14 Things Stores Are Getting Wrong
By Lauren Parker
I recently attended an excellent Retail Influencer Power Luncheon organized by Berns Communications Group, and while there was plenty of talk about the winners in the retail space, there was plenty of pointed discussion about what was going wrong too. In attendance was Steven Dennis, Sageberry Consulting; Gilbert Harrison, Harrison Group; Pano Anthos, XRC Labs; Stephen Sadove, Stephen Sadove & Associates; Stacey Widlitz, SW Retail Advisors; and Keval Desai, Interwest Partners. Keeping the worst retail offenders off the record, here are some highlights.
STORES AREN’T INVESTING ENOUGH IN TECHNOLOGY…
“I spend 70% of my time in stores and I’m surprised by how many customers they’re losing because retailers can’t get the technology into place,” says Stacey Widlitz of SW Retail Advisors. And even for retailers that do have something like mobile checkout, it’s often not promoted so the consumer doesn’t even know it exists. That said, stores need to look carefully where to invest their dollars and tech is one area of many. “The customer wants anything and everything and wants it now, and this all requires big investment,” says Stephen Sadove, Stephen Sadove & Associates. “That’s the basic cost of entry. But all these pressures require investment: you need to keep stores fresh; you need to invest in labor for service to keep customers happy; you need differentiated product to keep margins high and avoid a race to the bottom on price. So you need to ask yourself: is mobile checkout really the best investment for your limited dollars? Does your store have the traffic flow to justify it?”
…AND THE ONES THAT ARE AREN’T DOING IT FAST ENOUGH
”The big boxes will tell you that they’re changing and they are, but they don’t know how fast the consumer is changing and how fast everything else is changing,” says Gilbert Harrison, Chairman of Harrison Group and Chairman Emeritus of Financo. “I had a conversation with a small digital brand that’s spending more on digital than a big box company on digital. So while the big stores are spending and innovating in their own world, compared to the digitally native companies out there, it’s not enough.” It’s telling to look at the makeup of the Board. Are there digitally savvy 30-somethings on the board? There’s often cultural resistance to that. A store like Macy’s is definitely innovating, requiring all suppliers to put RFID tags, opening more Backstage, adding new vendors, buying STORY and hiring curating queen Rachel Shechtman, but are they moving quickly enough? Do the people in the organization have empowerment?
RETAILERS AREN’T NECESSARILY RECRUITING THE BEST TECH PEOPLE
To a young Silicon Valley tech expert, is retail (with the exception of Amazon or hot digitally native brands) really the most exciting, most lucrative place to start your career? No. Traditional retail stores don’t value IT people to the level that, say, retail tech startups do, so prime tech talent can be elusive. Retailers need to realize how crucial data and store analytics are, pay their IT people a lot more, and recruit in a more enticing way. “We’re in Silicon Valley so we talk to tech people in the language they can understand,” says Keval Desai, General Parter at InterWest. “When we recruit an engineer for The RealReal, we talk about machine learning to automate a catalog.”
STORES AREN’T THINKING ENOUGH LIKE TECHNOLOGY COMPANIES
”Julie Wainwright of The RealReal said from day one she was building a technology company, not a retail company, and it shows,” says Desai. “The CTO has a seat at the table, and that makes sense.” Plus, stores can’t just talk about omnichannel and having retail, web and mobile platforms for consumers. They all need to integrate seamlessly. “At The RealReal, each sku is cross channeled, so if you buy from the store, we immediately remove that item from the app. But you need the technology to synchronize all that.”
LEGACY DEPARTMENT STORES ARE AFRAID TO CHANGE
“We always ask our companies four questions,” says Steven Dennis, President and Founder of Sageberry Consulting: “Are you wired to say yes or to say no? (they know what the right answer is but often have to think about it); How do you think about risk?; What’s your innovation budget? (most don’t even know what I’m talking about); and last, What’s your innovation process? (you can tell if a company’s even thought about it).”
THERE IS OFTEN A LACK OF VISIONARY LEADERSHIP WILLING TO TAKE RISKS
The Merchant Princes of yore serve an old model. “Most retailers don’t have an innovation process inside the organization to deal with all the ‘shiny objects’ the consumer wants,” says Pano Anthos, Managing Director of XRC Labs. “The merchandise mix might constantly change but there’s a lack of vision at the top. It used to be that the merchant prince was all about product, but now you have product plus supply chain, technology, etc., and it makes it all much more difficult. It requires a big culture shift, and that’s a big problem.”
MAJOR RETAIL BUYERS ARE OFTEN OUT OF TOUCH
Department stores might use those data analytics, but are they losing the personal touch? The GMM, DMM model is archaic, agreed the panel. Buyers have become spreadsheet people, they don’t live the product, they’re not curating and often when they try to do something like that, the GMMs shut it down. Millennials are more innovative but are they given the opportunities to implement their ideas? Too often their hands are tied. “Do buyers even work in the stores anymore?” asks Stacey Widlitz, Founder of SW Retail Advisors. “When I was a buyer at A&S at the start of my career, I had to work the stores on the weekend. It creates localized store experiences.”
IT’S NOT ALL ABOUT PRODUCT
The old retail models were so product centric, but now it’s “product plus plus plus.” Retailers also need digital leadership to understand social media to truly listen to and focus on the customer. Are those techniques in place? “People will buy ‘good enough’ product in a great experience,” says Harrison. “When you look at the winners in the cosmetics industry, they’re not necessarily the best product. A company like Glossier knows it’s about that tribe and she [founder Emily Weiss] understands how to build that tribe.” The highly photogenic (read: Instagrammable) Millennial Pink stores bear this out.
RETAILERS CAN’T BE RIGID IN DEMOGRAPHICS
Stores must be flexible if they start appealing to an unexpected demographic, and react accordingly. “The RealReal started out with demographics in their 40s through 60s, but now, one-third of the consumers are millennials. That surprised us,” says Desai. How did Millennials get turned onto used and consignment shopping with heritage designer brands? “Millennials are very vocal in their support of sustainability, and The RealReal’s model offers that, not to mention goods that hold their value and even increase in some cases. We openly publish how the brands hold their value in 10 years, so consumers can feel confident about the investment.”
STORES NEED TO KNOW THEIR CUSTOMERS THE WAY ONLINE DOES … WITHOUT BEING CREEPY
No one would need to ask ‘Can I help you?’ if they knew you and knew what you need. Remember the futuristic movie “Minority Report” where Tom Cruise’s character walks through the airport and holographic pop up ads offer suggestions based on his previous purchases? Facial recognition isn’t sci-fi anymore, as Facebook photo auto tagging can attest, and it’s something that retailers have the capability to use. But will it creep out customers? That’s another story. Consumers are accustomed to and okay with being tracked online (e-commerce sites know exactly which items each customer clicked on, put in their carts, abandoned or purchased), yet re-enacting that scenario in store requires permission, plus an app. “Say I’m a customer who just spent $50,000 in a store’s Paris location. If I walk into their New York location, they won’t know that,” says Anthos. “That’s crazy. Online there’s an advantage to being a logged-in customer, so brick and mortars need to figure out that value exchange and what it offers the customer. Melissa Shoes utilizes a facial recognition platform and they reap a 30% conversion rate in the store when consumers opt in and take a selfie. It’s not a big ask and consumers think it’s fun. They can go through checkout without having to show a credit card because they’ve identified themselves as loyal customers.” Facial recognition at retail is popular in China but hasn’t fully caught on here. Targeting individual consumers in store based on prior purchases doesn’t just require permission, it demands cultural acceptance as well.
RETAILERS AND CONSUMERS AREN’T ON THE SAME PAGE
By design, stores and consumers have different agendas. Stores want dwell time. Consumers want efficiency. The customer’s most valuable commodity is time, and search is key so she can get in and out of the store quickly. Retailers would rather get customers lost so they can shop longer and make impulse buys. People love Amazon because it saves them time. If stores did customer journey maps, they’d figure out what the paint points are and adjust to move them through the store quicker. But that’s not always in their own self interests.
NOT ALL STORES KNOW WHAT TO DO WITH THEIR DATA
Retailers can get reams of data but they don’t always know how to use it. In store, there are anonymous ways of observing customers, like surveillance cameras, heat maps and old fashioned salesperson observation. “Are customers picking items up but putting them down? Maybe they’re too expensive. Are they missing them completely? Try moving the items around the store,” says Anthos, noting how one store observed their customers and discovered that just by flipping the escalators the other way, women’s sales went up 30%. They also found via heat maps that customers were crowding around their digital signs. The retailer switched the signs to analog and solved the problem. “Online you wouldn’t be so blind. You’d be focused on optimizing your store.”
BUY NOW PICK UP IN STORE CAN BACKFIRE BIG TIME
Aside from its hard-to-say-without-laughing acronym, BOPIS, or Buy Now Pick Up In Store, is growing like crazy. It’s a great idea in theory but often fails in practice. Why? The web and store experience aren’t always seamlessly integrated and the user experience is often awful. Making a consumer wait in the store while a clueless salesperson hunts for their order, all while keeping existing customers waiting, makes the whole process nonsensical.
IF YOU’RE PLAYING CATCH UP, IT COULD BE TOO LATE
So many companies who didn’t invest early enough are now being punished for it. They don’t know how to spend and catch up. “Fifteen years ago, the customer journey was pretty simple,” notes Dennis. “Today, 50% to 60% of store sales start in the digital channel, either directly or through affiliates. A lot of the retailers have a hard time changing to accommodate these consumer shifts.” And for many, it’s just too late.