• January 31, 2011
  • By Koa Beck, Editorial Assistant, CRM magazine

Stores’ Tenuous Hold

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The biggest change in retail during the past year has taken a long time to arrive: The economy is getting better, according to Cathy Hotka, retail consultant at Cathy Hotka & Associates.

With retail showing promise in 2010, businesses can buy newer technology and hire more. Among the technologies is the iPad. “Every CIO had a C-suite executive walk into the IT offices announcing, ‘I bought an iPad. Can you integrate this with everything we have?’ ” Hotka says.

Devices such as the iPad and smartphones have dramatically changed the retail landscape. Mobile WiFi access lets customers not only research what they see in stores on the spot, but also discover who may sell the item for less money.

The explosion of social media allows customers instantly to share experiences with certain brick-and-mortar locations. Customers can engage with brands in unprecedented ways, which for businesses can lead to benefits or detriments.

“Customers know that they’re in the driver’s seat,” Hotka asserts. “And they have been for the past 10 years, but even more so now.”
Many customers “presearch” before hitting the stores—research their prospective purchases before committing to anything. This change in shopping etiquette makes impulse purchases a “whole new concept,” says Hotka, who acknowledges that many customers arrive at a store only to buy a specific item, if they even leave their house at all to shop.

Retailers, Hotka says, are aware of this change and aim to create “frictionless experiences,” enticing consumers to buy by making the process easy. Common tactics include free shipping and storing credit card data from a previous sale.

The “frictionless experience” is further evidenced in Forrester Research’s report,  “The State of Retailing Online 2010: Key Metrics and Multichannel and Global Strategies,” by Sucharita Mulpuru, vice president and principal analyst at Forrester.

Mulpuru writes, “While the economy continues to sputter and consumer confidence wanes, Web retailers have managed to capture wallet share by offering shoppers the benefits of convenience, selection, and value.”

Despite the many shifts in retail, one initiative has remained fundamentally the same: catering to female shoppers. In the Newsweek article “The Richer Sex,” Rana Foroohar says that many women make most of the purchases in double-income households.

“Even before the financial crisis, the spending power of women was increasing in both rich and poor countries,” Foroohar writes. In the U.S., for example, men lost more jobs than women, mainly because more men work in the hardest-hit areas, like financial services and manufacturing, while women started more companies. In addition, the pay gap has narrowed: In 35 percent of double-income households, wives make more than their husbands, up from 28 percent five years ago. “Assuming the trend continues, the average woman will make more than the average man by 2024,” Foroohar says.

Though female shoppers have always been the cornerstone of the retail industry, techniques to appeal to them have changed over time. “A lot of retail was built on the model of my mom as the shopper, someone who had all kinds of time,” says Hotka, describing the older retail tactic of keeping female shoppers in the store for as long as possible. Hotka adds that the meandering housewife with oodles of time has since faded from the retail space. “She’s not only working full time, but she has an eighth-grader and a fourth-grader, and dinner isn’t going to make itself.”

Appealing to a driven career woman working the double shift of “mom” has proved difficult for retailers that seek to keep her shopping as long as possible.

With the advantages to online shopping, can brick-and-mortar locations compete? With perks like free shipping, comparing prices that are only a click away, quick navigation, and a huge product selection, what can stores offer?

Hotka says many problems must be solved first. The lingering disconnect between stores and their Web sites is problematic; Victoria’s Secret and Victoria’s Secret online are different companies, for example. “A lot of these companies set up the Web site within a silo, and it’s not integrated into the store.” The disconnect is also tough for customers, who often see the two as synonymous.

Although a few retailers, such as Best Buy, have integrated, others, like Target, are outsourced. “Many of these guys set up an online presence in a different state with a different infrastructure,” Hotka notes. “Some of them outsourced [that infrastructure]. They’re going to need to sever that relationship.”

Creating a business Web site within a silo poses another problem: in-store returns. Mulpuru writes, “While accepting returns in stores is a fairly standard service, few retailers have other programs in place to support multichannel buyers who research online and buy offline, or vice versa. Only 40 percent of retailers even have Web-enabled POS systems to enable shoppers to order items in stores that may be out of stock.”

Hotka says despite the many challenges, the customer is the big winner. “Customers have more power than they ever did before.”

Editorial Assistant Koa Beck can be reached at kbeck@destinationCRM.com.

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