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Supercenters and ecommerce jungles appear to be taking over. Observers talk of an “apocalypse” as news of store closures fills the business pages. Tech visionaries talk about the end of a business model. Who would want to own a specialized store with a physical presence in the digital age?
Despite the pessimism, I’d like to present a more optimistic vision of retail’s future, both offline and online. I don’t think it’ll be all supercenters and online marketplaces.
First, a confession. I love small, specialty stores. I know I’m paying a little more in some cases. I’ve tried the alternatives, big-box stores, supercenters, and ecommerce jungles. They’re alright. I can tolerate it for cheap commodity items. The experience disappoints, however, for items that require a personal touch.
Lucky for fans like me, personal touch in retail has a bright future. This is because of the internet and new technologies, not in spite of them. What’s more, retail giants are incapable of providing it.
As we gear up for Black Friday, I took a closer look at the trends in retail with an eye towards what makes small- to medium-sized retail successful. In short, how can the little guy compete with the giants and keep that special character and soul?
Though I’ll often use retail giants as examples, please don’t think I mean them any disrespect. It’s easy to criticize their business practices and the system that makes them possible. But the aggressive pursuit of low prices has struck a chord with billions of shoppers looking to save a buck. That success demands our respect. However, that doesn’t mean you should imitate everything retail giants do.
The question then is: How can small- and mid-size retailers better find a niche and more customers along the way?
Before we get into the details, we need to discuss a couple dominant narratives around retail.
The retail apocalypse is not coming
Retail is changing. Fast. I don’t want to minimize the pain that change is causing retailers who are closing stores, or closing shop altogether. That’s hard on employees, business owners and communities. Take a look at the numbers, though, and you’ll see that retail is growing. This growth is not only because of the Walmarts and Amazons of the world.
US retail sales grew by about $190b from 2016 to 2017. In the same period, Amazon’s worldwide retail sales grew by $42b and Walmart’s by $7b. Most of that revenue was in the US for both, so we’ll make a rough calculation and say that leaves over $140b of growth for others.
The recession, and an excess of retail space, took their toll on the sector in the US. Growth has been solid for years in the UK and Germany.
Some argue this growth is largely due to an expansion of discount stores like TJ Maxx or Dollar General. There is data to support this, but that also misses the point. Competition is getting even more intense around selling at the lowest price. Such low-margin businesses are hard to sustain and sensitive to price. When you’re competing with Amazon or AliExpress, this isn’t a sector I’d bet on long term.
The main point is that consumers are spending more every year. It’s important to compete for those consumer dollars in the most effective way possible. A race to the bottom on price is a race that smaller retail operations will probably lose.
Ecommerce isn’t killing offline retail
Formerly “pure-play” ecommerce shops are now often opening some kind of physical location. Most of these new locations look like traditional retail stores and put a huge premium on experience. These examples go from smaller upstarts, like men’s sportswear maker Rhone and luggage designer Away, to more well-known cases like Apple.
There’s also the fact that online-only retailers haven’t scaled well. Retail analyst Steve Dennis has written for years about the scaling problems of outfits like Wayfair and Stitch Fix.
Ecommerce startups are investing in brick-and-mortar retail for good reason. It’s helping them grow.
This doesn’t mean that online-only retailers are an endangered species. Many will probably work just fine. It does mean that this isn’t about online versus offline. Other factors are more important.
Online isn’t a separate place
Offline is the new online. Or is it the other way around? It’s hard to tell the two apart these days. Grandmas are shopping with mobile apps for their Gen Z grandchildren. Those grandkids are quitting Facebook to hang out in the malls where they buy the shoes that their favorite influencer is advertising on Instagram.
Online and offline are melding together, because online isn’t a separate place anymore. If almost everything now has an online component, it’s not a question of category. It’s a question of what you do online and how much of it.
Better experiences for better sales
I was recently on vacation in Vilnius, Lithuania. I wandered into a little shop with linen bags, towels, and dolls. A linen heaven. I saw a bag hanging with a bread symbol on it – a bread bag. I could use a bread bag. I have a friend that could use a bread bag. I bought two. Then the sales woman showed me a few other items they had and handed me a card with a discount code and a link to their Etsy store.
The linen bags are great – attractive and durable. I’ll probably go to their Etsy store, which ships worldwide, and snap up more linen goodies.
It works the other way around as well. There is a shoe brand I love. They’re a small manufacturer based in the UK. I buy them online and have been wearing them for years. Recently, I was in London where they have a flagship store. The store was small but perfectly on brand. I chatted with the sales staff about the shoes, which I liked and which I didn’t. They chatted with me and gave me a few new models to look at and think about. I didn’t buy a thing, but my connection with the brand was more solid than ever.
Online to offline or offline to online, these are human connections. I like to know that employees care about me and the products they’re selling.
This isn’t true of all products. I don’t want advice about what toilet paper to buy. Expert knowledge about softness or number of sheets will not inspire my loyalty. Customer service and experience are not key parts of this transaction. I want inexpensive and good enough.
This is part of a bigger trend. Supercenters and buy-everything ecommerce marketplaces are on their way up. Huge companies, and the investors behind them, are trying to remove every inch of friction so that they can ship you everything faster and for less. Consumers clearly want such services. From Amazon to Walmart to AliExpress, companies of this kind are growing fast all over the world.
There is a flip side to this coin. Smaller shops are offering more interesting experiences, offline and online. Increasingly, that’s the best way to compete with low price sellers of all kinds.
Experiences in success
Based on the chart above, you wouldn’t expect an independent bookseller to be thriving. But New York City’s Strand Bookstore is doing just that. The interior is claustrophobic. The aisles are narrow and filled with books. I’m a book lover, and my immediate impression is that they know what they’re selling. I combed through endless aisles of used and new books and never once thought, “This book isn’t worth the shelf space.” They also sell online.
Strand seems not to have noticed the rise of Amazon. They’ve continued to grow their presence in NYC. It helps that they’re in a big city with hordes of tourists, but another example of indie bookstore success, Square Books in Oxford, Mississippi, is hours from any cities or tourist destinations. Square Books just opened a fourth location.
From prose and poetry, we go to tents and tall mountains. MEC is a retail co-op in Canada. Despite starting before the internet existed, the outdoor gear seller has kept up with the times. CEO David Labistour said in 2016, “Our change is driven not by trying to outrun the competition, but by trying to stay up with the consumer.” It turns out that these are more than just words, as MEC regularly ranks as the best brand in Canada according to consumers.
MEC has managed consistent growth despite disruption from wealthy foreign competitors with more advanced technology. Visiting their website, it’s easy to see why. They have a simple message of getting outside and staying active. Their policies are clear, and it’s easy to get in touch with them by chat or telephone.
MEC is far from the New York City literary scene, but the fundamentals look the same. They know what they’re talking about. They have a consistent and focused message. They treat their customers well.
Both books and outdoor gear could be simple commodities to be sold online at the lowest price from some automated factory. Both product categories are also fertile ground for creating customer experiences that bring people back for more.
The giants test out exceptional customer experience
If customer experience is so great, won’t the giants just spend loads of money and beat everyone on experience too?
No. They’ve tried. They’re trying. It’s not working.
Maybe impersonal experiences are just baked into their culture. Maybe they just don’t have the same vision of customer experience.
The latest iteration of Amazon books, the physical bookstores Amazon has opened all over the US, illustrates this point well. They only stock top sellers and highly rated items. They don’t carry used books. Food and drink aren’t allowed. Events are rare. It’s not the kind of place you’re going to sit and chill with a cappuccino and a book. Cozy factor dialed down to zero. Convenience, automation, and discounts turned up to 11. It’s about as far from Strand Bookstore as you can get.
Walmart’s website is another good example. The gift guide looks good, and it’s just in time for holiday shopping. Select “For Him” and the first four items are a Roomba, an outdoor basketball hoop, a Braun men’s electric shaver, and some speakers. Select “For Her” and the first four items are a Roomba, an outdoor basketball hoop, a Gillette Venus branded shaving and skin care set, and some speakers. Oh and those shaving sets are both sponsored posts.
Don’t even get me started on the maze you have to go through to get live support from Amazon or AliExpress.
Online or offline, these retail giants are not optimizing for experience. They spend all their time and effort optimizing for price. Sometimes, that’s exactly what we want, and we’re willing to accept the flaws in customer experience. Other times, we want that human touch, and we’ll pay a couple extra dollars to get it.
Build it and they will experience (buying bliss)
Building this kind of experience depends on who your customer is and what they want from you. Despite that caveat, there are certain elements that successful retailers have in common. Luckily, new technology makes the process implementing these changes easier and cheaper than you might think.
Managing the small stuff better to spend more time with people
There are a million affordable services that can help you with building a website, managing shipping and inventory, automating emails, and so on. They’re also more accessible than ever. Most let you avoid coding and confusing technical details.
LiveChat makes it easier to connect with customers through chat on your site and on other platforms through integrations. ChatBot gives you the tools to build smart AI helpers that react to user input. Though I encourage you to add only chatbots that enhance customer experience and provide quick answers to common questions. Avoid the kind that frustrates users by keeping them from talking with real humans.
Whichever tools you choose, spend enough time to get the most out of them. New technology is better than ever at automating repetitive and unwanted tasks so you can focus on creating better experiences for customers.
Technology like this doesn’t have to be cold and impersonal. Used with empathy and the right set of goals, it will make both your employees and customers happier.
Quick and effective follow-up to customer questions
Speed is important here, but that doesn’t mean you have to always respond within seconds. Smaller stores will find that too hard to manage. A good system and clear priorities are more important.
For example, HelpDesk keeps customer support tickets organized and easy to work with. This makes responding within a working day reasonable. Employees can respond during slow hours, or a dedicated team can work through tickets. Either way, no one has to search around for emails or the problem history.
Consistent communication and style
Customers should recognize you from the design elements, messaging, and communication style you use. None of it needs to be complex or sophisticated. In fact, it should be as simple as possible. It also has to be consistent with your store’s identity and make immediate sense to your target customers.
Don’t rely only on marketplaces and social networks. Use them to get the word out, but link back to your own site wherever possible.
This point might sound the simplest, but it often takes the most work. There is no technological quick fix for this. To pull this off, you need employees that work well together and also understand what you do and why. Then your team needs to spend a lot of time coordinating the details and executing a single strategy.
Hire enthusiasts, guides, and experts
If you get the first three done, you’ll have a clear voice and style and time to show customers what you’re all about. So what do customers need?
McKinsey & Company reported that the most often cited consumer worry was: “Don’t know what to buy.”
Customers need advice. They don’t need the kind of always-be-closing sales advice that was common before the internet. Doug Stephens predicts in his book Reengineering Retail, “Retail associates of the future will be brand ambassadors – enthusiastic super-users of the products that the retailer trades in – who can speak with customers from first-hand experience.” While this might seem like an exaggeration at first glance, give it a second thought.
We don’t trust sales people anymore. Why would we? We’ve probably done most of the research already. We think we know better and we often do. The person we want with us in a store is somebody who shares our interests, and who can have a normal conversation about them.
Your piece of the trillion dollar pie awaits
These changes aren’t quick or easy. They require investment, mostly of time and effort, but of some money too.
The race to the lowest price is over. That is, we know the winners. They are the retail giants with the funding needed to enter the competition. The names of the giants might change, but the nature of the giants won’t. They’ll sacrifice everything to sell at a lower price. In a way, I’m happy that they’ll save me money.
I’m also happy that more and more retailers aren’t going this route. They are those that stepped out of that race and into another: the race for the best customer experience. I’m willing to pay a little extra for it. I’m not alone.
Go join the good race. We’ll see each other at the track.