Recently, it seems that not one day can go by without some headline news about the Retailers’ struggle to remain competitive and profitable in today’s increasingly challenging environment. Earlier in the year we saw the collapse of Toys R Us and Maplin – two high street giants who somehow failed to re-assess their business model and competitive proposition and ended up casualties of a sector that is being disrupted from all directions.
Brexit-fuelled inflation, rising business rates and falling consumer confidence are putting a strain on the sector. In addition, mounting competitive pressures are accelerating the need for increasing differentiation and efficiency, in a constant struggle to strengthen customer loyalty through better products and services and lower prices.
And yet, many fail.
House of Fraser have just confirmed they are now able to go ahead with their plan to close 31 of their 59 stores, and Shop Direct has announced the closure of 3 warehouses in Greater Manchester to be replaced by a new semi-automated one in the East Midlands.
Whether it is stores or warehouse closures, Retailers are now more than ever in need for implementing radical changes – but somehow are also ending under attack by the public media for the resultant loss of jobs, blamed for being the biggest driver of 50,000 redundancies so far this year. While I understand the terrible implications for all the people and families affected, I cannot but also understand the dilemma faced by the Retail industry.
They are attacked if they try to innovate and increase efficiency to reduce operating costs and improve the customer experience – as this often means introducing technology to automate processes and reduce human intervention, which by consequence leads to some job losses. And they are attacked if they fail to do so and continue to operate through undifferentiated and inefficient people-heavy models, until they cannot survive margin pressure and end up collapsing altogether – with much bigger consequences.
Fail to transform, and you‘ll fail faster
I really feel for the directors of Shop Direct, who had to take the big decision of relocating the 3 warehouses. Their dilemma was very clear in the words of Derek Harding, the interim boss who said: “This is a tough day for the business and we know how difficult this news will be to hear for our teams in Shaw, Little Hulton and Raven. However, these proposals are necessary for our future and to enable us to continue to grow and meet rising customer expectations. We take very seriously our responsibilities to our colleagues, many of whom have been with us for a long time and who work tirelessly to deliver for our customers.”
This was a tough decision, but also one that may save the business in the medium term, and therefore protect the jobs of all remaining staff. By creating a new warehouse in a more central and better-connected location and introducing better technology, Shop Direct hopes to be able to process more orders more quickly and enable same-day deliveries, which customers increasingly expect from online retailers.
In fact, it is not only high street players who are under threat, but also online operators who are already leaner and more agile. They all must re-think their business and operating models to re-align to fast evolving customer demands. And they all need to find innovative and differentiated ways to gain and maintain customer loyalty, in an environment where customers have more choice and less affiliation with generic stores that seem to offer the same products at the same prices.
So what do customers want?
In my view, in a retail world where Products and Price are no longer enough, this can be summarised under 3 headings:
1. Ultimate convenience
Nowadays, customers demand ultimate convenience, fast deliveries and efficient processes. The example set by the leading players like Amazon is dictating the standards expected by customers at all times, constantly raising the bar for what is acceptable. Amazon Prime has redefined the deliveries world – enabled by efficient fulfillment processes and robot-powered warehouses. Amazon Go has even removed the need to physically pay for items, and customers can walk in and out of physical stores without the hassle of queuing at the till to pay – as this is automatically done though smartphone and identification technology.
Accessible stores, easy purchasing and fulfillment processes, immediate product availability, seamless payments and no quibble returns are now just the basics – the minimum standards below which customer loyalty starts to crumble. Why would they want to purchase from a retailer which takes up their time and requires unnecessary effort, when they can get the same products elsewhere, for the same price?
2. Impeccable service
Aren’t we all are increasingly intolerant of bad service? Staff behaviours and responsiveness need to be impeccable. We expect sales assistants to be available to answer our queries and help us in any way, with spread arms and a sincere smile. We are not willing to wait for more than a handful of seconds for a phone to be answered or a webchat assistant to support us online.
But also, we expect personalised interactions and cringe at the need to repeat something twice. In the world of GDPR, when customers share their data, they expect retailers to use it at all touchpoints to provide better and relevant service, rather than just to meet their internal self-centered direct marketing needs.
3. Clear store purpose
Last but not least, it is nowadays paramount to understand why customers are coming into the store.
In a world where most start their journey online, the decision to go into a store is often driven by broader motives and needs – whether they are the desire to see and touch the product, the lack of understanding of what product best meets their requirements, or the preference for testing it or trying it on first. But many stores like Toys R Us and Maplin continue to offer an environment that simply displays boxed products on jam-packed shelves with elusive tags that only show the product name, price and SKU number, rather than the details the customer is actually looking for.
Re-purposing the store around customer needs is probably the most pressing imperative for Retailers. Also for those with strong online capabilities, the store should be the physical and complementary element of the customer journey, seamlessly integrated with the online stages and clearly positioned to offer those personal and immersive experiences customers are looking for.
But also, the store should be re-designed. It needs to become an embodiment of the brand and a destination built around the delivery of a great customer experience. Dusty shelves, untidy aisles and premises that have not seen any TLC in years are no longer where customers want to shop – no matter how many ‘Come in, we are OPEN’ messages you hang at the door.
In summary:
A clear store strategy is now essential to meet customer needs, but also to create clear differentiation and competitive advantage, in a world where many Retailers are still comfortably sitting on their ‘laurel shelves’, waiting for customers to walk in and buy their products.
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