Retailer Survival
There are three game changers that have made life extremely difficult for traditional brick and mortar retailers.
- The recent economic crisis
- Technology and communication evolving faster than ever
- The Internet and millennial customer shopping behavior
As a business owner it’s hard to deal with one major game changer at a time, let alone three. I have traveled a fair amount over the last several years and have visited hundreds of retailers. Because of my travels and conversations with several retail business owners, I have had the advantage and education of observing what is and is not working as the traditional brick and mortar retailer deals with these three major challenges.
The most important trait I have seen in those that are successfully navigating the new business world is an unemotional acceptance that the above three challenges are reality. Number one isn’t going to change anytime soon, number two and three will only continue to change. It is absolutely critical that a business owner identifies and becomes comfortable with reality. It may sound elementary, but it’s clearly a mental hurdle for small business owners. Just think about how many retail businesses have folded in the last five years.
Retailers who understand that the economy is years away from returning to the “glory days” have reduced staff while expanding advertising and technology budgets. Their competitors, on the other hand, are holding on to the “glory days” staff, waiting for the economy to return to historical peaks and reducing ad and tech expenditures. Who do you think is gaining market share?
Technological advances are coming faster than ever. A year ago nobody had an iPad. In 2011, Apple estimates they will sell upwards of 50 million units. Ten years ago, and even more recently, small business owners had to invest hundreds of dollars for productivity software (word processing, spreadsheet management, presentation creation). Today, Google offers free basic productivity software including cloud based storage space. In the retail world, it’s fatal not to be up to speed on the latest and greatest technology.
Consumers, especially millennials (those born in the late 70s and later), have never been more educated and savvy shoppers. It’s not uncommon for a millienial to know more about the product they are interested in than the salesperson they are purchasing it from; a scary and backwards situation. The new consumer is armed with smart phones that can price check an item in seconds.
Many retailers are afraid of the millennial and/or savvy shopper that enters their store while not recognizing and considering the fact there is someone in their store for a reason. Humans will always want to touch and feel products before they purchase. Humans have and always will want personal contact. Although the savvy shopper could easily make the same purchase online, she has decided to come into the store because she desires personal contact with the product she is purchasing and the person from whom she is buying.
The question becomes, how does the retailer convert the savvy shopper into a customer and not loose him or her to the internet? Consider the following story. A consumer walks into a store and browses for product. They come across the perfect product. They touch, feel and like it. To the shop owner’s horror, the consumer writes product notes on her iPhone and even takes a picture. This person will, for sure, shop online. What’s a retailer to do?
The retailer should attack this situation from 4 different angles.
- Only carry models of brands in their store that cannot be purchased online for significantly lower prices
- Employ knowledgeable sales people, not order takers
- Carry a decent inventory of the products sold/displayed
- Address the millenial shopper directly and confidently
Businesses need to generate profit. It’s counter productive to carry products in a store when the same products can be purchased significantly cheaper online. A retailer does want to carry brands that are sold online because many times, the savvy shopper has looked online before entering your store. Brands that are sold online have credibility and drive traffic into retail businesses. The savvy shopper may question a brand that cannot be purchased online.
It’s imperative that a retailer employs knowledgeable sales people. Used car salesmen have given the salesperson a bad rap. The salesperson of today and the future knows their product inside and out and will do whatever it takes to help educate the consumer. The short-term goal when the next customer walks through the doors is to solve her problem and give her an education. Half the reason a consumer enters a store is to get more information about products.
Good sales people approach the consumer by asking such questions as “what brought you into my store today?” or “can I show you this cool new product?” Good sales people don’t ask the dreaded retail question, “how can I help you?” The key is to generate conversation and get as much information from the consumer as possible. The last thing a good salesperson does is ask a question that could end the conversation.
Inventory. Don’t buy too much, don’t buy too little. In today’s economy, some retailers choose to cut inventory to the bone, or even zero – the kiss of death. If the consumer is in a store, she has been educated and is now interested in a product. There is nothing better to say than, “I have the product for you right now.” The customer not only gets free shipping, but instant gratification. This is the brick and mortar retailers clear advantage over the internet, the ability to provide a product that the customer takes home, that day, no shipping required.
Finally, the only way to drastically reduce the chances of losing a sale is to directly address the consumer that is believed to leave the store and shop online. For example, a statement that goes a long way is, “I can tell you are an educated consumer, and that you are likely to shop for this online.” Assuming that rule #1 is being followed (retailer is not selling product that can be bought for significantly less online), offer to take the customer to a computer or iPad and help her shop for the item she wants to purchase. Nine times out of ten, the customer prefers to take the item immediately and feels more comfortable knowing that she has a real person to talk with in the future, should there be any problems with the product.
This is all only a piece of the puzzle, and assumes that a retailer has customers walking into its stores. The rules for getting customers into a retail business is another post for another day.
Let me know what you think.
February 7, 2011 at 2:38 pm
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February 7, 2011 at 3:09 pm
Believe it or not, at an ARTS Conference way back in 1996 or so, the topic came up about how to stop consumers from comparison shopping. (At the time, the Internet was not a factor.) The discussion involved manufacturers — who had spent considerable effort in branding their name, logo, plus had done some consumer advertising — and retailers who made it a store rule to pull off all the tags and identifying marks of the manufacturer and replace them with the store’s own logo and tags. This was to avoid comparing UPC codes (now there’s the iPhone app that does the same instantly).
I understand both the value in a manufacturer gaining name recognition from consumers and also the store’s desire to make its name synonymous for having unique things.
I agree with you that differentiation is key. Lighting retailers who carried a very major name in their stores for years were quite upset when that brand name was now clearly marketed and touted at a home center. I heard of numerous lighting retailers who told me they had customers complain, “Why should I buy it from you? [The home center] has the same thing and for cheaper.” It wasn’t exactly the same product, of course, but it was familiar enough in look to fool the consumer — and it made the independent store look like they were “ripping off” (as one customer put it) the consumer, thereby damaging the credibility of the showroom. This is one reason why it helps to take your suggestion to heart about having product that’s not so easily “shopped” around.
We could have another blog post on this topic alone, I’m sure. In short, in addition to unique product, making the shopping experience different and memorable (for the good!) in your store is what will help keep customers coming back. I’ve heard from consumers who told me that they had a great experience at a lighting store where the consultant’s advice helped them make a decision to buy an item that was cheaper than the item they came in for, but they’ve gone back to that store and to that consultant to make additional purchases in the near future.
And I love your suggestion, “Can I show you this cool new product?” I know I could not resist at least having a look.
Stepping down off my soapbox now.
February 7, 2011 at 3:50 pm
Well written and I agree 100%. The difficult part is to find products that work well in all arenas. Or, are there products in your store that sell differently through a different distribution channels? Historically, products without any variables thrive online, hence why Amazon started with books, and then electronics..etc…
However, look at apparel. Apparel was a slow starter online because who knew how the item would fit and the consumer that was buying apparel outside of a store is probably still pissed catalogues are gone. So what is one item that works? Closeouts. The buyer purchased 10k too many t-shirt and they are not sitting in a warehouse, there is no point to ship them to the store (cost), security tag it (cost), pay someone to put it on the shelf (cost), fold it 3 items a day(cost), check it out at the cashwrap (cost), and pay for the bag they put it in (cost). It is a lot cheaper to stick it in a box with 5 other items and send it right to that person. Also, it is a lot easier for the end user to shop online than rummage through mislabeled bins of clothes when that store doesn’t have their size in the first place.
As far as retailers offering a variety of products that might have a better distribution channel, lets use a music store. I would never buy a guitar online. Playing music is a conversation between the musician and instrument. The musician has an idea, puts it through the instrument and then you figure out if you like what is says back to you! However, local music stores sells accessories (strings, etc…) for 2-3 times more than an online retailer. Even though I would not buy a guitar form sweetwater.com, I would buy strings and pics all day long. Plus, Sweetwater has an account rep assigned to you that calls you a few times a year to see what is up. I buy a guitar every 2-3 years from a local music store, but stings every 2 months. Answer this, who do I have a better relationship with?
If the local guy sold strings for a reasonable price, I would walk into the store every few months…and guess what, I might like a guitar that is on the wall and buy it. They don’t get it, hence why Guitar Center and Sam Ash are surviving.
The bottom line is that retailers (online or B&M) need to have full comprehension of the needs/criteria of the end user based on the product(s) they are selling. Once you have a pulse on that, start reworking your service model – and distribution model for that matter.
February 7, 2011 at 4:40 pm
Savvy advice, Nathan; no doubt hard won by the miles you’ve traveled and the (retailers’) shoes you’ve walked in. I love the advice about differentiation… I think it’s the key to the entire argument. Of course, for some retailers, it’s simply impossible to entirely separate yourself from the item being offered online. In those cases (like the now-ubiquitous iPad) where the price is set and the availability matches, it becomes more important to differentiate in other valuable ways. Unless availability is boiled down to it’s most self-gratifying notion: the desire to carry the product home immediately is huge.
The one point you make that gives me pause is the notion of today’s consumers being the “most educated and savvy shoppers ever.” I don’t know… They are certainly the most connected– to information, to each other– but I’m not certain that this always equates with educated and savvy. Some of the information they’re connecting to is either useless or untrue, and we’re certainly buying our fair share of products that more ‘savvy’ customers would happily pass by. The Snuggie, Shake Weight, and any number of abdominal exercise machines come to mind…
February 7, 2011 at 10:11 pm
Nathan, I agree with the bulk of your article, but I want to speak to the question of good salespeople. First, in my previous life, I have had the pleasure of training and managing thousands of sales people in a fast paced retail setting.Then I got involved in the lighting industry and discovered the need for a sales person that had to be technically savvy as well as posses superior sales skills.
While vendors can share their “PK” of what they sell, they fail at sharing the details on how to sell it. Mainly, I feel this is because they themselves don’t know how the sales process works.
Sales training, (the real in your face inter-personal skills) and sales management, especially in this economic climate should rank as high as an increased advertising budget, yet the average retailer has tabled training and personal development along with other critical activities that should be in the forefront.
Another challenge to a sales team are their limits in the use of technology and that limits the customers B&M experience. In order to assist a customer fully in the digital age, we must make it easier for a customer to shop with us rather than to search the web for our product. This can be done by forwarding the customers selections to their email address and having it there before they reach home. And, if they have a smartphone, they may get it before they leave your parking lot. This is a great time to offer an incentive, if that is part of your sales strategy. Now that’s service that is immediate and that’s what the 21st century consumer wants.
A quick Google search let’s you know what the price the consumer is familiar with. UMRP, IMAP and other pricing policies help B&M maintain margin and an educated sales staff knows how to build on that initial sale. Many sales people will offer bulbs, but how many will offer spares? “Did you want 2 or 3 extra bulbs?”
Sending thank you notes is a lost art that needs to be resurrected. A quick hand written note is nice for the boomers and even X’ers but the millennial’s appreciate a quick email or even a text if you have developed that relationship. And, it is all about creating that relationship.
In closing, sales is a methodical process that has a fundamental set of skills which must be constantly tweaked for the times and climate we find ourselves in. Sales people must always be evolving to best use the tools they have available and to offer the best solutions for their customers.
Crafted on my IPad.