Saving time is the most precious commodity for shoppers.
Offering lower prices has long been a key tenet retailers employ to drive transactions. Often at a high cost to the bottom line. Get ‘em in the door with a price breaker, and then trade ‘em up to higher priced items or a larger overall basket.
Along with everyday low prices, a bevy of other shopper benefits are generally part of a retailers’ strategic offering- customer service, in-store inventory, product mix, physical locations, and of course, convenience – defined by speed of service, check out, easy experience and the items being in-stock when you want them.
The devastating effect on the down economy is changing most retailer views that price as the lead strategy is simply too costly to play.
Convenience is emerging as the new driver. Convenience is about one-stop shopping rather than a retailers location. Getting much of your shopping list at one location is analogous to a shopping on Amazon.
Take grocery shopping.
No longer the exclusive purview of your favorite or neighborhood super market, there is a growing number of non-traditional entries offering grocery – Wal-Mart and Target, 7/11 and Walgreen’s – have put huge financial pressure on grocery chains that are already challenged by razor-thin margin.
King Retail Solutions (KRS) in conjunction with the University of Arizona conducted a shopper study on where people are purchasing groceries, fresh prepared foods, clothing and services from a non-service provider.
Shoppers were asked where they shopped and what they shopped for over the past 12 months:
- 77% purchased groceries from a store, other than grocery
- 62% bought fresh-prepared meals from a location other than a restaurant
- 57% purchased clothing from a non-apparel provider
- 20% bought services from a non-service provider
All from the non-traditional channels which owned these shoppers exclusively for years.
Which factors drove these shoppers to purchase elsewhere? Immediately following price is convenience and quality.
Shoppers are looking to complete their ‘shopping list’ as easily and efficiently as possible and the availability of products in non-traditional channels is helping to drive this behavior.
Evidence of this trend is as close as your neighborhood Wal-Mart when grocery purchases account for over 50% of their revenue.
Key Lessons in this shift in spending:
- Shoppers are embracing the blurring of retail offerings driven by convenience of getting more items on their shopping list on the same visit.
- Price isn’t the exclusive driver for those earning $100K to $150K annually. Convenience and selection are more important.
- Millennials are setting a trend and leading the way in purchasing groceries in big box, dollar stores and pharmacy.
- Continuous innovation on the right size format and product mix will keep loyal shoppers, shopping with your brand, on and offline.
The shift to convenience and expanded merchandise offerings is well on its way. What are you doing to be on this fast-moving train?
Lessons to glean from Target’s security breach.
Identity theft is more than frustrating. It hits you to the core about your financial well being. I’ve personally experienced it first hand years ago and today must still approach credit card purchases with special phone authorizations at the moment of transaction.
Target shoppers experienced the horrible and frightening effects of a credit card breach, as hackers inflicted the largest breach on any retailer in history. To date, this event is estimated to have cost the retailer hundreds of millions in lost sales due to the immediate reaction to stop personal credit card usage.
But has this historical breach resulted in notable customer behavior at retailers across America?
Apparently not! According to an Associated Press Gfk poll, only 37% of shoppers are paying more frequently with cash and more surprisingly, only 41% of shoppers have taken Target CEO Greg Steinhafel’s advice to check their credit card statements daily for suspicious activity.
Are American shoppers simply lazy? Have we become a nation of consumers who figure it’s the banks’ problems or Target’s or Neiman Marcus who will bare the brunt of the losses due to hacker success?
We tend to be a nation where big crisis are good for at least a 48 hour news cycle. But in the case of credit card breach, when added to all growing and actual threat of identity theft, cyber crime is becoming a leading concern of retailers and corporations. At a time, when all the trends favor online shopping convenience.
Cyber attacks against large corporations have been widely reported. Last year, more than 450,000 usernames and passwords from Yahoo were published on the web. The hacker group D33Ds Company took responsibility for the breach, explaining it had exploited a basic vulnerability in a Yahoo service to steal the details, exposing the email addresses and passwords of users of Gmail, AOL, Hotmail, Comcast, MSN, and several other email services.(Financier Worldwide.com/ Cyber Crime: A Global threat)
Natalie Burg, in a recent article for Forbes, shared lessons for retailers to be learned from Target’s data breach. Here are her points along with my thoughts.
- Communicate the Problem Immediately – Getting the facts must be accomplished, but the longer the story is lead by news organizations and not the affected company’s management, shoppers will believe what they read or hear.
- Respond to your customers – It is all about maintaining brand loyalty with your customers.
- Push your company for updated technology – US companies are behind other countries with out of date credit card security and technology.
- Invest in preventation – By 2015 most credit companies on planning to adopt a more secure EVM system. A comprehensive information security program even beyond the payment card industry standards set by Visa and Mastercard must be the norm.
- Rebuild Trust – Target’s daily communications and direct talk to affected customers is likely to allow the retailer to regain confidence in it’s all important RedCard. Speed and consistency on the heighted steps being taken to prevent further hacking, are a must for shopper trust to return.
Click on the link to read the full Forbes article, Five Lessons For Every Business From Target’s Data Breach
At the very least, redeploy resources more beneficial to your brand while building customer loyalty.
There is no argument that retailer focus on the holiday selling season is critical to making their year. But, with Black Friday total sales dropping while Cyber Monday totals growing, the question to ask is, “Can there be a smarter way to stimulate more profitable sales?”
First, consider the fallout from the increasing practice of moving up Black Friday hours.
- Employees are asked to give up their family time on one of the most traditional family holidays of the year.
- Retailers must add to their payroll the cost of double or overtime.
- A growing number of shoppers aren’t changing their behaviors based on discounts. According to the “Deal Seekers” report, fewer than 45% of consumers are motivated by discounts and deals may actually harm brands more than they help.
- Only 12% of US shoppers actually left their homes on Thanksgiving Day for Black Friday offers, yet retailers spend a disproportionate share of their marketing budgets that ignore 4/5th’s of their shoppers.
Some of the countries most respected and successful retailers have taken the position they will NOT be open on Thanksgiving out of consideration to their employees, brand and valued customers. Among those:
- Home Depot
- Nordstrom/Nordstrom Rack
- Burlington Coat Factory
- TJ Maxx
Also, the damage to your brand in pursuit of out-offering the competition with Black Friday deals is immeasurable, especially when your store becomes the headliner on the evening news.
Can the execs at Wal-Mart honestly believe that ending up on every news outlet showing customers fighting, sustaining injuries or criminal charges all in an effort to secure one of the 5 ‘tablets’ or large screen TV’s at a fraction of their everyday price, is the impression they intended of the Wal-Mart shopper’s experience?
As you make plans for the next holiday season, here are some considerations to in lieu of aggressive pricing tactics and stunts:
- Consider your employees first: Who wants to work on Thanksgiving? All your employees to spend time the holiday with their families. Even with Cyber Monday’s growth, 90% of retail shopping still occurs in store. Why not allocate more training throughout the year that is focused on the customer experience to deliver world-class service.
- Reexamine your everyday ‘low pricing’ and value proposition year round: Margin hits due to extreme Black Friday stunt pricing may be better spent.
- At all costs, protect your brand: If your promotional tactics results in arrests, injuries or worse, its time to rethink your core strengths as a retailer.
Please feel free to share your thoughts in the comment section below.
Understanding shopper behavior is important to profitable retail – and will become more challenging for the foreseeable future.
The challenge is to move beyond multi-channel retailing to a shopping experience that is truly seamless across all platforms and shopping channels – whether mobile, tablet, PCs and laptops, brick ‘n mortar stores, television, radio, direct mail, catalog, or any other emerging technology. Retailers need to have a better understanding of their shoppers’ many paths to purchase.
Starbucks has over 4 million Twitter followers, while Whole Foods and Zappos have over 3 million followers. Victoria’s Secret, H&M, Toms, Burberry, and Etsy all have 2 million or more followers. 70 million Pinterest users follow an average of 9.3 companies –greater than Twitter or Facebook. Pinterest shoppers spend an average of nearly $170 per session.
Here are some additional highlights from this report:
- E-commerce continues to rise, reaching more than $224 billion last year.
- Millennials and Gen Xers continue to demonstrate a high propensity to use mobile while shopping in store. They use mobile to request a price match, read product reviews and get additional information from bar codes.
- Electronics is by far the most researched online category prior to entering a store.
- Double digit increases for online purchases are projected to continue for the next several years.
Innovations are becoming numerous across many different types of retailers and industries.
- HomeDepot.com is a full-service resource for the DIY customer. The site offers pick-up options at the store as well as customized in-store deals and events.
- Chipotle recently introduced an app that allows customers to order customized burritos while paying online – and allowing the customer to skip the line and go to directly picking up their order.
- Staples introduced “omnichannel stores” – smaller store footprints which feature kiosks for finding information and for ordering products for in-store pick-up.
Download a copy of the study, Retail Insight: Spotlight on Modern Retail.