At the end of May, Sears Holdings announced the closing of 48 Sears locations and 15 additional Kmart stores – a continuation of the slow death march we’ve seen from the retail giant over the past several years. Sears serves as a harbinger for retailers in an age of digital disruption – it’s adapt or die for small and large retailers alike.
Of course, Sears isn’t alone in its decay. According to RetailNext’s Retail Performance Pulse for the month of April, physical stores saw a 5.6 percent year-over-year decrease in total sales and a 7.8 percent decline in shopper traffic.
And it shouldn’t come as a surprise that brick-and-mortar sales have been on a steady decline, but that’s not the full story – the report illuminated a glimmer of positive progress for physical retail operations. The overall traffic decline was softened by a 0.9 point lift in conversion, continuing a trend of similar increases over the previous six out of seven months.
Furthermore, the overall decline in sales at physical stores may not be fully representative. As Macy’s CMO Martine Reardon points out, many customers browse retail products in person, and make the purchase later online. This may look like a digital sale, but for companies with both digital and physical presence, it’s a false dichotomy. And competition with digital retail is driving innovation in physical retail space, benefiting those embracing digital transformation.
“Customers today are blurring the lines between online and physical commerce,” says Brian Solis, principal analyst at Altimeter Group. “And innovative startups are stoking that behavior. As a result, behaviors, preferences, expectations, and even values are evolving. Retailers can no longer compete through technology alone. They have to reimagine what retail means in this era of digital Darwinism and embrace the reality that traditional space, marketing, sales, service, et al., requires new thinking, expertise, metrics and most importantly, investment … even if that comes at the expense of shareholder return for now.”
Changing long-standing business processes and investing in innovation at the expense of shareholder return isn’t an easy task or an easy sell, as we’ve seen from Sears and other large retailers. What does it mean for SMB retailers? There’s an opportunity to innovate faster than the heavyweights. Here’s where you should start.
Be A Human, But Synthesize
There’s one thing digital can never be: human. There have been a number of tech solutions to mimic face-to-face interaction, but solutions like live chat only go so far. These platforms can feel like robots programmed to follow scripts, and, of course, that’s increasingly the case as chatbots become ubiquitous. Too much digital can be alienating.
The personal attention of a stylist, on the other hand, or connecting with the expertise of a menswear specialist on shoe leather care, are not replicable on a mobile device. Customer service is one of the areas where SMB retailers have the upper hand over their larger competitors, and they should capitalize on this differentiator. Excellent service creates positive impressions, which lead to positive reviews and drive sales in both digital and physical space.
But don’t deny digital. Recent research by Altimeter shows successful retailers understand that all customers are becoming hybrid customers (that is, digital and in-person shoppers). That means the mobile interface and the physical store should work together, allowing the customer to chart their own course to a sale. In-store apps like those used by Target and Sephora are an example of this, wherein GPS helps customers find their way to the products they want, and alerts them to specials.
Eliminate Purchase Barriers
It’s important to eliminate barriers that might prohibit customers from making a purchase. Whether it’s the effort it takes to get to a physical location or the payment options available, the path to a purchase must be clear.
According to Altimeter’s research, Sephora found that matching cosmetics to personal skin tone was one of their customers’ biggest barriers. So they introduced an in-store technology that lets you scan your skin to match with the perfect products for you. Technology like this eliminates purchase barriers in-store to encourage a fluid experience.
Other barriers come up at the point of sale. Take payment options, for example. As I’ve written in the past, the majority of retailers don’t accept digital currencies due to the high volatility of the market, high transaction costs and low transaction speeds. But accepting them could be beneficial for e-commerce businesses because it would open up sales to the three million people actively using cryptocurrency, so it’s worth keeping a pulse on the evolving landscape.
“Cryptocurrencies, if built on proper enterprise-level blockchains, offer a significant reduction in transaction costs and increase in transaction security to the benefit of retailers,” says Stefan Krautwald, Commercial Director of Fluzcoin, an independent retail cryptocurrency.
Another way SMB retailers can thrive is by partnering with other businesses that make life easier for customers. For example, companies can partner with rideshare businesses, like Lyft, to offer discounted or free rides to the store. A partnership like this was launched in Portland, Oregon last year. Lyft partnered with Validated, an app that allows shops and restaurants to cover the cost of their customers’ Lyft rides. Customers simply have to download the Validated app and then search for participating shops and restaurants. After the customer hits a certain spending target they can scan their receipts, get validated, and a credit will be pushed directly to their Lyft account.
Digest, Then Pivot
The inertia and established procedures of large retailers leads to trouble maneuvering in periods of disruption. The ubiquity and availability of (consensually given) data can allow retailers to pivot in real-time based on customer preferences. SMB retailers shouldn’t underestimate their ability to move quickly with the current of customer sentiment, understanding that it’s harder to adapt at a large scale.
Understanding their ability to maneuver, smaller retailers can utilize their ability to connect with customers, adopt new technologies to eliminate purchase barriers, nurture B2B partnerships, and move quickly to meet customer needs. The retail future is uncertain, and SMB storefronts are in a unique position to shape the physical retail landscape, much the way Amazon shaped e-commerce.