What does it take to thrive in an over-stored marketplace?
Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.
In my view, the over-storing of America is perhaps the most immediate and imposing problem facing retailers, especially those who have invested heavily in expanding their physical footprint over recent years. Pressure from Amazon.com and others online further suppresses the productivity and need for new physical stores.
Given this situation, which does not appear to be finding equilibrium any time soon, retailers need a radical change of focus and success metrics aimed at customer growth rather than store growth.
Shopper metrics: Measurements, such as new customers, customer share of wallet, transaction size and repeat transactions, all become worthy of becoming Key Performance Indicators, (KPI’s). These metrics focus upon the shopper, not the store. Further, in this new metric paradigm, customer lifetime value should supersede store related metrics like dollars per square foot, same-store sales and store volumes as the key standards of success.
Easy-access in-store merchandising: Physical stores must match the same level of efficiency shoppers experience online. Items that sell the most must be within easy grasp of the passing shoppers as they shop the store according to their needs. This approach stands in stark contrast to traditional merchandising that places priority on “manipulating” the shopper’s footsteps through the store by placing key categories and items in all corners of the store to insure shoppers must traverse more of the store’s aisles and departments.
Merging online/offline: Stores that survive and thrive will not only view their shoppers holistically across both physical and online touch points, but reflect this approach by offering access to online options to the in-store shopper. Progress is evident in this area among several retail channels, with home delivery, BOPIS and with kiosks enabling shoppers to buy additional items not stocked in the store. Shoppers gain faster access to products, more efficient trips, and a new array of purchase options that do not exist currently.
Smaller and more efficient stores: New stores will be built, but they will be fewer, smaller and smarter, with less inventory and more shopper-friendly layouts. Those stores that are not will likely join the growing list of closures that have dominated retail industry headlines in recent months.
DISCUSSION QUESTIONS: Is traditional expansion through new stores becoming more problematic or even counterproductive for many retailers? What do you think of the adjustments suggested in the article?