Handling an Evolving Retail Landscape
Hello and Happy New Year! We hope you enjoyed the holiday season, even if it was different than past years. 2020 is a year many of us want to put behind us – according to the Yelp: Local Economic Impact Report released in September, over 100,000 businesses closed for good. Some industries were harder hit than others, especially retail and restaurants. Professional services were least affected (i.e., accountants, lawyers, architects) with a 2% to 3% closure rate.
Courtesy of Yelp Local Economic Impact Report – September 2020
Executive Summary – Food businesses that could deliver and handle takeout (pizzerias, delis, bakeries, coffee shops) had significantly lower closure rates. Businesses that depend on foot traffic (burger joints, brunch spots, desert places, Mexican restaurants) had a 61% permanent closure rate. Bars & the nightlife industry are disproportionally affected, with 6,451 permanent closures (industry is six times smaller than the restaurant industry). Retail shopping, specifically men’s & women’s clothing and home decor, had elevated closures rates (58% were permanent closures).
Courtesy of Yelp Local Economic Impact Report – September 2020
We discussed the surging demand for eCommerce and innovative customer journey forms like buy online and pickup in-store (BOPIS) in our previous blog. According to a McKinsey Analytics study, COVID-19 has accelerated eCommerce adoption by ten years based on Bank of America, Forrester Analytics, and ShawSpring Research.
In my opinion, there are four critical paradigm shifts in the hospitality, retail, and food/restaurant industry.
- Mobile Marketing
- Emerging technology interfaces
- Augmented reality (AR)
- Self-service technology (SST)
Mobile marketing is currently the most effective marketing method. Digital coupons are still an underutilized, innovative marketing tool. The primary benefit is increased foot traffic into physical retail locations, and various studies back this claim. Also, mobile coupon redemption provides analytics regarding the traffic flowing into the brick and mortar location to measure ROI. In combination with GPS, a marketing beacon allows marketers to target consumers based on their location, enabling push notifications directly to their mobile phones.
SMS marketing at a glance:
Recent statistics on mobile marketing practices seem to provide support for the superiority of mobile marketing over others. Ninety-eight percent of consumers who SMS marketing messages open the messages while only 22 percent read email marketing messages (Wachs, 2013)
Only 11% of businesses have the capabilities to send SMS for marketing, notifications, reminders, etc
Digital coupons at a glance:
Mobile coupons enjoy a higher redemption rate (10%) than traditional coupons (1% or less) (Juniper Research, 2012)
About one-third of consumers who received mobile coupons are likely to visit brick-and-mortar stores for apparel, electronics, and consumer packaged goods (ROI Research Inc, & Microsoft, 2011)
Emerging technology interfaces are visible whether you are at IKEA designing the living room of your dreams or at home using augmented reality. If you’re a retailer, you must be aware that consumers are researching products before deciding to buy. Why not beat them to the punch by providing them with easily accessible product information such as descriptions, reviews, and competitors’ pricing? This could also double as an eCommerce site where they can complete their purchase after they’ve had time to think about it.
90% of shoppers with smartphones use their mobile phones while shopping at a brick-and-mortar store to compare prices, find deals and coupons, read product reviews, or communicate with friends (eMarketer, 2013)
Picking out clothing can be a time-consuming process having to travel to the store and trying pieces on. With Augmented reality, you can now bring the fitting room to your customers using virtual fitting rooms. Along with virtual “try on with 3D,” the customer will have a better idea of how the product looks when they are wearing them, whether we’re talking about shoes, dresses, or a men’s suit.
Retailers such as Build-A-Bear, Trader Joe’s, Best Buy, or Lowe’s who provide great customer service can distinguish themselves from competitors by adding significant value to what they offer (Grewal, Krishnan, & Munger, 2010)
You can see several examples of self-service technology (SST) in retail, whether you’re at Shake Shack at the order kiosk picking the ingredients for your perfect burger or Target getting the sale price of shoes using the price check scanner. One of the most recent and visible examples is BOPIS highlighted due to the health safety concerns from COVID-19. Through this blog, we’ve identified trends that are involving the nature of retail. If you’re a business owner, you should remove the notion that your business can compete on price. Solely eCommerce businesses have streamlined operations without the overhead of brick mortar businesses.
These retailers meet the customer requirement of maximum convenience, including a cross-channel buying experience. Combined with the advantage of a haptic product experience representing one of the few competitive factors which cannot be imitated by online retailers, a high SQ increases the probability of choosing a bricks-and-mortar retailer (Chiu, Hsie, Roan, Tseng, & Hsieh, 2011)
Your business succeeds by prioritizing your customer’s experience at the forefront and turning it into a competitive advantage. The term for this is known as Service Quality (SQ). A key theme regarding SSTs is that they should address low-value employee tasks through automation. Serving the customer most efficiently is only possible when an operation framework is in place. Ideally, the framework enables employees to spend more time interacting with the customer. Successful retailers standardize tasks through education technology (EdTech), so employees have the training to delight customers consistently.
In recent years, they (SSTs) were implemented most often to cut costs and raise productivity by turning customers into co-producers of services (Hilton, Huges, Little, & Marandi, 2013)
There are two types of SSTs in retail – Transaction, and Information. Transaction SST is for short-term, narrowly defined user interactions; examples include self-service checkout, express order terminal, and multimedia kiosk (product demo, videos, etc.). Information SST is a long-term user interaction where the customer requires thought & time; examples include an information kiosk where the customer can interact with products to get a 360 view or details about the product specifications. Other examples that aren’t as widely adopted yet are the decision support system (i.e., Augmented Reality IKEA example) and shopping assistant (i.e., Artificial Intelligence and 3D virtual reality).
Understanding the adoption and usage of mobile payment services by using TAM3
These capabilities may seem out of reach for ordinary SMBs. That is the furthest from the truth. Based on the Technology Acceptance Model, customers adopt innovation based on the perceived ease of use. Essentially, if you provide your customers with the tools that make the shopping experience more convenient, they will use them. Although it must be useful and solve a problem for them, I believe each 4 of the methods described in this blog does that. Successful implementation and adoption of these tools have the potential to improve your employee’s job performance too. When you put your employees in a position to focus on work tasks that add value for the business, such as helping guide customers on their purchase, that will create positive experiences for the customers and the employees. It is essential to pilot these initiatives before making sweeping changes. When you treat both customers and employees as stakeholders, the process is driven by feedback (qualitative data) vs. intuition. With the right strategy foot traffic and purchases can skyrocket.
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Reference: YELP. “Local Economic Impact Report.” September 2020
Reference: Grewal, Dhruv & Krishnan, Ram & Levy, Michael & Munger, Jeanne. (2010). Retail Success and Key Drivers. 10.1007/978-3-540-72003-4_2.
Reference: Chiu, Hsieh, Roan, Tsent, Hsieh (2011). The challenge for multichannel services: Cross-channel free-riding behavior. 10.1016/2010/07.002
Reference: Hilton, Toni & Hughes, Tim & Little, Ed & Marandi, Ebi. (2013). Adopting self-service technology to do more with less. Journal of Services Marketing. 27. 10.1108/08876041311296338.
Reference: Jaradat, Mohammed-Issa & Al-Mashaqba, Abedalellah. (2014). Understanding the adoption and usage of mobile payment services by using TAM3. Int. J. of Business Information Systems. 16. 271 – 296. 10.1504/IJBIS.2014.063768.