In this Point-Counter Point, we discuss pricing, online shopping, direct to consumer shipping, and the future of the industry. Part 1 argued that vendors are acting in a shortsighted manner and harming the industry. Part 2 argues thar retailers are falling short and need to take steps to adapt to changing consumer expectations.
Part II: The Retailer
In part one, we discussed recent experiences attempting to purchase shoes and a running jacket from local running shops. In both cases, the purchases eventually were made online, directly from the vendors. We made several arguments making the case that vendors are putting the wheels in motion to kill the industry, but should vendors really shoulder the blame?
In 2013, unit sales within the specialty channel decreased, while overall sales increased due to inflation in the price of most models. It’s clear that some customers are choosing not to come into specialty running stores, others are coming in but not purchasing, and the remainder are continuing to give us their business.
Recall the experience we described in part 1, when we went to a local shop with a specific shoe in mind. The model had just been updated, and the store had a few sizes of the older model in stock at 15% off their original price. As I tried on the new model, and the old model in a ½ size larger, I discovered that the individual helping me did not know what, if anything, had changed with the new model, and he was also not sure of the price. Later, I was surprised to learn that this person was the manager of the store.
When I made my decision, the man helping me closed the shoe box, stood up, and said “these will be waiting for you at the register”. At this point, my wife and in-laws were browsing nearby in the women’s apparel section. After the initial greeting, no one made an attempt to talk to them. At the time, there were two employees talking behind the cash wrap, and two employees, including the one who helped me, with customers. Even though I was the one trying on shoes, my wife is also a runner, and we have a family full of runners. Running gear is nearly a consumable good for us. Every time I go into a store, however, I have to work to spend money on anything other than shoes. In many cases, it’s a simple issue of staffing. Stores often staff to support their footwear fitting process, and sometimes as a result there is no additional staff to help in other departments. However, I’ve increasingly been encountering stores with ample staff in the building; they’re just not on the floor engaging customers, thereby not interacting with customers when they are making a purchase decision. In other cases, there is nothing compelling to buy. Seeing 10 versions of an identical half zip, with 10 different black tights, leads me to believe the store is not thinking through their overall assortment when they place their pre-season orders.
Stores need to rethink their assortment, merchandising, and staffing to meeting their customers’ expectations of service, information, and choice.
We hear from many shops that have identified a problem with showrooming. It is a real thing, but the approach to customers who use their smartphones needs to be rethought. Most in-store customers will leverage their mobile devices before making a purchase, whether they make that purchase online or in a store. Often, they’re not looking for a cheaper price, but are looking for more information. According to comScore research, 80% of smartphone owners use their phone to assist them with shopping for apparel. Additionally, frequent mobile shoppers actually spend more in-store than other customers. Mobile devices are helping customers to make purchase decisions on the store floor. The additional information helps them make those decisions. Why are retailers unable to directly provide this information proactively? While 1 in 3 shoppers will use their phone instead of seeking help from an employee, I hypothesize that this is not due to preference, especially in a specialty environment. If employees are friendly, knowledgeable, and available, they’re an obvious source of information. The new normal in the overall retail landscape, however, seems to be that employees are not available, knowledgeable, or friendly. Hitting one of those three is an above-par experience in the mind of many shoppers.
In most cases, current product is the same price online. Flaunt this, and proactively educate customers that your price is the same as “the Amazon” price. For older product, either play the game, or don’t. There is ample opportunity to offer lower price points through closeouts. This can be leveraged to offer a high-value product at a lower price point to your customer while still maintaining margin rates. If you're not hearing about closeouts, bug your rep to get the information. By pulling this product into our channel, we reduce the need for committed vendors to dump product in other channels, we provide value to our customers, and we still have the opportunity to generate margin dollars.
The changes we are experiencing are not limited to the run specialty channel. In 1992, department stores captured $9 of every $100 spent by consumers. Today, they capture $3. Department stores blame online shopping for the drop, but I place at least as much blame on the stores themselves, as they have failed to adapt to the expectations of customers. To return an item at Macy’s requires a 10 minute wait in line after a store-wide search for a cash register with an employee. Good luck if you actually need help with something or have a question. Most mass retailers have stopped investing in service in an effort to lower costs, and they will grow less relevant because of it. It is a much less painful experience to browse and purchase online than deal with the typical retail experience. In response, specialty retailers must double-down on their service model and provide an experience that is truly differentiated from any existing retail channel.
Retailers must stop leaning on ecommerce, Amazon, and omni-channel as an excuse for slowing growth, flat sales, or declines. They need to take advantage of the opportunities that now exist. Their customers start off more informed, but are hungrier than ever for even more information. The majority of online carts are abandoned. It is likely that every single customer in your store has abandoned a running related item while browsing online. If that item is in your store, you have the ability to move them to make a purchase decision in your store instead of the next time they’re online. Increasingly, those purchase decisions are driven by the suggestions and experiences of others. As centers of the local running communities, you have the ability to present authentic suggestions and experiences, bringing new products and ideas to your customers, from you customers.
The back-end of the business is equally important to the customer facing aspect. With enhanced technology in the hands of retailers and vendors, we are able to forecast and plan better than ever. As we compete for each incremental margin dollar and customer, we need to also continue to invest in more sophisticated planning and forecasting tools and processes. This allows for more thoughtful and accurate futures orders to be placed, fewer and smaller in season revisions, and faster identification of trends (both positive and negative). Given the size of most of our businesses, resources don't exist for specific category management or forecasting and planning functions, but with the resources available from vendors and technology partners, there should be continuous improvement in order accuracy. On the human side of this, it also means looking at in-season corrections in an objective and data-driven way. This may mean having fewer models on your futures orders, but fewer in season corrections, resulting in more appropriate and consistent inventory levels across your assortment.
To be successful, the industry must think outside of the standard retail service model and provide a compelling and unique experience to the customer, viewing them as a runner, not just a pair of feet. If the customer is viewed as more than a pair of feet they will stop viewing you as a shoe store. Go where they are, speak their language, and lead them to solutions that they would not have found otherwise. The value of product on their rest of their body likely greatly exceeds their shoes, and it’s likely they never thought to buy any of it from you. You probably never asked.