalypse – tumbleweeds skittering across empty aisles, shoppers scanning bar codes and buying products online for cheaper, shuttered storefronts on barren streets. Many retailers have greeted the advent of the mobile shopper with this sort of “end-is-nigh” panic.

Though the idea of a retail store apocalypse might make for a good zombie movie setting, it doesn’t have to be a real world scenario. Yes, showrooming  – the customer practice of checking prices in store then buying somewhere else online – is a problem for many retailers. But showrooming shouldn’t be a show stopper. These digital shoppers are ready to buy.  Excelling at multichannel sales is today’s must-have capability, and retailers must adapt if they want to survive.

Clear advantages in the battle for market share

In the battle for the customer, multichannel retailers are not without strengths of their own. They have physical locations where shoppers can touch and feel products. They have real, live people who can provide the kind of in-person advice and service that’s essential to certain product sales. And they have shoppers who increasingly go both online and in-store to buy. While overall retail sales in the US grew at an annual average of just 3 percent between 2006 and 2011, digitally-influenced in store sales grew at an average of 13 percent.

With shopping behavior changing so quickly, we identified seven strategies multichannel retailers should consider to remain relevant and profitable in a digital world.

1. Be the authority

Amazon’s effort to offer all things to all people risks making the company a jack of all trades and master of none, especially where advice and presentation are a big part of the purchase experience. Multichannel retailers can exploit this opening by making themselves category experts through best-in-class service and advice, positioning themselves as “curators” of the finest and choicest SKUs. By representing the best of a given product category, retailers subtly take the customer’s side in the matter. They become an advocate for the customer.

Providing expert reviews and recommendations, building a community of experts who can help each other, developing specialized searches for products (search by style, personality, occasion, etc.), and creating rich, engaging content are all ways to communicate expertise and help customers make informed choices. And in stores, train sales staff so they have deep expertise in their category. Some retailers have even set up video chat functionality to call on remote experts to answer customer questions on the spot.

2. Use that data

With the increasing availability of data, marketers can move from identifying segments to targeting micro-segments based on patterns in individual consumers’ research and purchase behavior. This kind of analysis enables a stronger relationship with customers as the data specificity allows retailers to cater to specific needs and wants.

This approach can help develop offers tailored to the individual and target underserved segments, such as teen-age consumers or Hispanic mothers, with distinctive marketing, experience, and product offerings. Target, for example, developed micro-sites targeted at specific segments, such as its Club Wedd microsite for couples that includes registry and planning tips as well as a suite of services provided by partnering vendors.

3. Re-imagine the retail store

As digital becomes more integral to the shopping experience, traditional retailers need to “re-conceptualize” the role played by their stores. Emerging innovations are redefining what convenience means to customers. This is more than allowing customers to pick up or return products ordered online to a physical store. It’s about using the store as a service hub, refashioning store set up and rebalancing space allocation across channels, and altering the character and atmosphere of a store to put customers in the mood to buy, an approach the sociologist George Ritzer calls “retailtainment.”

4.  Make it personal

While technology has allowed for more sophisticated targeting, it’s important not to forget the personal touch. Offers such as personal shoppers across multiple channels can bring a similar personalized experience that is supported by just-in-time data. Neiman Marcus, for example, is looking to enhance its service legacy with an app that identifies when customers enter the store and prompts staff to engage with them consumer based on purchase history and preferences.

An important part of making personal connections is creating local connections. The mobile apps Shopkick and Foursquare are offering local businesses innovative ways to use digital offers that lure shoppers into their stores, and keep them coming back. Shopkick has reported driving more than $110m in in-store revenue for its partners.

5. Partner up

Retailers need to find new partners and allies to get capabilities, expertise, and access that they can’t easily develop on their own. Cross-retailer loyalty programs, for instance, could help create the same multi-category loyalty experience that Amazon has created through their Prime offer.  Retailers can look to promote products and services across the on- and offline worlds through personal one-to-one marketing delivering email and text offers to mobile phones, potentially when the consumer is near or in one of the retailer’s stores.

6. Be unique
We already know that competition in the world of commodity goods is fierce. To break the commodity perception, you need to develop unique products.  Partner with fashion brands and celebrities, for example, to launch exclusive lines of merchandise.  Kohl’s has done just that with its “JLo” clothing line and collection, created with the singer and actor Jennifer Lopez. They can also double-down on exclusive private label offerings and get more control over operating margins.

 7. Be first

Finally, traditional retailers can move into new, untapped markets.  This might mean entering emerging markets where competitors don’t have a foothold yet, especially in highly fragmented, but heavy online emerging markets where there are opportunities to bring a lot of buyers and sellers together. China and India in particular are fruitful targets because of the rapidly growing middle class and wide access to technology. Even some economies in Africa offer a mobile-savvy consumer base and a rising middle-class. Political risk will be higher, to be sure, but entry costs require less capital investment.

Multichannel retailers need to nail the digital shopping experience – customers expect nothing less.  But retailers’ ability to turn physical stores into profit centers will determine if they are able to prosper or become another victim of the ongoing digital revolution.

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