By Brian Andrus
According to recent news, it is the rise of e-commerce has created a ‘retail apocalypse’ where traditional department stores, malls and major brick-and-mortar brands are heading towards extinction. The statistics that get quoted include that in 2016 more than 1,000 stores closed; we have seen more than 300 retailers declare bankruptcy so far; and experts estimate that 10 to 12 percent of shopping malls will close down in 2017.
It is claimed that profits decline because brick-and-mortar retailers simply cannot compete with the speed and pricing of online behemoths like Amazon.
The fact is that things are changing. The other fact along with that fact, is that things have ALWAYS changed! Most traditional retailers have now realized that they MUST recognize that they will need to become competitive because e-commerce is only going to grow. But the question has become how to do that? And, how much?
Let’s look at some working solutions, rather than spectate further regarding the ‘apocolypse”.
One successful strategy is to shift to a personalized and unique shopping experience. Through staff training can be created a more informed workforce that provides more value to the customer by knowing their products better, including being technical experts about their products. Decades ago it used to be that one went to the hardware store because the proprietor was so darn helpful and knowledgeable. More recently Home Depot used to be unique by having proven and experienced sales people in various departments. When that dropped out to a degree, so did their uniqueness and their customer loyalty. Another recent example is electronic stores, where you sometimes go for real and informative help, and then you end up making purchases.
Another workable strategy is utilizing technology to customize in-store shopping. One can go in and rather than waste valuable time waiting in a line, one can electronically check out items in their shopping cart that they want to purchase. Another historical note: decades ago Safeway grocery stores were among the first to be unique in offering MANY aisles for shoppers to be able to more quickly check out. Sounds hokey, but it was true 50 years ago and at that time was unique. When things slowed down at the checkout lines, the same staff wore other hats within the store stocking shelves etc. My grandfather was very proud of this innovation in the store he leased to Safeway. With today’s electronic solutions, this expanding that very simple idea. Shoppers that save valuable time are more satisfied, and interested in returning.
An additional strategy working is where brick-and-mortar retailers attract customers with video and instore-online experience that offers the conveniences of online shopping with a personal, human touch. This is a combination of technology, staff knowledge and service.
Lastly, most everyone is familiar with how well Disney trains their staff (“cast memberS”). These trained employees to deal with us in a very uniquely friendly, service-oriented manner. So, retailers are revisiting and appreciating the well-known values – friendly, honest and sincere customer care versus traces of rudeness and dishonesty and lack of real care from staff – be they salespersons, servers, customer care personnel, etc. The retail team has to present a united front void of traits that customers over and over have come to dislike.
As with our commercial real estate professional organization, true professionals who honestly care for their clients’ welfare and success is, by survey, the most valued trait by clients/consumers.
While many blame the rise of online retailers like Amazon – or discounters like Walmart – for a decrease in brick-and-mortar spending, that is a superficial view of the situation. The real problem is not outside their arena, which is the easiest diagnosis. In truth there there are steps that retailers can do something about, as covered above.
Yes, some department stores and mall-based retailers overexpanded over the past decade or so. Yes, in some cases economic conditions tightened, which may be industry specific or area-specific. And, it may be that a gamble of overdevelopment didn’t pay off and resultant over-supply of goods/services simply went above actual consumer demand. There is even one case where the demographics behind a large development were found to be faulty! That was an expensive error.
The point is, the blame game by some is a useless and profit-less activity in itself. At the end of the day, despite dire statistics, the brick-and-mortar store is poised to make a recovery, has made a recovery in places and/or can make a recovery. According to a recent Kiplinger report, department store sales have remained steady over the past nine months. The amount of new retail space being developed has declined significantly: after many years of new retail space development surpassing 150 million s.f. annually, we have not seen more than 40 million s.f. in development since 2009. Online shopping will continue to increase due to decreased foot traffic, but right now online sales amount to about 10% of total retail volume.
How to remain competitive? The above strategies are valid examples of what can work. Stores need to re-think their customer service approach and move towards a more helpful, valuable, and personalized model. They and the affected owners, investors, municipalities and developers can and must pivot and take action.
How relevant is the human factor? Good, bad and ugly. According to a recent customer service study by Kibo, retailers are falling short. Kibo found that only 25% of store associates, for example, could place a customer order; of those, only a handful were able to place an order in a store aisle with a handheld or mobile technology device, meaning customers would have to go to a register or customer service center to place an order. The study also found that just 53% of store associates could access personal preferences without the customer signing into the store’s account. Plus, Kibo found that 16% of retailers had inconsistent pricing between their website and brick-and-mortar stores, which might turn off savvy shoppers who have instant access to price comparison tools.
No sympathy for those complaining when strategies exist to solve the challenge. There’s too much talent and management technology available.
Combine that with what has become known as an “omnichannel” customer service model, as a final example. This is where mall-based stores create a number of technology innovations they can take advantage of. Machine learning technology supported by emotionally intelligent staff will create a better and more personalized customer experience. Some retailers have even developed facial recognition technology so sales associates can address customers by name when they walk in. Access to inventory and the ability to place an order on the spot using mobile technology should be implemented across the enterprise. Pricing must be competitive and consistent throughout the company. Finally, integrating online and in-store sales is a good way to get customers in the door. For example, Kohl’s now offers discounts to consumers who order online and pick up items in-store.
Granted, the facial technology is a bit creepy. I’ll stick to the honest and truly talented customer service.