Photo: ShopRite, Succasunna, NJ
Are retailers overlooking their communities?
A study from University of Alabama at Birmingham’s Collat School of Business finds community involvement by stores can help make customers less price-sensitive and less likely to patronize other retailers. While not a new strategy, researchers believe it is one too many retailers overlook.
Results from a survey of more than 1,700 consumers show that, as retailers’ community engagement increases, the importance of having a lower price decreases. Community engagement was also found to directly build consumer trust in, and commitment to, the retailer. As customers become invested in the retailer through such engagement, they tend to draw in additional customers through word-of-mouth.
The authors contend that local retailers, in particular, can use community involvement to offset the economic advantages that larger competitors have, such as greater buying leverage due to higher volume. Being able to offer same-day delivery is a newer challenge that many local stores face against larger rivals.
The study asserts that local merchants may not feel an immediate impact from community engagement efforts, but will realize benefits long-term as they develop stronger customer relationships.
The study pointed to a few “relatively low-cost” ways to drive consumer engagement:
- Donations to civic groups
- Fundraisers
- Employee volunteerism
- Scholarship grants
- Sponsorship of community events
- Partnerships with other local retailers
Other studies have also shown that brands can benefit from their values and beliefs:
- Nearly eight-in-10 (79 percent) Americans say they are more loyal to purpose-driven brands than traditional brands, and nearly three-quarters (73 percent) are more willing to defend them, according to the “2018 Cone/Porter Novelli Purpose Study.”
- Roughly half of Millennials (52 percent) and Gen Xers (48 percent) want retailers to align with their values, according to Euclid’s report, “Evolution of Retail: The Brand Perception Effect.” Only 35 percent of Boomers said that was important.
- Study says community involvement may entice consumers to shop in-store – University of Alabama
- Study Co-Authored By Associate Professor Ozge Sahin Looks At Conditions For Overspending – Cone Communications
- Survey Reveals Younger Generations Increasingly Demand Alignment of Brands’ Values with Their Own – Euclid/Globe Newswire
Discussion Questions
DISCUSSION QUESTIONS: What is holding back local stores from investing in community engagement? What are some dependable versus overdone community engagement strategies?
Poll
BrainTrust
Lee Kent
Principal, Your Retail Authority, LLC
Georganne Bender
Principal, KIZER & BENDER Speaking
As someone who often has to hit up local stores to support my local school and its robotics team, I can attest to two things: one, local stores get hit up ALL THE TIME for donations and participation. So for them I think it’s hard to balance how much they give away and who they support and who they don’t. If they support this local high school but not that one, it can end up not paying off in terms of the benefits cited in the research. Plus a lot of them are mom-and-pop — are you going to go out and support the community, or are you going to have your store open? That’s a tough question to ask. So I sympathize with their challenges.
I think more frustrating, from my POV, is the second trend. The national chains don’t let their local stores participate anymore! This is a big miss. Almost every national chain store in my community says “we support national efforts” and won’t support local communities anymore — no sponsorships of local teams, no donations to support silent auctions or fundraising. Their employees can donate their time for volunteering efforts, or the retailer might do an organized “clean up this ditch,” but the actual connection to the local community is minimal.
In this day of social media — where national paid search terms are getting more and more expensive and yet location-based search terms are still a wide-open field, I don’t understand why both local and national retailers don’t do more to take advantage of this through engagement with the local community. It’s natural SEO and search term domination for the low, low price of a team banner or t-shirt. It’s a real shame that more retailers don’t recognize the opportunity.
And I think the most important thing here is not the money, it’s the people. Great if there’s money donated, but if there’s not a people to people connection there’s a missed opportunity. It’s more powerful through authentic conversations, connections and bonding that those relationships take precedence over price. I’m with Nikki that there’s a wide open field here for both local and national retailers.
Honestly, many local merchants are likely so busy with running their business that community engagement efforts may just not be top of mind. That said, it is a “no-brainer” strategy as there is a real trend for consumers right now to want local, authentic, one-of-a-kind product and engaging the local community is just good business. Where I’ve seen highly successful programs, it’s been around holiday festivals or wine fests in local shopping enclaves – supporting things like 5k/10k races in and around their neighborhoods, and support of local charities.
The only limitations are commitment and creativity. Being community-focused is a definite tie breaker in store choice. Unfortunately, many community-based retailers lack such a commitment. When I asked a food retail CEO if he was community-focused, his reply was that he has been a member of the local country club for 25 years.
In addition to the article’s suggestions there are even more ways to demonstrate a commitment to one’s community. An underutilized asset is the parking lot. One retailer invites the local high school band to practice mid-week in the parking lot, followed by drinks and snacks. Another invites local pet groomers to do their thing in the lot. Both of these are significant tie breakers.
Get the creative juices going. The reward-to-cost ratios are overwhelming.
I love the parking lot ideas! My favorite is Cow Pie Bingo, plenty of indies run it each year. Seriously, Google it!
One of the things I have always loved about Home Depot (by the way, there is a lot to love IMHO) is the discretionary spending they allow their store managers. Of course there are guidelines for that spending but every store has an opportunity to get involved in the community and they are encouraged to do so. Another national brand that comes to my mind is Costco. The store manager of our local Costco is a member of our Rotary Club and they are always making donations and participating in events and fundraisers. This goes a long way in our community not just towards promoting the store but in promoting goodwill. I understand Nikki’s point and the issues associated with smaller brands however larger brands might find some golden rewards and lasting loyalty if they let their local stores jump on this bandwagon. For my 2 cents.
To piggyback off Nikki’s point — local and small businesses do get hit up for donations a lot. Part of this is because those searching for the donations genuinely do want their event/fundraiser to feel like it is part of the community by bringing in nearby and well-known businesses. The other reason is that they are much more accessible — it is very easy to simply walk into a store and either talk directly to the gatekeeper or find out their email address. Not so the case with bigger corporations.
I would recommend that local stores set up best practices like only donating to 503c entities, having off-the-shelf donation packages, asking what type of recognition they will get and, of course ensuring that they agree with the cause to which they are donating in the first place.
Being a good corporate citizen, especially at the local level, can help brands move up the relational access of loyalty framework (the opposite end is transactional) and into the spaces of true and cult loyalty.
What holds local retailers back from community involvement? Time. And even then, there are indie retailers who give theirs generously.
Every independent retailer I know is involved in one way or another with their community. Some partner with local charities to host in-store events, others make it an everyday part of business. And most of these events happen under the radar of surveys and press.
Some indies run solo community events, others, like the retailers in Geneva, Illinois, band together to bring customers to their shopping districts.
These retailers plan monthly community events, gather together to cut grand opening ribbons, decorate their neighborhood for the holidays, hold events, street fairs, sidewalk demos, wine tastings, face painting, live music and even make guest appearances in each other’s stores to cross-promote, all to bring people to Geneva — and to their businesses. It works but it also takes work.
We all know that running a successful store isn’t easy; supporting your community takes time and leadership and commitment. But consumers reward these retailers with their business, and the retailers who host community events know that it’s worth it the effort.
I love the creative approach Aussie burger franchise Grill’d takes to community engagement — each outlet gives customers a bottle cap with purchase that they can drop in one of three community project buckets. Each month the project with the largest number of bottle caps get an allocated amount of funds. It’s relevant to the communities of each outlet and gets the customer involved. It is such a low cost to the business but makes a huge impact.
This is all about building brand value driven by true customer loyalty. This is simple, just not easy. First, ensure that the messaging and promotions you provide resonate in every geography in which you target. In other words, keep it local, even if this is a national campaign.
I think that socially conscious methods of community engagement are wonderful and important; Patagonia among other retailers come first to mind. However, the title question of this post: “Are retailers overlooking their communitities?” hits the nail on the head. With all of this talk about experiential retail, I find few are actually able to articulate how that translates to the shop floor, and community is at the center of experience.
Apple’s new physical retail strategy has been increasingly community-oriented since the advent of their stores in ’01. Here in Chicago, the brand new Michigan Ave. store is hosting educational panels with real talent, they are providing coding classes from business partners in the community, and partnering with municipal organizations on a variety of civic technology and education initiatives. That type of community engagement is aligned with their brand, and ultimately their product.
There are other retailers following suit, but in the wake of Toys “R” Us’s funeral, stimulating community engagement should begin with what customers (even silently) want out of your products , and be anchored around brand values. This doesn’t require any donations or much investment, and therefore is even more executable for smaller local retailers who can create events or partnerships centered around what their community wants out of the local retailer they are already supporting.
One hates to be cynical here, but it seems dubious that, in a nation where big-box stores, specifically Walmart, have put one local business after another out-of-business, “community engagement” is going to offer some great defense against the latest threat (online). Sure not all of these (literal) has-beens were engaged, and those who were may have been better off than those that weren’t, but the sad reality is too many people just applaud the involvement, and then turn those clapping hands to a keyboard and order something. And one can’t entirely blame them: supporting the local cookie sale is nice, but if the price for that is 40% above what would be paid online, it may well be too much of a cost.
This is a critical issue for all retailers, large and small. Of course real community connection breeds loyalty and overcomes issues like pricing and home delivery. It is alarming how few retailers are truly customer and community centric. If this is a real and authentic aspect of the retailer’s DNA, then such connections will be natural and rise above being “too busy running the business” or available “CSR” budgets. While this type of engagement has always been important to long term viability of a particular location, in today’s hyper connected world and with Millennials demanding authenticity, this now becomes a cost of entry. If you don’t authentically connect with your customer and your community, there are easier ways to make money than being a retailer.
Retailers of all types for the most part try to be involved with their communities, but as things get more difficult financially, you must pick your charities wisely. We get more than 200 requests a year for donations, and 90 percent of the folks coming in do not spend one dime in my store and never will. This is the new way today, and unless I support a business with my dollars, I’d never ask for anything, as in my opinion it is wrong to do so.
Walmart gives people a form to fill out, and Aldi gives out nothing, which leaves what few stores are left to carry the burden of the folks who seek out donations. I politely tell them what charities I take care of and wish them well, but it is increasingly difficult to meet the demands, and if things were to improve I could do more but it’s unlikely that this will happen.
I still volunteer my time in the schools talking with kids and doing mock interviews and some job shadowing, and any of us as business people should give our time to community events.
Either way, stay involved and always try to improve your community in ways that help. I wish all of you the best.