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If your company doesn’t want to become a casualty of the “retail apocalypse,” you need to pay attention to two important aspects of your business: Customer experience and your brand’s reputation.
Retail Casualties Mark a Change in Consumer Behavior
As other companies continue to innovate, it’s no wonder the ones who remain inflexible can appear to the outside observer to be sort of literally falling off the map as they close doors on hundreds of locations (think Sears, Payless, Toys R Us and Macy’s, to name a few). This may be due to a failure to respond to rapidly changing consumer behavior trends.
One of the biggest disruptors in the world, Tesla, recently surprised consumers and Wall Street when it announced it would close most of its stores. Was this an epic fail — or an epic pivot as the company attempts to ride the wave of changing consumer behavior? Statista says worldwide retail e-commerce sales will be two times higher than 2016 numbers — that’s 200% growth in just four years. Maybe Elon Musk is on to something.
While Tesla plans to offer a generous return policy for its Model 3 which will be sold only online, only time will tell how well consumers will respond to buying a big ticket item like a car without a test drive.
Meanwhile, other companies have closed shop — but not willingly. Payless ShoeSource filed for bankruptcy in late February and plans to close all 2,500 its U.S. stores. The company has long struggled to compete with online sellers like Zappos and Amazon. Sears continues to hang on by an ever-thinning legal thread, having filed for bankruptcy last year and accepted a takeover bid at auction. Its store count withered from 700 to just 425 stores nationwide.
And things don’t look much better for the retail sector as time goes on. In a single 24-hour period in Q1, Victoria’s Secret, Gap and J.C. Penney announced that they would close upwards of 300 stores combined. All three retailers reported declining sales during the past holiday period.
How Can Your Business Survive the Retail Apocalypse?
While these closures may strike terror in the hearts of retailers, they don’t have to foreshadow a universal experience. Market Research firm CB Insights recently took an in-depth look at the state of retail, outlining some of the trends and technologies that can help a retail business not only avoid this fate but continue to grow. Here are some new approaches to traditional brick-and-mortar business models that are working in the current market environment, enabling smart retailers to add stores instead of closing locations or filing for bankruptcy:
- Enhance the experience with technology. Big box retailers such as Best Buy and Ikea are leveraging various strategies and technologies to remain relevant for their customers. For example, Best Buy will soon offer a free in-home consultation service for technology equipment, and Ikea owns Task Rabbit, which is an app that consumers use to find people to assemble all that furniture. This blend of in-store service and technology makes them more than a store, and more of a trend-setter for consumers.
- Be the right size for your market. Bigger isn’t necessarily better. Kohl’s has decided to shrink some of its department stores to provide a more streamlined shopping experience, going from 90,000 square feet to 60,000 or even 35,000 square feet locations. This lowers operating and supply chain costs, while enabling a more personalized approach to customer service.
- Target new demographics. The demographics of the U.S. have changed, and several retailers are finding success by targeting Americans in lower income brackets. Retailers that sell budget and discount goods, such as Dollar General, Dollar Tree and Five Below have exploding numbers. Dollar General alone planned 1,000 new stores in 2018 — more than any other U.S. retailer.
- Reinvent the grocery sector. Margins in the grocery sector are already thin, and this is a highly-competitive industry. Aldi is gaining market share by optimizing its stores for cost savings to lower its prices below those of other retailers. This private-label grocer doesn’t offer consumers choices, but competes on price, which is very appealing to a lot of consumers. Other grocery chains such as Safeway and Whole Foods have added online ordering and delivery services.
- Create a new niche. The one-stop shops like Sears and Macy’s have struggled to hold onto consumer’s attention, while niche retailers are seeing their businesses thrive. From farm-related products to arts and crafts supplies to RV equipment sellers, consumers rely on such stores to fill a particular need. Examples include Camping World, Hobby Lobby and Tractor Supply.
- Repurpose physical stores. Retailers are finding new ways to add value to their physical store space, drawing people to the stores and providing further incentive to buy. For example, Apple stores are known as a fun place to hang out and try new products — not just complete a purchase (although once they play they tend to be more willing to pay). Some Nike stores are now allowing customers to exercise at their locations, and employees recommend products tailored to their fitness preferences. Very creative!
- Leveraging automation. There are more stores without traditional cashiers today than ever before, but some retailers going beyond handheld checkout devices and curbside pickup to enrich the customer experience. For example, Lowes is experimenting with robots that help shoppers find items they need, and Walmart has technology that automates its supply chain.
So, despite many big retail brands closing down locations, retail is far from dead — and some retailers are thriving. Their ability to navigate new consumer trends and appeal to a tech-savvy, discriminating and younger customer base is why brands like Target, Costco and Dollar General are expanding — not shrinking.
It All Comes Down to Reputation
Of course, brand reputation underscores the survival of these retailers. Brands with a reputation for innovation and great customer experience will continue to attract and retain customers, while those who fail to respond to new trends simply won’t.
Consumers look for information about businesses online before they hand over their spending dollars. Are you easy to locate? Is the information on you Google listing accurate? Do your reviews reflect the service you provide? What are your customers saying about you on social channels? All of these consumer touchpoints determine how people perceive and experience your brand — and if you manage them effectively, you can survive the retail apocalypse, and maybe even thrive in a new retail world order.
May 2, 2019 at 05:55PM
Forbes – Entrepreneurs