Avoid the Crisis: Four Changes Brick-And-Mortar Retailers Must Make to Prepare for the Future
It’s no secret that brick and mortar retail has only gotten worse. With plummeting profit margins, the increase in online shopping, and the uncertainty of their future, retailers are getting ready for a fresh wave of store closures. Some of the biggest names in the retail business are reducing their physical presence, and it is critical now more than ever to prepare for the future.
The Retail Shutdown
The closure of major retail shops and brands has adversely impacted overall mall traffic. Sears and Kmart retail stores are suffering from the steepest decline in operating performance with a revenue decline of nearly 20% and a loss of $1.1 billion in 2015, forcing them to close 43 percent of its existing stores. Nordstrom, the upscale retail outlet with 10 percent decline in its business, is feeling the pinch as it gets down to slashing 350 to 400 jobs from the support team as a part to change its operating model.
Macy’s with 10 percent loss in business is closing 14% of its stores to continue to remain profitable. Aeropostale, the teen apparel retailer, currently valued at $2.9 million, filed for bankruptcy protection, a move to be followed by the closing of 113 stores in the U.S. and 41 in Canada, a huge chunk of roughly 800 stores according to Forbes.
According to CBS News, J.C. Penney,(JCP) is joining its department store rivals and announced the closure of 130 to 140 of its stores and two distribution centers in February this year in its attempt to close 31 percent of its locations to regain its pre-recession productivity. CNBC reported about 50 percent of Abercrombie & Fitch’s 745 U.S. leases would be on the chopping block in the coming year. American Eagle which had reported a net income of $400 million in 2008 saw a steep fall to 80 million in 2015. The store plans to close 150 location in 2017 to compete in an industry that is rapidly shifting to online commerce; the company said it would roll out a new website intended to be more mobile-friendly.
Some of the major brands that could not survive its second tour through the bankruptcy process and ended with all its stores closing down this year include American Apparel, Sports Authority — the fourth-largest sporting goods chain in the U.S., BCBG Max Azria Global Holdings, Wet Seal, and The Limited among others.
The list seems endless.
Of all the big retail companies, Walmart was the largest and most profitable of all other retail brands posting a net income of 15 billion continuously for the past five years. However, it could not escape from the rough patch the industry is going through as its shares declined 18% in the past 12 months. In January, Walmart announced it would be closing approximately 270 locations around the world, including 154 stores in the United States.
How Can Retail Prepare for the Future?
What could have gone so wrong in retail industry inducing such mass closures and exodus of players across the country? Could this be related to some tectonic shift in the way people are shopping and buying? Is online shopping bursting the retail bubble?
The growth of e-commerce has outpaced the overall growth of retail sales. Retail sales are expected to grow by 3 to 4 percent in 2018, according to the analysis firm RetailDive, but only 1 percent of that growth is expected to happen in physical stores. A similar message comes across in a Forrester report stating online sales will grow continuously and capture 11% of total US retail sales by 2018, which is roughly $ 414 billion.
E-retailers’ aggressive marketing, pricing and customer acquisition tactics have contributed extensively to their online retail growth. They have been quick to gauge the market sentiments and act swiftly on it.
The good news is that retailers are no longer oblivious to customer expectations and the latest trends. Brick and mortar stores are being influenced from the ease of online shopping and are restructuring their business models to deliver a great customer experience backed by huge investments in in-store technologies to achieve it.
The buzzword “omnichannel” echoed the renewed energy of retailers at the recent National Retail Federation Conference in New York. They were unanimous in accepting and agreeing that every channel must work together to deliver a unified, consistent, and contextual customer experience.
Bridge the Glaring Difference Between Brick and Click domain
E-commerce was able to take over the brick and mortar retail sector because of their foresightedness to capitalize on the ease of the medium to connect with customers anytime, anywhere and of course at their preferred time. It’s time retail shift focus from “selling goods” to facilitating engagement by leveraging in-store proximity technologies.
According to Proxbook over 19 industry verticals have invested in and deployed proximity technologies with Retail, Shopping Malls, Hotels & Tourism, Stadiums & Sports and Airports being the top five. Retail, in particular, has been more aggressive in deploying location-based marketing strategies. According to a prediction by BI Intelligence, out of 4.5 million beacons to be active by 2018, 3.6 million are slated to operate in a retail space. With this endeavor, retailers aim to attract shoppers back to their physical stores through personalized offers and enhanced experiences.
Take the In-Store Experience to a Different Level
Going to a retail outlet takes more than just money; it takes effort and time and surely it isn’t the easiest way of shopping. The busy millennial generation who values experiences over things considers shopping more as a chore than anything else and retailers need to give this zealous lot a compelling reason to get them off their couches. One way retailers can achieve this is by designing and projecting their stores as experience destinations — a place that promises to make shopping fun and a revered experience for its customers, something they can be proud of flaunting on social media akin to their holiday destinations. These destination stores will have more to offer than the brands displayed across their aisles. They will be attractive and have an up-to-date look with digital signage throughout, a good mix of high fashion and promotional stores. Hired staff need to play an active role as the engagement facilitator than just an information provider.
Capitalize on Big data and IOT for a Personalized Service
Retail is generating a huge amount of data and is a big source for Big data. IOT will contribute significantly to this pool in the future. Harnessing accurate and valuable customer data is crucial to design and deliver personalized, contextual, and relevant engagement programs for an exceptional customer experience. The data will play a critical role in helping enterprises understand and bond with their customers in a very different way. In order to design that personalized experience or create that distinguished offer that will have customers running to your store, you have to become an expert on your customer’s behavior, know them inside out, research their preferences, buying patterns, their location, preferred time to connect, and what would interest them etc.
Retailers are increasingly leveraging big data to gain a competitive advantage by getting real-time insights from their customer data. The real time analytics can help retailers make decisions on a granular level, with calculated risks and innovation.
2017 will see lots of retailers deploying customer acquisition platforms based on proximity and location-based technologies and services that will use data stored in CRM to foster a better understanding and stronger bonding with the customers.
Demolish Siloed Experiences by Integrating Channels
It is time for retailers to ditch their fragmented approach while designing a strategy or adopting a technology and focus on the intent of delivering a wholesome experience by integrating their efforts across platforms. Sophisticated technologies and co-dependence of digital and branding strategies in turn, are helping it transit to an integrated customer focus system. It is essential to integrate all the standalone systems, departments and customer touch points to optimize the customer experience.
Proximity MX is a mobile engagement platform that leverages location-based technologies to help you connect, know, engage and integrate with your customer. Request a demo to know how Proximity MX can help you prepare for the future and take the in-store customer experience to the next level.