Stress on brick-and-mortar retailers reached its peak in 2017 with the doomsday, “retail apocalypse” narrative. Heavily publicized store closings, dips in big chains’ stock prices and the rise of e-Commerce outlets like Amazon painted a deeply negative picture for retailers. However, data from Fung Global and research by the IHL Group (Debunking The Retail Apocalypse) illuminated an alternative view.
While retail is indeed changing, there is evidence to suggest that businesses, both big and small, can thrive in 2018 and beyond — if they evolve and adapt to these changing times. Driven by one underlying theme — focus on technology investment and spending — retailers that have adapted are not only surviving, but thriving. Here are six key traits we see in the retailers that are doing it right:
- Give customers a better experience: Amazon — particularly with its Prime membership — has made it all the more convenient for people to never leave their couch. So it’s essential that retailers remember “you need to be better than that alternative.” It’s no longer about pure inventory or acting as a de facto warehouse. Instead, retailers that offer a pleasant and helpful in-store experience are thriving — it’s why boutiques are popping up everywhere, and places like Chick-Fil-A are expanding while other major chains stagnate. Their staff and their stores are built for a great experience, not just a display of inventory. These stores not only invite shoppers in with their structure, but welcome them as soon as they enter with great service. They build their brand on pleasant, knowledgeable associates who help customers find what they want and offer a fast, simple checkout experience.
- Always be in-stock: Being out-of-stock is a disaster; if a customer knows what they want and can’t find it at your store, they will leave and order it online. Now you’ve lost a sale, and potentially a customer, forever. To consumers, the Internet is never truly “out of stock” because they have so many different web sites to browse. Take Amazon, for example; it’s not merely a “retailer” but an entire marketplace. Yet modern retailers are frequently off in inventory by as much as 25%, making shopping unpleasant for consumers. New technologies and tools — such as RFID and image recognition — are emerging that allow stores to optimize their inventory and make ordering more efficient across multiple locations. These can be crucial for retailers as they prepare for the future. Not only will they boost sales and optimize inventory, they will also help minimize the work that must be done by associates in these areas (which leads to more associates in the aisle, helping give customers a better experience).
- Emphasize IT spending: Many retailers have a simple method of determining their IT spend, and one they’ve used for years: take last year’s IT spend and up it by 1% to 2%. That method is no longer effective. IT spend is becoming more important with each passing year, and companies that do not begin to allot more strategic and significant spend to their technology will not survive this current moment in retail. Companies don’t have to outspend the biggest players in the retail industry, but they do have to outspend their closest competitors. When you group retailers by growth, there’s a clear trend in IT spending: leading retailers with above-average growth are spending six to seven times as much as the slow-growth retailers in the back of the pack. It’s becoming increasingly clear that technology is crucial in customer experience. Modern tools let you cultivate loyalty, offer rewards, check out in-aisle, reach customers online and more. Retailers that ignore these tools do so at their own risk.
- Go to the cloud: For retailers looking to make a big technological change as quickly as possible, the cloud is maybe the most transformative single step you can take. It won’t take much time, but it can alter the way you do business. A hybrid cloud approach is the best choice for most retailers because it can give a single view of inventory as well as customer data across all channels. As a percentage of software spending, the cloud is skyrocketing among retailers: 31% of all software spending in retail 2018 will be on cloud solutions. If you haven’t yet made the jump, don’t wait; otherwise, your competitors will have vast advantages in inventory, reporting, insight and more.
- Embrace mobility: There is simply no denying we live in the age of mobility, and that a lot has changed since the introduction of the iPhone a decade ago. At this point in time, every customer lives a mobile lifestyle — and they want their retailers to be doing the same. Retailers that have embraced mobile POS have seen significantly higher growth in sales, according to IHL research. Take a look at the biggest players in the retail space, and you’ll see that they’ve adopted mobile devices and mobile POS systems at a rate far above the average retailer: leaders in retail growth are 250% more likely to be using mobile devices for associates, and 150% more likely to use mobile POS to complete the transaction. When you use mobile, you’re freeing up associates who can help customers in the aisle find items, suggest more items they may be interested in and check out quickly. These are some of the many reasons the leaders in retail have overwhelmingly adopted mobile devices and mobile POS.
- Follow the leaders: If you’re trying to be the best, you must emulate the best. Per the Debunking The Retail Apocalypse report, here are some significant stats about retail leaders regarding their spending and priorities:
○ Leaders consider IT transformation a 135% higher priority
○ They consider lowering supply chain costs a 145% higher priority
○ They rate associate training and tools a 194% higher priority
○ They rate inventory visibility a 55% higher priority
○ They rate clienteling/assisted selling a 26% higher priority
While 2017 was a unique year for retail, the idea that there is a “retail apocalypse” is deeply misleading. Retailers that adapt by focusing on technology that can do everything from simplify checkout to right-size inventory will thrive as the industry moves into the future.
Henry Helgeson is the President of Cayan, a provider of payment technologies and merchant services. He is involved in numerous industry associations and is an active member of the Electronic Transactions Association’s (ETA) Mobile Payments Committee and has spoken at numerous events and conferences including ETA, Money2020, RSPA Retail Now, SXSW and PYMNTS.com.
Greg Buzek is the Founder and President of IHL Group. Noted by RIS News as one of the “25 Most Influential People in Retail” and the National Retail Federation in 2015 as one of “The List of People Shaping Retail’s Future,” he has a Masters Degree in Business Administration (MBA) from The Ohio State University, and 25 years of experience in retail market analysis, business planning, product development and consulting with Fortune 500 companies.