The new year and decade have just started, and store closings are already making headlines nationwide. More than 1,200 closings have been announced.
Traditional retail chain giants such as J.C. Penney, Papyrus, Express, Pire 1, and Macy’s have collectively announced hundreds of closures, according to Coresight Research, a marketing research firm specialized in the retail sector.
According to USA Today, last year store chains such as Payless ShoeSource, Fred’s, Gymboree, Charlotte Russe, Family Dollar, Forever 21, Charming Charlie, Sears, Kmart, A.C. Moore, and GameStop have liquidated much of their physical stores. If this trend continues, retailers are likely to close more than 100 million square feet of space in 2020 for the fourth straight year, according to the latest market projections. That’s the equivalent of about 562 Walmart supercenters.
Malls are also rapidly decreasing in popularity and have dealt a heavy blow to traditional stores’ revenue streams. Digital transformation remains at the heart of the current state of the retail industry. According to financial data firm Refinitiv, online purchases accounted for 11.2% of total retail sales in Q3 of 2019, which is up from 4.2% during the same period in 2010.
Although most retail sectors are feeling the impact of the digital transformation, department stores, which historically provided a wide array of products, have been the first in line to suffer. Digital retailers or marketplaces, such as Amazon, now provide a huge variety of merchandise in one place without customers ever needing to leave the house.
How Retailers Can Thrive in 2020
For retailers to survive and thrive, they’ll need to take a different approach than what was historically the traditional market’s take on retail. Customer-centric stores with targeted marketing are key to building customer loyalty and increasing retention However, the only way retail chains can understand their customers is to tackle their campaigns is via data analytics.
All retailers need strong analytics solutions, both online and offline. There are different types of buyers in physical stores and online stores. Each type has different behaviors and purchasing patterns. Offers that may do extremely well online might not work in stores. For example, store layouts may need to be readjusted to better reflect the new dynamic of customers.
This challenge, along with many others, can be addressed if retailers collect and analyze data, and have an appetite for finding and acting on insights. Retailers also need to pay special attention to the friction points between offline and online data. The transition from physical stores to digital should be smooth, and they should be interconnected.
People are starting to use physical stores more as a pick-up location instead of going there to shop, which cuts down on time waiting for their items to ship. More than 50% of Americans who order online say they mainly use stores as a pick-up location. Supporting this trend is the decrease in in-store foot traffic, which has dropped 5% compared to January 2019.
According to a new study by the International Council of Shopping Centers, customers who shop in a physical store become more likely to shop at the store online, and the other way around. This means that effective interlinking between the two properties (digital and offline) should provide the maximum revenue output for any retailer.
Another finding from the same report is that for every $100 a customer spends online with a retailer, they spent $131 in-store with the same retailer within a 15-day period. It also works in reverse. After spending $100 in a physical store, the average customer spends $167 online with the same retailer, according to the study.
What’s Next for Retailers
Retailers should start by having conversations with a strategist who will help them understand their direction, identify gaps that are preventing them from succeeding, and help them build a roadmap for their businesses and company-wide analytics solutions. This will give retailers the ability to set a course and determine their timeline with respect to their constraints.
One of the most important goals retail companies need to focus their attention on to maximize revenue is user journey analysis.
Retailers going digital want the best app or website for their users since that leads to more conversions, increased customer retention, and a jump in revenue. However, companies first need insights to help them improve the user journey.
User journey analysis leads to both depth and quantity of insights, which blossoms into A/B testing opportunities and deep-dive analysis. Regardless of what is being sold on your website, through user segmentation, retailers can gain a holistic view of their users and discover where they find value in the store’s digital experience. This helps steer the company in the right direction by focusing on building a product or service based around the likes and dislikes of the customers.
If you’re a retailer and need help with digital transformation, we’re here for you. Contact us and we can get started!