A retail ’apocalypse’ is not currently underway, but a rapid evolution of the retail industry is certainly happening. The velocity of change, abetted by disruptive omnichannel retailers such as Amazon, has yielded dire financial impacts on retail stocks in 2017, leaving many of these retailers unable to service crushing debt loads and forcing bankruptcy and store closures at unprecedented rates. This is a do-or-die moment for legacy retailers. There will be winners who grab their shares of the growing ecommerce pie, but those retailers who do not double down on their unique value propositions will certainly struggle to maintain solvency.
Rapidly changing customer behavior mandates that retailers adjust to new market dynamics. Total 2017 U.S. ecommerce growth came in around 15% year-over-year, and new studies show that 7% of all retail shoppers shop exclusively online1. Investment in digital commerce is growing at unprecedented rates, leading many to speculate that the in-store retail experience is dead.
However, studies also show that 80% of retail shoppers are visiting stores as frequently or more frequently than they did in 20161! Furthermore, 56% of retail executives expect store formats to rapidly evolve into fulfillment centers by 20201. To really drive home these data points, for each company closing stores in 2018, 2.7 are opening additional storefront locations.
Source: IHL Group, August 2017
So how are some legacy retailers not only surviving, but thriving? The answer lies in four pivotal focus areas:
360-degree customer views
Omnichannel customer experience
Store front transformation
Mobile innovation and enablement bridges the online/offline divide. Customers receive real-time, personalized incentives and transact on-the-go, while store associates provide differentiating service to in-store customers. Nebraska Furniture Mart has made significant investments in mobile customer and store associate enablement technologies. A branded mobile app directs customers to specific product in-store, while mobility provides mobile point of sale capabilities and empowers store associates to focus on providing exemplary customer service. As a result, Nebraska Furniture Mart’s web sales were up 33% in 2017.
360-Degree Customer Views
Generating a 360-degree view of customers powers meaningful touch points throughout the customer journey, both online and offline. This data enables powerful activation of marketing technology to generate real ROI. By leveraging a robust customer data platform and a powerful marketing automation cloud provider, Sephora now delivers more focused, better personalized, and more effective campaigns through engagement rules and detailed response measurement. Sephora has realized a 200% increase in response rates without increasing campaign spending.
Omnichannel Customer Experience
Retailers can gain market share and enable growth through transformational changes to core lines of business. This includes leveraging big data, adopting innovative technologies and frameworks, and remaining customer obsessed. Home Depot created a detailed customer journey mapping and organized its efforts around providing industry-differentiating digital experiences at each customer touch point. Digital enhancements to the company’s supply chain improved online-offline integration to provide seamless customer experiences. As a result, 45% of online orders are picked up in a physical store, and 20-25% of those shoppers make an additional purchase in-store.
Store Front Transformation
Re-envision brick and mortar space to provide offline experiences that cannot be replicated online. Use square footage for ship-from-store fulfillment and to expedite delivery times. Target stores now fulfill close to 55% of all online orders, which doubles shipping speed and reduces supply chain costs. Target will also invest $7 billion in the next three years to reinvigorate the in-store shopping experience and to provide more fashionable private label brands and designer collaborations.
Retail isn’t dead. By focusing investment in the right omnichannel categories, legacy retailers can withstand—and evolve to meet—rapidly changing market dynamics. However, retailers who do not move quickly, keep the customer at the core, and learn how to fail fast will struggle to survive.
Would you like to learn more about Credera’s experience in the retail industry and how we’ve helped clients including The Container Store, Finish Line, Pep Boys, and more? Please reach out!