“Survival” is the word of the year for department stores. Since the online boom, digital has slowly — but surely — chipped away at the medium’s profits and the perceived value these establishments can offer. Consumers are firmly grounded in the online era of commerce. And while outliers exist, several stores are being forced into a make-or-break moment of viability.
How then can a department store thrive in this familiar, but ever-changing, landscape? Can they follow a model like Saks Fifth Avenue, which now has workout gyms, boot camps and smoothie bars to draw people in? It’s questionable since these offerings vary in scalability. Or maybe they can be more like Walmart, a company flourishing in the digital age? It’s unlikely.
Department stores that follow Walmart’s model for success may quickly find themselves in a worse spot than they started. That’s because the cash on Walmart’s balance sheet allows them to easily acquire companies like Jet.com, invest in global expansion like Flipkart and advance current retail options, like adding Bonobos and ModCloth fashions in store.
In short, Walmart has successfully bridged brick-and-mortar retail through its sheer capacity to spend. In fact, it looks more like a tech
company than a retailer, given its P/E ratio as of the end of November.
Walmart, in essence, is the exception, not the rule. And while department stores of all stripes want to compete like a Walmart, they simply can’t. In the absence of the ability to contend in this way, retailers have pivoted to an “everything but the kitchen sink” strategy.
There have been varying levels of success with this approach. But, the differentiation in this success has typically laddered up to one common attribute: advertising. But not just spending for the sake of profit potential — using data to inform conscientious advertising.
A Case Example
Many years ago at Pep Boys, with DDB as my agency, the hardest part of getting anything done wasn't on the DDB side, it was managing the politics of our internal merchants and buyers. These well-meaning representatives each wanted their products and SKUs promoted in TV advertising.
The same was true in geographic regions. They wanted local TV advertising to hold precedence over the national promotions. The problem was: Data wasn’t as ubiquitous then, so too often the loudest voices got heard, rather than the soundest results.
The takeaway? Data needed to be the decider when it came to advertising.
It’s easier to say “Lead with data,” than it is to execute. That’s because department stores come with hangups: They have boardroom and executive suite members justifiably leery of new methods of doing business. There are legacy systems in place that impair the company’s ability to nimbly update merchandising capabilities. And there is general malaise around advertising, since it’s omnipresent on our TVs, devices and surroundings.
To sum it up: There’s baggage. But in a world where success is measured in quarters, department stores need to move fast to ensure their survival. Here’s three tips on how they can start:
- 1.Expand beyond online thinking
Google and Facebook both spend more advertising dollars on TV than online. As a result, they will each be a Top 50 TV advertiser this holiday season. Digital retailers like these have years of focus and DNA online, and yet still see the massive value in offline ad buys.
In addition, brick-and-mortar retailers struggle to acquire top-tier talent to empower digital ad success. And unless they have separate divisions based in San Francisco, Austin, New York or Seattle, they will continue to find it difficult to recruit digital thought leaders in roles ranging from engineering to design.
- 2.Invest in direct mail and Customer Relationship Management (CRM) emails
Done well, these can be cash cows. CRM email is even more profitable if mapped, sequenced, tested, and tested again. If attention is paid to email from all angles, it can be a CFO’s golden child.
- 3.Advertise on TV specifically
TV isn’t dead. In fact, according to a recent study on 863 cross-media campaigns (TV + Digital), the top 60% of performing campaigns had a TV reach tallied at 70%, while digital reach only amounted to 6% of results.
Despite television’s sluggishness to adopt advanced attribution measurement (i.e. outcome currency versus outdated currency), it is still the 800-pound gorilla that can work. In one of TV’s most ground-breaking yet hardly-known studies, CBS discovered that 70% of TV advertising’s impact comes from creative rather than daypart/network choice. That means the most important piece for consumers is what advertisers put in those precious 15, 30 or 60 seconds.
Taken together, department stores need to lead with data and creative. Performance will show what’s working and what needs to be rethought. An easy way to start is to measure the return on advertising spend (ROAS) for each piece of creative. Here’s just one sample of what that can look like for a one-month span:
If “Creative F” was the preferred TV advertisement of the CEO, this trackable model would show how performance didn’t justify the spend — and how “Creative D” performed 26 times better. The company could then shift dollars to this best option for more profitable TV or radio and rotate out less successful (and profitable) creative.
This is data measurement on a simple — yet digestible — scale. This is something department stores can take up immediately. And it’s a warning shot to those who refuse to change. The call to link creative and data is here. Now it’s up to department stores to answer — or become obsolete.
Mark Hughes is author of Buzzmarketing (Penguin/Portfolio) and CEO of C3 Metrics.