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Editor’s Note:
This is the first of two articles. Part II will appear in the May-June issue of SRT.
Given the many bankruptcies and store closures the retail industry encountered during the past year is it any wonder that retailers across the country are somewhat frazzled? In fact by October 25 of last year the US had already broken a retail milestone for number of store closures one not seen since the 2008 financial meltdown. According to FGRT figures 6985 retail stores closed in 2017. To put that number in context it is more than a 200% increase over the number that closed in 2016. (Ed. Note: FGRT is a think tank whose research teams follow emerging retail and technology trends specializing in how retail and technology intersect and in building collaborative communities. As SRT went to press Sayner reported that UBS put the closure number closer to 8000.)
As always there are nearly as many different reasons why as there were closures. Increasing internet shopping is only one of them albeit a legitimate one. Financially troubled chains inventory issues changing consumer tastes sameness of selection weather even politics are among the many reasons contributing to the retail apocalypse. One of the biggest factors however is the fact that this country is simply over-stored.
The good news is retail is actually alive and well. The 2017 holiday season enjoyed nearly a 5% increase in sales including both online and in-store. Retail jobs are not vanishing; in fact they are gaining and the future is bright. New stores are opening and existing stores are expanding. The tax reform bill signed in December 2017 will only help.
Given that preamble allow me to present “The Secrets of Retail Success.”
Secret #1. Simple Is Best.
Retailers are finally learning that having more products won’t necessarily win over customers. We are already overwhelmed with too many choices. Who wants to dig through racks of sameness to find one?
Great Item? Not Many.
Remember the KISS method: Keep it Simple Stupid. In his book Paradox of Choice Larry Schwartz maintains that humans given too many choices will simply not be able to choose. Many experiments have proven this to be true.
Experiment by Professor Sheena Lyengar
One experiment conducted by Professor Sheena Lyengar from Columbia studied a booth in a California gourmet market offering samples of W&S jams. Every few hours the offering was switched from a selection of 24 jams to a group consisting of only 6. On average customers sampled two jams regardless of assortment size. Sixty percent (60%) of the participants were drawn to the larger sampling while 40% stopped by the smaller one. What’s interesting is that 30% of those drawn to the smaller assortment bought – while only 3% exposed to the larger assortment did.
Presence of choice might sound appealing as a theory but in practice more choice is often overwhelming resulting in lower sales. The takeaway: More is not always better!
Application to Business
Keeping things simple applies to your presentations email blasts social media posts and especially your windows. You don’t need to put a sampling of everything you sell in the front window.
Secret #2: Expand Your Categories
Consider a display of items made in your community. The idea is to keep a store’s brand somewhat regional. A regional chain in the Midwest decided to try this concept with no set sales goals.
Ritchie SaynerSecrets for Retail Success Ritchie Sayner KISS (Keep It Simple Stupid) is one key to success.
The stores ended up doing millions in apparel glassware blankets jewelry handbags belts scarves candles and bath products. Granted not every item is right for every store. The point is
Think Outside the Box
If you think outside of the box products are available that have a local connection.
Secret #3: Build Customer Loyalty
This is a hot topic in retail today and it starts by capturing customer information. Case in point: Nearly half of all households in the U.S. are Amazon Prime members. Since sales to Prime customers are nearly twice that of non-Prime shoppers brick-and-mortar stores have become challenged to find ways to keep customers coming in.
One such method offered by Restoration Hardware is the RH Grey Card. For an annual fee of my keyword00 customers get 25% off in every department 10% additional savings on sale merchandise and design services and early access to clearance events.
Loyalty programs also known as frequent buyer programs have become commonplace. To be effective there must be perceived value. The key is the customer knows that by being part of the “program” he is not getting the same offers everyone else does. One note of caution however: Make certain that you understand what your loyalty program is costing you.
Secret #4: Provide Legendary Customer Service
Shoppers are tired of being considered faceless numbers in a crowd. They are willing to pay for a better shopping experience. A recent study showed that over two-thirds of Americans spend 14% more with a company they believe delivers excellent service.
Saks Save Me service allows shoppers to call a dedicated number to resolve fashion emergencies and in some markets even sends a wardrobe van. Some preferred customers are offered rides home in a chauffeured BMW.
A colleague of mine who flies often for business has been shuttled between connecting planes in a Porsche simply because the airline values his business.
Guarantees and no-hassle return policies are an important part of customer service. You don’t have to look further than Zappos to see just how loyal customers can be if a brand thanks to a liberal return policy convinces customers they simply can’t go.
Believe it or not customers who return 50% of what they buy are also the most profitable.
When I see a sign at the register that states “NO Refunds or Exchanges. All Sales Final.” I cringe. Stores with this approach will have a hard time surviving – and most often it is smaller retailers who take this approach. Perhaps one reason why they remain small is small thinking?
Customer returns are a way of life. Online returns account for one third of purchases. And 30-60-day return policies are now the norm. So why make it easier for customers to bring things back?
A recent Journal of Retail study made an unlikely discovery: The longer a store allows customers to return something the less likely they are to actually return it. A far-off deadline becomes more abstract. A closer one becomes more concrete and thus changes your subsequent action. It’s known as The Endowment Effect: The longer you own something the more it begins to feel like it is really yours.
Ritchie Sayner is vice president of business development at RMSA Retail Solutions and author of Retail Revelations: Strategies for Improving Sales Margins and Turnover available from Amazon.
He can be reached at rsayner@rmsa.com. Go to www.facebook.com/RitchieSayner to follow him on Facebook.
Editor’s Note: Secrets 5-9 will appear in the May-June issue.
References
- “Can You Afford Your Frequent Buyer Program?” SRT July/Aug 2017.
- “Is Your Return Policy Hurting Your Business?” SRT May/June 2016.
Additional secrets: Build loyalty – and make customer service legendary.
Summary of Retail Trends and Strategies
The retail industry faced significant challenges in 2017 with a record number of store closures attributed to factors like increased online shopping and an oversaturated market. However the sector remains robust with rising sales and new store openings. Key strategies for success include simplifying product offerings expanding local categories building customer loyalty and providing exceptional customer service.
“Presence of choice might sound appealing as a theory but in practice more choice is often overwhelming resulting in lower sales.”
Real-World Examples of Retail Success Strategies
Here are some real-world examples that illustrate successful retail strategies focusing on simplicity expanding categories and customer loyalty.
- Apple Inc. is renowned for its simplistic product lines offering a limited range of products with a focus on quality and user experience. This approach aligns with the “Keep it Simple Stupid” (KISS) method reducing consumer overwhelm and enhancing decision-making.
- Target’s collaboration with local artisans and designers to create exclusive regionally-inspired product lines is a successful example of expanding categories. This strategy not only diversifies their offerings but also strengthens community ties and attracts local shoppers.
- Starbucks’ Rewards Program exemplifies building customer loyalty by offering personalized rewards and incentives. This program enhances customer retention and increases purchase frequency by providing exclusive offers and a sense of belonging to its members.
