A common myth among department stores in the age of online shopping is that discounts and sales gimmicks bring customers back into stores and keeps them there. Unfortunately, this popular strategy doesn't make retailers money. CEOs and marketing departments should employ a brand differentiation strategy instead of offering customers more product for less money. Here's why.
Green Street Advisors says that for department stores to reach pre-recession levels of sales per square foot, major stores, such as JCPenney, Sears and Macy's, should close one-fourth of their brick-and-mortar stores. That means 320 fewer JCPenney locations, 300 fewer Sears stores and 70 less Macy's locations across the United States. This type of bad news might send stock prices lower for these vaunted stores.
Added to the mix are online retailers. CNBC notes that consumers can buy 70 percent of what's found in department stores on Amazon.com. Stores may decide to offer discounts to boost traffic in order to compete with Amazon.com, but fashion designers such as Coach and Michael Kors threaten to remove their clothing lines from stores that keep selling products for less than what they're worth.
How can department stores retain a loyal customer base without ticking off suppliers? Brand differentiation is one key strategy that goes beyond having celebrity endorsements, adding an extra touch like a coffee shop or completely redesigning stores.
Differentiation in department stores begins by giving customers a reason to go into a retail location. Resonating with millennials is the ideal way for a brand to maintain a loyal customer base moving forward, since these young people drive the American economy. These three factors can help stabilize a store's customer numbers.
Brands must engage with customers constantly. Marketing departments should learn to sell what the customer wants by testing new products, analyzing the data behind the sales of new items and determining what decisions drive customers. Testing happens before launching a new product line or concept, which allows stores to save money without wasting a huge amount of research and development effort.
One area of testing and data analysis includes online shopping. Retailers must determine how millennials engage with stores by having a fantastic online presence, sales apps and ways to personalize the customer experience.
When stores complete the proper testing, they should have an idea of the right price the first time without the need for sales. Consumer surveys, supply chains and brand marketing all come into play when determining price. Knowing a price before hand allows executives to monitor KPIs and profit margins.
Time to market is critical in a global marketplace with online shopping. Retailers must get products on the shelves before the competition so they can capture greater market share. This means each company must have data analysis in place to respond to the needs of customers faster.
Department stores aren't dead yet, despite their decline. These brands must learn to set themselves apart from others if they are going to survive online shopping and millennials who want a seamless shopping experience without a lot of hassles.
Photo courtesy of Mike Mozart at Flickr.com