Who says brick-and-mortar retail is dying? In recent weeks, some notable large retailers such as Macy’s have thrown cold water on a popular assumption that Amazon is killing the old-fashioned concept of physical stores. In fact, physical stores are key to positive financial returns reported by big-box retailers lately — although some businesses are faring better than others. Between them, Kohl’s, Macy’s, Target, and Walmart have provided five lessons for how to maximize the value of a retail brand’s entire omnichannel ecosystem (including the physical stores) to stay relentlessly customer-centric:
1. Get Mobile Right
All the leading brick-and-mortar stores rely on mobile apps to make shopping faster and more efficient, whether the customer is in the store, at home, or on the go. Macy’s is making the shopping experience easier with mobile check-out. Walmart has developed its own app to make it easier to complete in-store tasks such as picking up prescriptions at in-store pharmacies. As Walmart CEO Doug McMillon told investors during a recent quarterly earnings call, “By becoming stronger at mobile and leveraging digital capabilities, we improved in-store experiences, including our pharmacy and money services areas. We enabled easy reorder online. We’re making the checkout experience easier with Scan & Go and also digitizing the returns process.”
Meanwhile, Kohl’s has been relying on a mobile wallet app that includes personalized, in-store promotions based on a customer’s shopping history. The company’s latest financial returns suggest that the approach is working.
2. Balance Online/Offline
It’s been widely reported that with Amazon is relying on its Whole Foods grocery stores to act as fulfillment centers for online orders – but brick-and-mortar retailers are doing the same thing, and they have more experience managing their physical stores. Target, for instance, is converting brick-and-mortar locations into centers for delivery and curbside pick-up, a process that the company will accelerate as it makes operational its recent acquisition of Shipt. But achieving the balance between online and offline commerce is a learning process. After Walmart acquired Jet.com in 2016, the company expanded features such as free two-day shipping, and integrated online with offline by adding grocery pick-up locations, where shoppers can order online and then pick up their groceries at drive-through lanes. But Walmart’s ecommerce growth hit a speed bump during the 2017 holiday season as the company struggled to manage the spike in demand for online orders. Consequently, the company’s ecommerce growth slowed down.
Retailers are getting more creative with how they use their store space. For example, Macy’s has been rolling out stores within stores known as Backstage to cater to bargain hunters. Macy’s is also leasing some of its store space to other businesses including pop-up stores. And through a relationship with Amazon, Kohl’s has opened up Amazon return counters at some of its locations. As I pointed out on our blog previously, this arrangement increases foot traffic for Kohl’s stores while helping Amazon address the hassle of product returns.
4. Reimagine the Role of Your Employees
Smart retailers are rethinking how they rely on their own workforce at the store level. Since 2017, Walmart has been testing a service that relies on its employees to deliver purchases to customers – in effect, redeploying store-level employees into delivery professionals as well. Walmart recently announced it is moving into the second phase of the program.
Macy’s also recently launched a creative way to rethink the role of the store employee: the Macy’s Style Crew program, in which its own store employees and personal stylists can become brand ambassadors. According to Glossy, members of the program are being recruited to feature Macy’s products and services on their socials. Glossy reports: “These ambassadors share short video clips produced in partnership with Macy’s and the branded video platform Tongal that are designed to showcase the employees’ personal interests, while featuring related products carried by Macy’s in order to drive conversions . . . Participants are incentivized by receiving a portion of the profit, similar to the way stylists receive a commission on sales at brick-and-mortar Macy’s stores.”
It will be interesting to see whether these kinds of programs affect employee turnover positively or negatively depending on how well employees perceive them.
5. Pace Investments with Profits
There is a price to pay for maximizing the value of a physical space. Walmart and Target have both paid billions for acquisitions and remodeling costs intended to make their stores more appealing – investments that have dragged down their stock price even as these companies have reported positive numbers in key performance indicators such as same-store sales because, ultimately, Wall Street did not see meaningful, sustainable returns from the high costs these companies invested during the time frame being analyzed. These businesses are fighting long, expensive wars to remain customer-centric in the digital age. Their stories suggest that retailers are going to need deep pockets and a lot of patience – and success is not guaranteed. Of the four retailers, only Kohl’s and Macy’s seemed to get this balancing act right in the most recent fiscal quarter. And, of those two, Macy’s even surprised themselves after many quarters of over-investment and lack-luster performance.
Even still, retailers with brick-and-mortar stores still hold the advantage of offering instant access to their products and easier returns, which is one reason why Amazon bought Whole Foods and is opening Amazon GO stores without cashiers. Only retailers that began to lay the tracks for a better in-store customer experience are going to win. Contact us to discuss how to succeed in retail in the digital age.