Where have all the shoppers gone?
Rundle Mall 19 December 2011
Rundle Mall 19 December 2011
It’s the week before Xmas and I have just heard on the radio that 50% of people are yet to commence Xmas shopping. On Sunday I visited Rundle Mall, Adelaide’s premier shopping precinct, and didn’t find the Xmas crowds of years past, so this news item rang true to me.
Now, we know that this year is a bit different with 6 full shopping days until Xmas with Xmas eve falling on Saturday. People will be waiting for salaries to be deposited on Wednesday or Thursday and for a lot of people this will also include annual leave payments and Xmas bonuses to buy those sought after gifts.
While retailers expect to be busy this week, most won’t get last year’s actual, let alone target. So why is this...where have all the shoppers gone this Xmas?
Australian Economic Conditions
Australia has one of the more robust economies in the world. We have parity with the USD and trade strongly against the Euro and GBP. Our economy has always been driven by agriculture, but in recent years mining our natural resources has bought wealth to our country. While we are the ‘lucky country’ we maintain this by being one of the most highly taxed populations in the world combined with expensive social welfare.
The underlying economy is very strong; however, like most of the world, we are in austere times. We are educated by the media that times are tough (even though we have had 50 basis points taken off our mortgages in the past 2 months) and that we should save. Banks are reporting the highest saving rate in a generation within Australia. We have a lot of ‘stuff’ so we don’t need more and the Baby Boomers have taken a shower in their Super, so they are spending either.
However, some retailers are doing well. Travel, both international & domestic, is up as people want experiences not ‘stuff’. My small retail business is looking at attaining another 10% uplift as are others. It is because in these tough times you need to leverage a multi channel approach, provide exceptional customer service, value your customers and have the right product at the right time.
A number of Australian retailers are bleating about the web. However, if you take a multi-channel approach the web becomes your friend. A web site enables a small retailer to appear as if they are big (eg Kogan) and to attract customers outside of your geographic area. It markets to potential customers that you have the products and services that they want. It also helps you once the customer calls or comes into your shop as they are more educated than before and it helps you to close faster.
The key thing about the web is that it is impersonal. What retailers need to grasp is that shopping is about having an experience. So why should I buy at David Jones, Myers or JC Penny when the only difference between an instore experience verses that online is price? With prices generally cheaper online than in a retailer then the only differentiator can be service, which most major retailers cannot deliver upon. In my business most of my insurance sales are off line whereas most quotes are online. This is because when a customer has an off-line experience this is far better than it can be only with service and the opportunity to save even more is a key differentiator.
So web can be your friend, but you need a differentiator in order to drive more foot traffic to your stores.
Something to see & do
If you have a boring shop and fitout then why should customers go out of their way to visit you. They may as well go to your web store or to another competitor. When I arrived at my current job the fitouts were a bank style that hadn’t been updated in 10 years. Surprise, surprise sales were in decline. Within 2 years I had approval to create a dynamic fitout that enabled staff to interact with customers all based upon the Friedman sales techniques. And sales soared as the customers valued this experience.
In 2012 I hope to revisit these fitouts to create an icon that will attract customers to return again and to interact with us at a different level.
Some retailers that are very strong on providing something to do and see instore include Zara, H&M, Anthropologie and OPSM in Melbourne.
Customer service from Retailers
I read recently that Myer was increasing their staffing numbers and customer service training this Xmas. It’s about time! Myer is a mid level department store retailer that stocks major brands. In recent times as the business has tried to increase margin they have sacrificed customer service and this has lead to a decline in sales and reputation.
When you are competing on price with other retailers and the web this is a zero sum game and eventually your business will die. You need to differentiate!
As mentioned retailers can differentiate by focussing on customer service, not just for Xmas but the entire year, create new and exclusive experiences (such as the Nike Shoe Fitting service) and to entertain people while they are instore with unique fitouts and activity.
People say that they are busy, but they still attend festivals and shows, they want to be entertained and enjoy their experience at all levels. If retailers can grasp this then price doesn’t become the primary factor, but the experience does.
In the most recent edition of Harvard Business Review (December 2011) there is a fascinating interview with Ron Johnson, the new CEO of JC Penny, on his take on retail. He firmly believes that retail is about providing an experience to customers and a new level of service. It is not about pricing which he says “what online does best is compete on price…that doesn’t create new value. It’s a race to the bottom.”
Johnson then went on to talk about his time at Apple where he developed Apple Store concept. He totally rethought the traditional retail model to allow customers to try before they buy, staff set up the product before you leave the store and you can come back to the genius bar to learn about your product or to get it fixed. Even the stores look great which creates an experience in itself.
Even in my business my staff are trained to demonstrate product to customer (especially GPS and other technological products), allow customers to try it and we even train them on the product. Even though our prices are higher than JB Hi-Fi or Dick Smith our customers buy our products because we can assist them in getting the most out of their purchase. We also go one step further than Apple – if you don’t like the product or change your mind you can return it and we will give your money back!
Johnson ends the article by saying “the only way to really build a relationship is face-to-face. That’s human nature. That gets at the essence of what retail stores have to be about.” If you are just transactional or price focussed you won’t be building these relationships.
Right Product at the Right Time
Another factor is having the right product at the right time. During my Xmas buying period in August my buyers noticed that remote control helicopters were appearing in shops, at the Royal Shows and in shopping centre pop-ups. We thought that if we could source a quality toy at a great price then our customers would support us. We found a quality supplier who could deliver helicopters at two price points - $30 & $50. We are on target to move 650 units in 3 weeks through our small store network - $26,000 in turnover that will help us achieve our growth target for the year.
This concept is about having enough stock to satisfy demand of product that your customers want to buy. As a retailer you need to put yourself into the customers shoes and think about what you need to buy and then to make it easy for them to buy.
Kmart in Australia has taken this philosophy to heart. They want to provide their customers with everyday products at a great price. Their buyers have put themselves into their customers shoes to buy good product that they use everyday – towels, crockery, tooth brushes, etc – at low prices. This is creating a differentiator for this department store retailer that is helping them to combat online and off line competitors such as Big W and Target.
Where to Next for Retailers?
The steps are really clear for retailers today if you want to get customers back into your stores during 2012 and next Xmas. They are:
· Take a multi-channel approach and launch a fully functional web site that lists all of your products and services at a great price
· Rethink your fitout to determine whether you can create an experience so that people have something to do and somewhere to be during their visit
· Create a culture of exceptional customer service – this is the only real differentiator that you have as a bricks & mortar retailer
· Put yourself into your customers shoes & buy stock that they want, need and desire to buy
Then ignore the media hype about poor economic conditions and another GFC. People need and want to shop, so if you can create the right environment in your business then you will be successful. My retail network is still growing…is yours?
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