“One trend that consistently emerges is how bullish retail Winners are about their stores’ potential,” say Brian Kilcourse and Steve Rowen in the RSR report The Retail Store 2018: From Apocalypse to Renaissance*.
“We find that consistent sales performance is an outcome of a differentiating set of thought processes, strategies and tactics,” the authors say. “Winning in retail is not an accident.”
They classified retailers from various countries who responded to the survey as Winners when their stores recorded sales growth above the industry average, and the ones below are labelled as Laggards or Also-rans. The implication is that the responses from the Winners would indicate what is a strategy for success.
Winning stores aren’t shrinking back in terms of plans for their stores: two thirds of these respondents stated that in the near future they would open more stores in their existing markets, 55% would open new stores in new markets and 47% would replace existing stores with new formats.
Winners plan to expand
“This is the most optimistic view we’ve ever seen in our research into the store and heralds a change in attitude — on a wide scale level —about how bright the future of the store could (and frankly, needs to) be.”
Only 19% of Winners said they plan to thin out their store portfolio, whereas 23% of the other respondents said they would … and 18% of the latter also said they don’t (or can’t) anticipate changes in their store format, geography or quantity. Only 9% of Winners were unable to anticipate these changes.
Additionally, Winners are more likely to see their stores as a part of consumers’ overall experience of the store’s brand. Most of them view the store as their primary face to the customer (67%) and the primary point of customer order fulfilment (48%), but to 62% of them it’s also just one of the ways consumers can shop from them.
In the survey, 54% of all respondents identified consumers’ price sensitivity as their biggest challenge. “We’ve observed this phenomenon for several years now. Retailers continue to view the primary threat coming their way (most notably from Amazon, as well as Alibaba in emerging markets) as a pricing issue. And it is — but there’s more to it than that.
The online marketplaces have successfully reduced the number of variables that define value to consumers to be (1) price, and (2) availability.
But Amazon and Alibaba have also added more complex value attributes like community feedback (reviews), content (product information and product alternatives), and even context (relevant recommendations), say the authors.
It’s not enough for retailers to just create strong digital platforms, they add — they also need to make service their defining feature. “And that means that retailers must re-envision the store experience, to be one that is relevant, enjoyable, and satisfying for the consumer.”
Visiting a store should also be fun — the customer should enjoy going there and be satisfied by his in-store experience. And this is one of the areas that is lacking in today’s stores, say the report’s authors.
Retail stores have grown to be efficient and standardised. “Making stores fun again will not be easy.”
Based on responses, “retailers want to make stores better places: full of technology that controls operational costs, makes employees smarter, puts actionable information into store managers’ hands, creates competitive nature and ultimately makes stores more fun. But they’ve got a lot of ground to cover before they can get there.”
Stores reflect online experience
More than half of the respondents believe the best ways to improve their stores are to reflect more of what consumers enjoy about online shopping, and to create more fulfilment options (e.g. direct delivery, same-day service, etc.).
“Stores are now fulfilment centers and shipping and return locations, along with their traditional role as selling channels,” say the authors. “This requires technology investments, not just once, like a Point of Sale refresh, but a continual honing of both the offer and the environment itself.”
Typically, a retailer’s biggest problems are money and time. To modernise a store costs a lot of money, especially when you need to make these changes over several of your stores (the store multiplier factor).
Their biggest opportunity comes from using technology to empower store employees, agree half of the retailers who responded to the survey. “Bringing the best aspects of online into the store promises to make the in-store experience more entertaining, efficient and convenient.”
Retailers don’t seem to know if they stand the best chance of succeeding by going online or remaining brick-and-mortar stores, say the authors. The most respondents (60%) believe that reflecting more of what consumers like about online shopping in-store will create opportunities for them.
Yet, in RSR’s survey earlier the year The State Of Online Commerce 2018: High Hopes, retail Winners indicated that one of the most important ways that etailers can compete with Amazon is to open brick-and-mortar stores.
It comes down to the fact that retailers should evaluate which are the desirable aspects and use them to create an engaging and consistent shopping experience — both online and off.
“However, one look at the state of stores today and it becomes readily apparent that this will not be an easy task: today’s average in-store experience features very little about what consumers enjoy online. Having said that, we also believe the in-store experience must remain differentiated: and the ability to engage with employees and touch and feel the merchandise is key to that differentiation.”
If money wasn’t an issue…
Retail Winners would hire more people if money was not an issue — but not necessarily product experts, the Apocalypse to Renaissance RSR report shows.
Most (62%) of retail Winners indicated that hiring better people would make their stores more relevant, and 60% indicated more individual customer-specific engagement would help very much — only 28% of the rest of the respondents indicated that better staff members would make a difference to their stores.
No matter how well a store does, there was a much lower percentage of respondents who recognised the benefit of hiring product experts. Less than half (42%) of Winners and 34% of the rest indicated these kinds of employees would make their stores more relevant.
Across the spectrum retail respondents said introducing new technology was the top player that would make their stores more relevant (71% of Winners and 60% of the rest).
* RSR conducted an online survey between May and July 2018. Of the 182 retail respondents, 27% represented fashion (apparel, footwear and accessories), 23% general merchandise, 20% hard goods, 17% fast moving consumer goods, 8% hospitality, retail services/ entertainment and 4% were boutique retailers. The majority (53%) are based in the US, followed by the UK/Ireland (26%), Europe (20%) and China (1%). Similarly, the majority of retail stores are in the US (70%), followed by the UK/Ireland and Europe (both 49%), and Canada — 8% of the respondents have retail stores in Africa.