Monthly Archives: March 2017

Redesign Shopping from Scratch

The first part of any such strategy is facing reality. Retailing executives must acknowledge that the new technologies will get faster, cheaper, and more versatile. They need to forecast the likely digital density in their categories and prepare for the effects. What should I do differently today if I believe that 20% of our sales will soon come from digital retailing—and that 80% of our sales will be heavily influenced by it? Should we be opening any new stores at all? And if so, how different should they be? How should we adjust to a world of greater price transparency? What happens when traffic-building categories shift online and no longer pull customers into our stores?

Situations like these call for start-from-scratch, across-the-board innovation. In the book Idealized Design: How to Dissolve Tomorrow’s Crisis…Today, coauthor Russell L. Ackoff recounts a similar turning point at Bell Labs in 1951. The vice president in charge of the labs asked a group to name the organization’s most important contributions to telephonic communications. The VP pointed out that each one, including the telephone dial and the coaxial cable, had been conceived and implemented before 1900. He challenged the group to assume that the phone system was dead and had to be rebuilt from scratch. What would it look like? How would it work? Soon Bell’s scientists and engineers were busy investigating completely new technologies—and came up with concepts for push-button phones, call waiting, call forwarding, voicemail, conference calls, and mobile phones. Retailers need the same start-over mentality.

 The design specifications of omnichannel retailing are growing clearer by the day. Customers want everything. They want the advantages of digital, such as broad selection, rich product information, and customer reviews and tips. They want the advantages of physical stores, such as personal service, the ability to touch products, and shopping as an event and an experience. (Online merchants take note.) Different customer segments will value parts of the shopping experience differently, but all are likely to want perfect integration of the digital and the physical.

The challenge for a retailer is to create innovations that bring the vision to life, wowing those customers and generating profitable growth. Let’s see what this might mean in practice.

The experience of shopping

Traditional retailers have suffered more than they probably realize at the hands of Amazon and other online companies. As volume trickles from the stores and sales per square foot decline, the response of most retailers is almost automatic: Cut labor, reduce costs, and sacrifice service. But that only exacerbates the problem. With even less service to differentiate the stores, customers focus increasingly on price and convenience, which strengthens the advantages of online retailers.

If traditional retailers hope to survive, they have to turn the one big feature that internet retailers lack—stores—from a liability into an asset. Stores will continue to exist in any foreseeable future—and they can be an effective competitive weapon. Research shows that physical stores boost online purchases: One European retailer, for instance, reports that it captures nearly 5% of online sales in areas near its physical stores, but only 3% outside those areas. Online and offline experiences can be complementary.

The traditional store, however, won’t be sufficient. For too many people, shopping in a store is simply a chore to be endured: If they can find ways to avoid it, they will. But what if visiting a store were exciting, entertaining, emotionally engaging? What if it were as much fun as going to the movies or going out to dinner—and what if you could get the kind of experience with products that is simply unavailable online?

This is hardly beyond the realm of possibility. Jordan’s Furniture, a New England chain, achieves some of the highest furniture sales productivity in the country by using themed “streets” within its stores, a Mardi Gras show, an IMAX 3-D theater, a laser light show, food courts, a city constructed of jellybeans, a motion-simulation ride, a water show, a trapeze school, and special charity events. Cabela’s and Bass Pro Shops not only have some of the highest-­rated websites; they also have some of the most engaging physical stores. These kinds of store experiences are expensive to create. Might digital technology improve the customer experience in stores more cost-effectively?

In fact, it is already doing so. Digital technology can replace lifeless storefront windows with vibrant interactive screens that change with the weather or time of day and are capable of generating recommendations or taking orders when the store is closed. It can allow customers to design products or assemble outfits and display their creations in high-visibility locations like Times Square. It can create engaging games that attract customers, encourage them to stay longer, and reward them for cocreating innovative ideas.

Digital technology—in the form of tablets, for example—can also give sales associates nearly infinite information about customers, describing the way they like to be treated and creating precise models of their homes or body types that enable perfect choices. It can change pricing and promotions accurately and instantaneously. It can provide customized recommendations. Virtual mirrors accelerate and enliven the dressing room experience by connecting customers with trusted friends. Technology can eliminate checkout lines, capture transaction receipts, file rebate claims, and speed returns. It can give a call center operator full access to a customer’s purchase and complaint history.

My objective here is not to enumerate every possible innovation. Rather, it’s to illustrate how the opportunities for digital technology in stores, mobile devices, call centers, and other channels are just as abundant and viable as they are for websites. Moreover—and this is key—retailers in many categories can link these channels and technologies to create an omnichannel experience with stores that is superior to a purely digital retail strategy.

One task is to apply these innovations early enough, frequently enough, and broadly enough to change customer perceptions and behaviors. Adopting successful innovations three years after competitors do is unlikely to generate much buzz or traffic. Of course, many digital innovations will fail, and the effects of others will be hard to quantify. So a second task is to upgrade testing and learning skills to 21st-century levels. It was hard enough to gauge the effects of pricing changes, store-format upgrades, or newspaper versus TV ads in the old world. (Remember John Wanamaker’s famous lament that he knew he was wasting half his advertising budget but didn’t know which half?) An omnichannel world makes those test-and-learn challenges look like child’s play. Retailers must now try to assess the effects of paid search, natural search, e-circulars, digital displays, e-mail campaigns, and other new techniques and third-party innovations such as SCVNGR, a location-based social network game—and must gauge those effects on both physical and digital channels (which include mobile apps as well as the internet).

Leading-edge companies such as PetSmart and the UK pharmacy chain Boots have begun applying science to this task: They are testing digital and physical innovations with clinical-trial-style methodology, using sophisticated software to create control groups and eliminate random variation and other noise. All this is costly, but it’s hard to see how retailers can avoid doing more of it.

Highland Park coffee shop

The Ravinia Coffee Station has introduced a new Sunday morning perk to the neighborhood: live music.

Weather permitting, it’s a scene out of the classic Creedence Clearwater song. Down on the corner and out on the sidewalk, owner Josh Weisbart and a recurring line-up of musicians play acoustic music to lift the spirits of customers and passersby. “It’s wonderful to find live music just happening,” said Laura Davis Sherman of Highland Park. “It’s a really great pause in the week.”

The Ravinia Coffee Station, 723 St. John’s Ave. in Highland Park, opened last November. Weisbart, who plays guitar and mandolin, bills himself as “a casual musician.” Taking his cue from the summer-long Ravinia Festival, Weisbart said he “always intended for music to be part of the big picture” of the to-go coffee shop located on the corner of St. Johns and Roger Williams avenues. “Music has the ability to bring people together,” he said.

On this Sunday morning, a larger crowd than usual gravitated toward the coffee shop in response to a Facebook post by Marcus Newman, a mandolin player and longtime Weisbart friend, who wanted to use this particular gathering as a platform to raise awareness for three Israeli students who were recently kidnapped. The teens, tragically, were found dead the next day in the West Bank.

Accompanying Newman were fellow Deerfield resident Dr. Gary Schaffel on bass and Andy Dennen from Gurnee on guitar. Together, they comprise Soul Zimra, a Jewish worship ensemble that had been performing mainly at B’nai Jehoshua Beth Elohim in Deerfield, where Newman is a member. Recently they have been branching out to other area festivals and more secular settings such as the Midtown Athletic Club.

The Sunday morning jam sessions last from 7 a.m. to 10 a.m., not typically musician’s hours. “Why does music only have to be at night,” Newman laughed.

Weisbart does not only get a little help from his friends. He has also encouraged young musicians to join in. This day’s ensemble included 16-year-old twin brothers Zach and Sam Powers, Highland Park High School students. Zach played the melodica, a combination of keyboard and harmonica, and Sam played mandolin.

The music, “appropriate for Sunday morning in the neighborhood,” Weisbart said, includes folk music and bluegrass. Selections range from a sing-along of Simon and Garfunkle’s “Homeward Bound” to a Mumford & Sons hit.

Music and coffee shops are a good brew, Weisbart observed. Both, he said, are very social. “Music is a great way to start the day. It really gets me in a good mood.”

The good vibes are contagious. “Eight of us came out here two weeks ago,” said onlooker Andrew Bloom of Highland Park. “We were watching the bike riders go by. They were smiling because they heard the music. Cars would roll down their windows and you just saw smiles. It’s such positive energy.”

Online shopping cart

Retailers are trying to combat such massive lost opportunity with emails – offering targeted marketing messages reminding customers that they left merchandise unpurchased. Some send one email, some send multiple. Some wait a few days, some send a note immediately. Some offer discount codes to lure shoppers back to their carts. And therein lies an opportunity for wafflers.

“Consumers are definitely wising up to the fact that retailers are doing this,” says Carrie Gouldin, Web community manager at Thinkgeek.com.

She set up a system at her company, which sells geek chic merchandise such as the iCade (an iPad arcade cabinet), to send out one email reminder to customers who have opted in to email communications. The current offer is $10 off $50.

In the online retail space, abandonment rates of shopping carts hover around 65 percent, according to an analysis by Baymard Institute of 14 recent studies. While that seems like a really huge number, it’s a smaller figure that’s more startling – a recent study by Listrak shows that only 14.6 percent of the top 1,000 retailers are doing anything about customer flight.

Presumably, shoppers could abandon their carts intentionally, hoping for a discount email to follow shortly. The question Gouldin and her colleagues ask is: “Do we want to train customer to have this behavior or not?”

Thinkgeek’s answer is decidedly yes.

Gouldin says that double the people open their abandoned cart emails than their regular newsletters and Thinkgeek get 10 times the revenue per customer.

“And the trade-off of offering a discount is worth it to us,” Gouldin says.

Email marketer Listrak, which did the study on the top 1,000 retailers’ responses to cart abandonment, says that other retailers who have tried campaigns also have had positive results. Listrak expects the number of retailers who follow up with consumers to grow exponentially, starting with the top retailers and then moving down the chain (see http://link.reuters.com/hux58s).

“The top retailers are all doing it,” says Megan Ouellet, director of marketing for Listrak, citing retailers such as Land’s End, Best Buy, Home Depot and Zappos.

“It’s the mid-market retailers that aren’t as progressive. Sometimes it’s a resource issue.”

There is no service yet tracking discounts for abandoned carts. The closest thing is an online gallery that Listrak put together of 20 top campaigns, but since offers change so often, it’s not reliable for consumers.

Trial and error might work, however. Shopping expert Julia Scott, who runs the blog Bargainbabe.com, has had email pop into her in-box after she has abandoned carts, but not many discounts.

“I know a lot of retailers don’t do this,” Scott says. “They will email me and say hey, you left some stuff in your cart, but they don’t offer anything, which is a lost opportunity. Even a small coupon or free shipping would tip me over the edge.”

The staff at dealnews.com, which aggregates shopping offers, see an increasing number of offers appearing in their in-boxes. Since the team tests 300 or so offers daily – all the way to the last stage of purchase – they abandon carts all day long.

“I’ve noticed recently that more stores have begun emailing me about an abandoned’ shopping cart, although usually to just ask if I had “trouble checking out,” says dealnews features director Lindsay Sakraida. “The more clever retailers will offer enticement in their email, to make you reconsider the purchase.”

Lest consumers try to game the system too much, some companies have built-in restrictions. Thinkgeek, for example, generates a unique code for each email that can only be used once. Other companies, says Listrak, track consumers who have received discounts before and do not send them any more offers. And others simply change their offers so often that it’s impossible for the consumer to predict what they’ll get.

Despite the risk of proliferating coupon codes, expect more retailers to jump into the fray simply because it works. For browsers looking at clothing and other impulse items, Sakraida thinks a discount could make all the difference.