Retail apocalypse, a self fulfilling prophecy

Retail apocalypse, a self fulfilling prophecy

Retail apocalypse, a self fulfilling prophecy

 

In article after article, we can read about how the retail apocalypse reaps its victims. In the big newspapers, we are greeted by black headlines on how e-commerce takes over and that the retail no longer has any future. The journalists refer to so-called experts and reports with statistics as proof of their claim and there is no one who wants and dares to nuance the debate.

 

Experts – with interest in e-commerce

If you take a closer look at who is the so-called experts, you will discover that the vast majority are people who very are often interested in e-commerce. It can be people who directly or indirectly run e-commerce companies, payment systems, e-commerce platforms or have invested in similar businesses. And if you dig deeper to look at who is behind the reports with statistics and percentages on which claims are based upon, then you will find the same type of actors. This does not in itself need to be wrong, but the risk is obvious that it leads to a somewhat skew image since it is not in their interest to nuance it. This is confirmed by, and to some extent, defended by the industry. In talks with the HUI Research (Swedish retailers institution for research), it is expressed as “We act on the client’s mission and must present positive statistics for their area of ​​interest. After all we live in a competitive market ”.

I fully understand the research agencies that act on assignments. I would also like to make it clear that I do not for a second doubt that e-commerce is here to stay. I just wish the debate to be a bit more nuanced.

After all, you can't blame e-commerce for ''Retailers apocalypse''

Where did shops on the street get lost?

In an article from 1 November 2018, I described how the Gartner Group, with its CEO Miriam Burt, in a report on the retail business, pointed out that the number of physical stores started in 2017 was greater than the number that closed.

“E-commerce has seen gaps and opportunities that ordinary stores have not understood to use”

Success factors

1Utilizes and constantly seeks new opportunities for communication platforms to increase customer loyalty.

2Offers flexibility through various options for purchase, such as “click and collect”.

3Facilitates on returns. Statistics show that 92% are willing to buy again if it is easy to make returns.

4Integrates with customers’ “touch points” as connected home appliances.

5Creates a strong and competent staff always willing to be at service.

6Providing service-led retailing, combining channels to increase personalization and customer convenience

7Uses technology for customer-centric and up-to-date experiences, such as intelligent “shopping assistant”.

8Build up and actively maintain partnerships with partners, other retailers (also competitors), suppliers, technology suppliers and customers.

9Strains to create an engaging store experience and allow customers to see, touch and try before buying.

I will here in a series of articles elaborate my reasoning point by point.

What physical stores can learn from e-commerce – point one.

Loyalty or Communication

As I have already described, stores that wanted to take up the fight with e-commerce often lacked a strategy integrated to the ongoing business. If there is any connection I do not know, but also in regard to the loyalty programs, we often find shortcomings in strategy and or the work on integrating it into operations. In a study from Acando (2017), based on interviews with 20 of Sweden’s largest players in the retail trade, it turned out that:

  • Only 35% of companies responded that they have a loyalty strategy
  • 45% of companies do not consider their loyalty program to add value to their customers
  • 55% do not know if their loyalty program is profitable or not

I do not know how well it correspond with the percentages for the smaller players, but I would be very surprised if figures for SME would be better.

What is customer loyalty

Customer loyalty can be defined as the customer’s willingness to shop in a specific retail chain or a specific brand. A customer who makes regular purchases is included in the broader definition of loyalty, but based on how loyalty is achieved, different forms can be defined. At the overall level, one speaks of false and real loyalty.

loyalty form RETAIL APOCALYPSE

translated model  – source www,butikshandel.se

In the hope that the customer will remain loyal, in the retail sector, traditionally and somewhat routinely loyalty programs have been created with a reward for purchases, that is, when a customer has bought goods for a certain amount, the customer is rewarded in the form of a gift card, coupon, discount or the like. As more and more people have acquired these programs, the initial competitive advantages have disappeared. And the loyalty that “early adapters” won went quickly to false loyalty.

Loyalty program does not build brands - But brands lead to loyalty.

When e-commerce took off, the reaction from the stores was – We must do the same. We also need a webshop. The problem was that there was no internal competence and that e-commerce was often seen as a separate phenomenon. Even today I come across businesses, large and small, who have not bothered or been able to convey in the organization how to work with their digital channels and e-commerce. The result of this shows of in confusion and irritation at all levels and directions internally, but also externally. I often meet at store managers, even from the larger chains, who have not understood how they from central level work with their webshop. In franchise stores, one even see the webshop as a competitor. This is understandable since no conditions for identifying sales from e-commerce have been created. For smaller stores down to really small ones, a more fragmented image appears. We can easily find examples where e-commerce has taken most of the revenue and the focus naturally has shifted to digital sales. However, the majority have been forced to realize that e-commerce customers and sales do not come by themselves. Those who managed to maintain their physical operation in parallel with e-commerce now often suffer from identity problems. This applies to large players as well as to smaller ones. However, it is easier to fix for the smaller ones.

While the stores primarily has focused on loyalty, e-commerce has focused on communication and information.

Communication is not equal to Relationship

As there are major differences in the systems for communication platforms, and it is usually the price tag that decide. Big players can afford to invest big in complex systems to create a relationship with the customer. All with the purpose of driving the customer into a purchase. Here, e-commerce offers opportunities that the store does not have. Through social media and Google, e-commerce players can find you as a customer even after you leave the webshop. Even for the small webshop, this is highly applicable. But it is expensive, complex and the competition has increased sharply.

Amazon - just ``artificial breathing``

Communication is not equal to Relationship

As there are major differences in the systems for communication platforms, and it is usually the price tag that decide. Big players can afford to invest big in complex systems to create a relationship with the customer. All with the purpose of driving the customer into a purchase. Here, e-commerce offers opportunities that the store does not have. Through social media and Google, e-commerce players can find you as a customer even after you leave the webshop. Even for the small webshop, this is highly applicable. But it is expensive, complex and the competition has increased sharply.

Amazon is by many considered to be the solution and savior. But Amazon is, in my opinion, manly “artificial breathing” similar to the physical store’s old savior “the mall”. What I mean is that even though Amazon offers many benefits in the short term, it does not give much in the long run if you have not done your homework with a clear strategy and offer.

 

Caring for relationships has never been that important as now. But nagging and shouting with offers does not build relationships, it damages them. With regard to relationships, the physical store has a great advantage. An experienced feeling and physical relationship create trust and weighs heavier than a net-experienced one. This is confirmed by the fact that the pendulum turns now over. From having been physical stores that felt compelled to enter the market for e-commerce, we now see typical players in e-commerce that open up physical stores, meeting points or showrooms. Competition has now hardened, and it is not enough to meet the customers in only one channel.

Channel model RETAIL APOCALYPSE

translated model  – source www,butikshandel.se

Single channel (physical or digital) – In the beginning, physical store stood in straight competition against e-commerce stores. With the help of low prices and in pace with the technology being developed mainly for payment systems, logistics, and customer intelligence, they slowly but surely took their place on the market.

The number of physical stores that currently work with single channel and not actively in e/commerce in any respect is negligible. We may find small players who trust a flow of customers based on their location. The number of e-commerce players on the other hand is many.

Multi channel (parallel channels) – To meet the new competition, physical stores also jumped on the train with their own webshops. As the mobile phone development made mobile e-commerce possible, we had three possible channels to meet the customer. Everyone lives their own life and is characterized by poor coordination and lack of integration. Here you will find the majority of the players, both large and small.

Omni channel (integrated channels) – Omni-channel enables you to deliver a total experience with equal conditions regardless of whether customer chooses to shop online or offline. As you are able to uniform communication and total experience (equal in all channels), you can also nurture your brand better.

The success factor lies in how well you manage to create a holistic thinking in the buying process that permeates the entire business to meet the consumer.

Battle of the “Omni Channel”

With the ambition of a seamless experience, it is primarily players with focus on physical activities that have driven the development of omni-channel. Recently, we have also seen examples of traditional players in e-commerce that start up physical stores. The aims are ultimately to strengthen their competitiveness, build brand, and or prepare for what knocks on the door – experience-based trading, AI, AR, IOT (Artificial Intelligence, Augmented Reality, Internet Of Things (everyday things eg. Household household appliances that can communicate with the outside world)).

The success factor lies in how well you manage to create a holistic thinking in the buying process that permeates the entire business to meet the consumer.

WHO IS WINNING?

Even if physical stores would learn from e-commerce and have every opportunity to draw the longest straw, the outcome is not given.

Which is the most difficult – to integrate e-commerce operations with a physical one or integrate a physical store with e-commerce operation?

A physical store with ambition of achieving success, has to go back to the basics and consider the changes that have occurred. Stores that do not realize this will not succeed. One needs to clarify eg. “why do we exist, what do we sell, which values ​​do we offer, in what way and to whom” – conditions for understanding where “we are going” (our purpose and ambition). Doing the homework makes it easier to choose which channels to work with. You will understand how these should be integrated in order to strengthen the offering, and how to create a coherent customer experience through the channels. Then you will automatically question whether you are working with false or real loyalty, and your requirements on technology and what tools to use will be clarified.

The next item to be dealt with in next article – 2. Offers flexibility through different options when buying, such as “click and collect”.

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