It’s a tough time for retailers. Amidst a market correction of brick-and-mortar bloat, a host of general merchandise, specialty brand, and mall-anchor retailers are shuttering stores at an unprecedented pace (potentially 8,600 stores this year according to Credit Suisse). According to the U.S. Bureau of Labor Statistics, this has caused the retail industry to lose over 60,000 jobs in the last two months alone.
How did we get here? For years, retailers embraced an “if you build it, they will come” mindset and aggressively expanded their store footprints. But with over-expansion combined with the rise of mobile shopping and ubiquity of Amazon – it’s no wonder the retail bubble burst.
Doesn’t this all feel familiar?
These latest developments aren’t a new phenomenon. Linens & Things went belly up nearly a decade ago in 2008, followed by Circuit City in 2009, Blockbuster in 2010, and Borders in 2011. (Linens & Things eventually resurfaced as an online only brand.) The thinning of the retail herd has happened before and will likely happen again.
It’s easy to try and explain the recent spate of store closures and struggle to survive: Too many locations. High overhead. Too much debt. Slow economic growth. Tech disruption. Fickle consumers. But this is about more than square footage, financial missteps, or the ebb and flow of natural business cycles. This is simply another chapter in the never ending narrative of creative destruction leading to digital innovation.
Take Borders as a case in point. Early on, the bookstore pioneer had the technology advantage. Their inventory system could even predict what people in different parts of the country would buy. Borders ultimately failed for many reasons. Yes, they got too big, were overleveraged, and made an untimely foray into the CD business just as the iPod was taking off.
But they also squandered any digital edge they had. Borders outsourced their online sales to Amazon (an ultimate competitor), entered the e-book game too late, and generally floundered without any sort of cohesive cross-channel digital marketing and merchandising strategy.
Simply put, ecommerce and digital marketing are the future, and retailers must embrace them to survive. But too many traditional brick-and-mortar retailers continue to view digital as a threat. This isn’t to say all brick-and-mortar stores are doomed and that retailers should pack up shut down every last store. It’s unrealistic that 100% of retail will move online in the near future. (Online currently accounts for 10% of total retail sales in the U.S.) Plus for every trend, there’s an outlier like Floor & Decor, a retailer that’s quietly defied conventional wisdom about the fate of brick-and-mortar – at least for now.
Keys to retail survival in the digital age
Competitors come and go, consumer preferences evolve, and commercial real estate prices rise and fall, but one truth stands firm: to compete and survive, retailers must constantly embrace new digital strategies that are squarely aligned to better customer experiences – both online and in-store. This was true ten years ago with Borders, and it’s true today. But some have failed to learn the hard lessons of the past and continue to cling to old methods.
Movable Ink works with some of the world’s most innovative brands, both online-only and multichannel. Here are some innovative best practices retail marketers should consider embracing today in the fight to not only survive and stay relevant, but to thrive by increasing sales, reducing costs, and keeping competitors both big and small at bay.
Retailers need to rethink direct marketing. The catalog or email full of general products sent to everyone isn’t efficient or effective. It’s time to stop selling everything you have on the truck and hope something resonates. You must provide customers with value based on their personal needs and motivations in the moment. It’s time to get more intelligent about content.
Research shows that personalizing experiences pays off. According to a 2016 study by OneSpot and Marketing Insider Group, 59% of US internet users agreed that content customized for them increases their purchase intent somewhat, while another 19% said it significantly increases their intent to buy. Now is the time to invest in technology to combine your content, data, and business logic to bypass these long cycles and use variables such as location, store hours, time of day, and weather to deliver personalized content in real time through all of your digital channels such as email, web, and mobile app.
Real-time marketing is highly effective for in retail for product promotions with constantly changing prices and inventory, and as a way to combine personalized offers and content automation into newsletters, abandoned cart emails and order confirmations.
Predictive & behavioral analytics
Historically, predictive modeling was a long, complex process that often tilted more towards the retailer’s needs and goals than the customer’s. Sure, some level of prediction is better than blindly throwing darts, but the answers generated often missed the original question: how do you provide customers a better experience? How do you act on real-time customer behaviors across all channels so you’re ready with relevant merchandising at that crucial moment when your consumer is ready to buy?
Take product recommendations for example. If you’re a book retailer, does it still make sense to spend time and man hours manually curating titles for your weekly newsletter instead of using recommendation algorithms powered by customers’ recent browsing and searching behavior? (This is still going on today at major retailers.) Sure, having a shelf in-store dedicated to local authors or staff picks is charming and effective if you’re a local mom and pop store. But how do you execute and personalize something like this at scale in the digital world without using some kind of automation? You don’t even need to surrender all human involvement. Years back, Netflix explained their recommendations were powered by a combination of advanced algorithms and human analysis. AI-based predictive analytics is becoming easier and more accessible – even for retailers that can’t afford a data science team, or to marketers that assumed these techniques were too costly or time consuming.
Today, product recommendations are table stakes. People don’t buy products, they buy the experience they will have with the product. Marketing needs to make this a fundamental part of the message. Predictive and behavioral analytics is helping take recommendations to the next level by varying the experience for individual customers with the same product (the same boots could be used for a life-long planned trek to Patagonia or for a weekend Tough Mudder).
Integrate digital in store
The need for digital innovation isn’t limited to online channels. Even as retailers cut down their number of stores, they still need to rethink how to effectively integrate new digital techniques into those remaining stores in addition to the physical layout. In fact, it’s a mistake to think that ecommerce and brick-and-mortar retail is an absolute either or proposition.
A prime example of a retailer going the opposite direction from online to brick-and-mortar is Amazon Books – the company that disrupted the whole space to begin with. Amazon currently has six stores in five states with six more locations coming soon – including two in New York City. Only time will tell the long-term success of these stores, but the fascinating aspect is that they are designed and built with a digital-first strategy to bridge online and in-store experiences. Amazon describes their stores as “a physical extension of Amazon.com.” Amazon Books integrates the benefits of offline (e.g tactile browsing and playing with e-readers) and online shopping (e.g. customer reviews next to each physical book) to help customers find books and devices they’ll love.
There are a lot of interesting companies offering brick-and-mortar retailers new technologies to replace old marketing techniques. Glass-Media is working to disrupt retail signage with more effective and cost efficient technology. Point Inside is enabling retailers to engage with customers in store using beacons. Your efforts however don’t need to always include new fangled technology. Simply give your store employees tablets to help customers find products, make recommendations, and even order items right there if not available in store so they don’t have to stand on line.
It’s both a challenging and exciting time for retail. Only time will reveal the final winners and losers of this most recent retail bubble. But this much is clear — retailers who want to survive must reorganize from both an operational and marketing perspective and get back to focusing on customers wherever they are – online or in store. Smart forward-looking retailers never put the brakes on digital innovation and, as a result, will be better positioned to weather whatever bubble comes next.
Vivek Sharma is CEO of Movable Ink