Retailers are struggling to make a profit. News articles in the last few months have highlighted stories about Macy’s, Bed Bath & Beyond and the Gap and the difficulties those individual stores are experiencing. Even at Nordstrom, where customer service is king, has soft sales and their stock is down 42 percent from a year ago.
Why are retailers struggling? Here are ten reasons:
- The Switching Economy: According to Accenture, one of the largest consulting firms in the world, the “Switching Economy” has increased 26 percent since 2010. Customers are becoming less and less loyal.
- Competition has never been greater: Third party sellers such as Amazon, Walmart, Wayfair make it easy to find the same item for less money. Start-up companies such as Uber didn’t even exist prior to 2009 and are now worth over $50 Billion. Consumers are connected to their mobile devices and at any point in time, a competitor can entice your customer with a promotion offer even at the point of purchase.
- Brick & Mortar and E-commerce work in silos: Retailers were shortsighted when developing their on-line businesses. The physical store and e-commerce each have their own organizations and rarely interact with one another. A customer could have been a loyal brick & mortar customer for ten years, but online, the same customer is a newbie with no history.
- Consumers are encouraged to shop on-line: For some reason retailers think it will be more profitable for customers to vacate the store, go home and shop online. However, the Internet allows competitors to advertise a similar product perhaps at a lower price point. The customer is drawn away from your company’s products to whatever is available for less money. Products become commodities and personalization is lost.
- Even Luxury brands are no longer immune: Although most luxury brands keep tight control over their distribution channels, many products still appear on third party sites like Amazon. Luxury brands are experiencing less traffic and in many cases higher rents – a worrisome combination.
- Budgets can no longer be reduced: Since the economic downturn in 2008, corporate America has been managing to squeeze profits by reducing budgets, stretching staff thin and adding technology to replace human labor. Retailers like Macy’s are now considering selling their brick & mortar stores they have owned for decades and leasing them back. I’m not sure if that’s the best long-range plan.
- Technology is used as a panacea: Companies are developing systems to eliminate the human interaction at lightning speed and are eager to allocate large budget dollars for technology. However, if technology is not coupled with an enhanced, more complete and satisfying customer experience, the dollars spent might as well be thrown out the window. If technology doesn’t create a better customer experience, it will be doomed from the first day of implementation.
- Knowledgeable associates are rarely valued: Products and services have become more complex, while experienced sales associates are far and few between. Too many companies eliminate seasoned staff with a history of building strong customer relations with inexperienced help who only see the customer transaction as a one time event; in other words, one and done.
- Millennials trust people more than brands: Before Millennials make any purchase they read reviews on social media. They trust their friends and even strangers more than corporate messages. For Millennials especially, companies must ensure that quality is integrated into their products as well as service delivery. They also want to do business with companies who have totally integrated social responsibility into their corporate mission and messaging.
- The customer experience is viewed as a date: Most companies view the customer experience as one date or a single transaction at a time. Now that the customer can communicate in an Omni-channel world filled with transactions via social media, apps, online, call center and the physical store, it has become more difficult to build a unified relationship. The ideal customer experience should be more like a romance with the “dates” connected and supported with a human and emotional component.
The solution to the problem of why retailers are struggling is not simple. Customers are not as loyal because competition is greater and retailers have failed to design online shopping in a way that will continue to enhance the brand and build a personal relationship. When companies turn their product into a commodity, it’s very difficult to keep customers loyal. Loyalty is created by a person-to-person relationship. Retailers need to rethink how they do business.
When I was growing up, my dad owned a retail store and he recognized every customer by name. He knew their families, preferences and would even try to learn something unique about the customer that he could recall on the next visit. One easy step to create loyalty is for retailers to learn their customers’ names whether the customer is shopping in the store, online or through an app.
Consumers do not want to spend their dollars in an anonymous environment. I can guarantee you that my dad would have designed his online site with the photos of each of his sales people prominently displayed. He would have given his customers the choice to either self-serve or communicate with a sales associate via telephone, chat or email to continue the human-to-human touch. He would have understood that online sites should function as a remote store and not an emotionless machine.
Is it too late for retailers to regroup and put the word “relationship” back into this new Omni-Channel world? Of course not! Time is of the essence for retailers to regroup and turn around to embrace the customer and create a long lasting romance.
Why do you think retailers are struggling?