This holiday season has seen an increasing number of people using the internet to shop for holiday gifts as opposed to buying them in brick and mortar retail stores. Even the great holiday sales and Black Friday discount madness weren't able to stem the tides of change. These days, customers are more likely to use a retail store as a place where they can get ideas and then comparison shop for the best price by using their smart phones. The problem has gotten so bad that many retailers are struggling to find ways to prevent customers from using their store as a showroom for Amazon purchases.
The era of e-commerce is in full swing and frankly, it's about time. After all, Amazon is 20 years old and eBay is only a year younger. It's a change that has been gradual but now brick and mortar retailers need to find new ways to make e-commerce work for them.
According to a report at Forbes, there are a few changes that retailers need to make in order to prevent their extinction. Here's a list:
Embrace online shopping – Many retailers are paying more attention to their online stores. In fact, many large stores have begun to integrate an online shopping experience into their stores. Macys, a 150 year old retailer, has seen a 40% increase in their online stores. In order to exceed their customers' expectations, they have transformed 300 of their brick and mortar stores into distribution centers. By using their workforce to fill customer orders more quickly, they are able to compensate for the decrease in in-store sales. In addition, Nordstrom has seen a steady 35% gain in their online sales. In stores, they have mobile iPad stations that allow customers to shop the store's website to find items that are out of stock. Since they offer free shipping and free returns, customers are more than willing to use a combination of shopping strategies to get what they want.
Change their cost structure – When you buy a product at a retail store, it's been marked up several times. First, the company that makes it charges a certain amount, then the distributor marks it up before selling it to the retailer. From there, the retailer marks the product up again before selling it in store. This is where online sellers have an advantage. Because they don't have the pricey overhead that comes with renting and stocking a store, they can sell the same items at a lower cost. For brick and mortar retailers, being able to match online prices is a losing game.
Offer free shipping and free returns – The biggest problem with online shopping is that you can't try things on or touch them before you buy them. I love to shop online, but when something isn't right, paying for shipping both ways just doesn't make sense. Some online retailers even charge “restocking” fees, meaning that returning a $30 shirt that doesn't fit leaves you with a credit of about $7 after paying for shipping and other fees. However, companies like Zappos, that offer a generous return policy and free shipping both ways, have found that instead of costing them more money, the free shipping actually increases the dollar amount that customers spend. For traditional retailers, offering free shipping is a great way to retain customers and increase customer sales. In fact, a hybrid company that offers a place to touch and try on items, even if customers then had to order the correct size from an in-store kiosk could be the future of retail.
Subscription clubs – There has been a rise in the number of retailers that are offering a subscription based business. For example, shoe clubs that require you to buy a pair of shoes each month at a low price or accessory companies that offer monthly shipments are easy for people to “set and forget”. These clubs make money over time by guaranteeing that their customers will continue to purchase from their company. When subscription sales are done right, they build customer loyalty. Also, companies like Amazon have even found ways for people to make standing orders of things like groceries and diapers that arrive each month automatically. The customers can set up an automatic shipment and have the charges applied each month. In addition, Amazon also offers a Prime subscription that gives, along with other perks, free 2 day shipping on Amazon products. Even though it costs $79 a year, customers who subscribe shop at Amazon before looking elsewhere. For many people, the convenience of this arrangement makes it less likely that they will ever buy those product elsewhere.
For traditional retailers to survive, they are going to have to find new and creative ways to meet the changing needs of their customers and compete with their online competitors. It will be interesting to see how the landscape of the American mall will changes in the next few years.
What do you think retailers can do to prevent becoming just a showroom for Amazon? Please share your thoughts in the comments.
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