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Reinventing Retail Part 2

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As the global economy has expanded and provided a multitude of options for how, where and when shoppers make purchases, the nature of retail has changed. Retailers must adapt to the competitive landscape, and in turn, update the in-store experience. Smart retailers have taken these shifts in the marketplace as an opportunity to enact new strategies for retail. The shifting economy has impacted not only the way stores sell to customers, but also the inherent structure of retail organizations. Today’s leading retailers are keeping customers happy by creating positive shopping experiences and offering the personalized service shoppers demand.

In the first part of this two-part series, we focused on myths around large retailers and product design. The second part will address the third and fourth myths related to how retailers are addressing the changing nature of business.

Myth #3: “Minimize in-store labor costs.”

In the past, stores viewed labor costs as part of their cost structure; a part that could be minimized to increase profit margin. But as better informed shoppers demand superior in-store experiences, employees have become a valuable investment for retailers.

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One major factor impacting stores is “showrooming,” where brick-and-mortar stores are inadvertently being used as showrooms for products customers intend to purchase online. Cognizant’s 2012 Annual Shopper Study found “showrooming” is the number one risk factor facing retailers today because retailers run the risk of losing in-store purchases to online competitors.

To stay ahead of shopper demands, smart retailers are embracing “showrooming” as an opportunity for customer interaction points, part of an omnichannel customer experience. The shopper study found consumers increasingly desire personalized in-store experiences, the kind they can’t find shopping online. Well-trained, knowledgeable employees are a critical part of that. Retailers should be viewing their employees not just as staffers, but as brand ambassadors.

Considering associates brand ambassadors is just part of the process for retailers. For employees to be qualified to speak on behalf of a brand, proper training is crucial. Traditional training processes should be restructured and involve both in-person and digital learning approaches. For the millennial generation in particular, “gamification” — applying gaming concepts to learning — has been found to be particularly effective for training.

The right training is essential for store associates, whose level of expertise must meet the expectations of the increasingly better informed customer. The relationships associates build with customers can increase future sales, and the metric “return on investment labor” (ROIL) has become a reality for retailers. Well-trained associates can provide customers with genuine engagement, expertise on products, in-store promotions, and loyalty rewards.

Techniques for ensuring customer satisfaction are also enhanced by empowering employees. By allowing employees to use their best judgment in creating a positive experience for the customer, brands can build deep customer loyalty. A leading global luxury hotel chain, for example, gives employees carte blanche to spend as much as $2,000 on a guest, whether addressing a complaint or just providing a guest with perks to enhance the quality of their stay.

In addition to spend, retailers can provide employees with resources to aid in-store sales. Mobile devices like tablets and smartphones can ensure associates have real-time access to information customers need. Employees can also build deeper relationships with customers through the use of dynamically-generated, single-use coupons.

By allowing employees to provide customers with coupons instead of cash, retailers have the option to track coupons back to individual employees. And coupons can be used for a variety of situations, from price matching, to future discounts and credits as a response to customer complaints. These retailer techniques for training and empowering employees gives associates credibility when interacting with customers, and provides them with the tools to assist customers at a higher level.

Myth #4: “Floor space and inventory investment determine product offerings.”

In the old retail model, stores served as spaces where customers could touch and check out products before buying them. But as customer needs have evolved, retail has evolved with them, and stores have become places for customers to buy not just products, but also seek services and solutions.  

Our shopper survey found shoppers’ expectations of stores have shifted. Today’s consumers expect stores to sell answers along with products, and retailers must consequently view themselves as sellers of solutions to customer problems. To meet customer needs, retailers are now creating what is known as the “endless” aisle, offering a one-stop shop for customer needs through strategic partnerships and in-store innovations. Through these alliances, retailers can offer services for which customers would previously need other vendors.

ULTA, the cosmetics superstore, sells beauty products, but also offers salon services. In addition to offering home improvement services, Lowe’s and Home Depot offer subcontracting installation services with the purchase of cabinets. We’re also seeing pet retailers increasingly offer veterinary and grooming services. This combination of products and services adds value for the customer by allowing them to not just buy a product, but solve whatever problem drove them to the store in the first place.

Retail is no longer limited by floor space and inventory; new services demonstrate retailers’ increased understanding of customer needs. Alliances with other vendors to offer additional services make retail organizations more complex, but also allow retailers to stop acting linearly and think more broadly, creating new sales opportunities.

To continue stretching their brands, retailers will need to put processes in place to support partnerships. Similar to the transition to e-Commerce, organizations will have to make additional offerings and services available to remain competitive.


Colleen Coleman is an Associate Vice President of Merchandising within Cognizant Business Consulting’s Retail Practice. She has 25 years of experience in retail information technology and a bachelor’s of science in industrial engineering from Iowa State University. Colleen can be reached at Colleen.Coleman@cognizant.com.

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