For your brand to succeed, you must prioritize customer experience over everything.
Putting the customer first shouldn’t be a simple discussion during weekly or monthly marketing meetings. It means building out every facet of your business to serve the relationship between your customer and the product. Retailers who are winning today, and will continue to win in the future, are those who deliver an experience to customers that goes beyond their physical products regardless of if they sell on or offline.
The Hidden Truth Behind the “Retail Apocalypse”
Retail is going through a change at all levels for a variety of reasons. Urban areas are taking up a larger portion of the population which eliminates the need for spacious, suburban shopping centres1. Improved digital and delivery expectations have made online shopping more popular and viable. Finally, retail stores were once seen as stable of an investment as real estate. As a result, developers (particularly in North America) simply built too many retail stores from the 90s until the 2008 recession2. Proof of that is the US’ discrepancy in population vs retail space vs other developed countries3:
The “Retail Apocalypse” is a phrase coined to describe the recent increase in the closure of malls and stores, particularly in the USA. Most articles imply the rise of digital commerce is the reason behind the closures. While they are right to highlight the growth of digital commerce as a factor, they would be wrong to suggest that it is the reason why stores are closing.
Despite its growth, digital commerce only accounts for 10% of sales and won’t reach 15% of sales until 2021 assuming the same rapid growth its recently had4. While Amazon did about $150 billion last year5, it’s a drop in the bucket compared to the $5 trillion done in the USA in that time6. Digital commerce is on the rise but relative to the big picture – it’s still small.
That begs the question, what is the real reason stores are closing down? The answer is Debt.
In 2005, the USA changed its borrowing laws from debtor friendly to creditor friendly. Those changes have generally caused bankrupt companies to liquidate much more frequently. Since retail was previously seen as a stable industry, retailers took out loans to help them through the great recession in 2008. Now, it’s time to pay back those loans, but companies are struggling to do so due to their sales falling, despite stores being profitable7.
If the “Retail Apocalypse” were real, the retail industry’s market capitalization wouldn’t be growing every year8. The industry as a whole is growing. Online stores are thriving and “tier 1” malls, such as the Eaton Centre or Yorkdale Mall (two of the larger shopping malls in the Toronto area) are growing at 10-13% a year9. Retail isn’t dying, it’s changing.
We now pronounce and hold a moment of silence for the death of the “Retail Apocalypse”. (DOTRA, thank you JAY-Z)
The Evolution of Retail
The new age of retail focuses on intangible experiences rather than physical products. People who believe that digital commerce is the reason that stores are closing need a paradigm shift. People don’t go to Amazon because they want to buy products online, they go to Amazon because they want personalized shopping experiences. That distinction is key to modern day retail and the continued success of certain analog retailers.
Retail has shifted from serving the masses to serving the individual. It went from being merely convenient to being convenient to you. That is the reason why more sales are taking place online on personal devices that can facilitate the customization and convenience of an experience to each individual.
How The Future of Retail Will Affect Your Brand
Every brand will change in the future depending on factors such as size, success, reputation, and industry. No magical strategy will work for every brand, each customer journey will need to be reimagined uniquely.
Every industry will be affected differently10. Commodity products are all closing down stores, whereas experience-focused ones are thriving. Music, photo and literature stores have all seen decrease in the number of retail workers since their stores don’t traditionally provide any additional value to the purchase of those goods. Those stores will have to re-imagine and re-innovate more than those who are growing, such as cosmetics, sports and pet stores.
The first step to succeeding in the future is figuring out where your brand and industry fall on the retail spectrum:
Let’s take a closer look at men’s apparel, an industry that has recently seen a 36% decrease in employees11. Brands generally choose one of two strategies. Either “fast fashion” which focuses on a lower price point and ease of purchase to drive impulses and quick decisions, or a focus on brand equity, looks, durability, and style-even if it’s more expensive. In a relatively unattractive industry, Bonobos used a creative strategy to grow very aggressively over the last few years. They did so by completely reimagining the customer journey. They use “guideshops” to compliment their originally online-only store. Other primarily online brands, such as Frank & Oak and Everlane have adopted a similar strategy due to its proven success. Bonobos’ experience works for the customer who can either shop on their world class online applications or:
The winners of the future of retail will be those who properly identify where they are on the spectrum and combine their digital and in-store experiences to work together accordingly. Balancing both, based on where your brand stands, helps the customer make easy, empowered decisions that lead them to you.
Learning From The Success of Others
Successful analog retailers are those who have focused on how customers interact with their products, rather than just the capabilities of said products. They never allow operational efficiency, merchandising, finances, or bandwagoning onto sexy trends (e.g machine learning) come in the way of that.
They share key, fundamental principles that your brand needs to adopt and deliver to win in the future:
- Center around the product and helping the customer experience it. These are stores and applications that are designed to connect customers to the product and further their relationship with the brand.
Example: Restoration Hardware, who have turned furniture shopping into an outing. They shut down their local outlet stores in Toronto in favour of a four story gallery with a restaurant, coffee bar, rooftop patio, & showrooms. Customers can experience the furniture while eating or drinking as they would at home rather than by constantly looking at price tags.
- Knowledgeable staff who inform the customer, guide them along their purchasing journey, and provide stores with an advantage digital can’t meet. Human connections are the advantage that every brick-and-mortar store will forever have over digital. The human presence significantly impacts a shopper’s information gathering, option evaluation, and purchase facilitation12.
Example: Apple stores have many employees and no cash registers. There always seems to be more blue (staff) shirts in an apple store than any other colour. The average Apple employee has about 76 sqft attributed to them vs 670 sqft to the average employee at Best Buy. This highlights the importance that they place on interactions between employees and potential customers.
- A town square atmosphere which fosters social gatherings – they’re not just a home for products. The best stores are the ones that provide visitors with unforgettable experiences that they can’t get online.
Example: Starbucks sells a coffeehouse experience, not a cup of coffee. I didn’t come up with that, it’s directly from their annual report. Every store has an inviting atmosphere which pushes the relationship with customers beyond the cup of coffee. Proof of that is Starbucks’ market share being double that of McDonald’s and Dunkin Donuts’ in the coffee market despite consistently losing blind taste tests to both. To comprehend the value of the store atmosphere, ask yourself, the next time you have work to do or a blog post to write, are you going to do it at Starbucks, McDonald’s, or Dunkin’ Donuts?
- An experience personalized to each customer. Personalized experiences meet the new customer expectation and improve brand loyalty. The cost of not personalizing emphasizes its importance13:
Leading brands place customer experience at the core of their business and reverse engineer whatever necessary to make it happen. Due to the process of working backwards, they deliver their experience agnostic of medium. Unsurprisingly, they all have great digital experiences as well. For example, Wal-Mart has responded to the threat of Amazon by building technology into their stores to improve the customer experience as well as buying out promising online stores such as “Bonobos” mentioned above.
Successful brands are the ones that focus on how it feels to use their phone vs the fact that their phone still has a headphone jack, or the ones who focus on how you feel in their coffee shops vs the taste or price of their coffee. They are the same brands that stay vigilant and innovative to cater to their customer’s experience vs trying to squeeze every last dollar out of every investment.
For your brand to succeed, do as these brands do, prioritize customer experience over everything.