Consumer Preferences Reshaping Retail Landscape
It’s been a tough time for the retailers and fashion apparel brands. First-quarter results revealed weakness across the market, which is resulting in numerous store closures.
As reported in WWD, there’s been over 2,800 closures so far this year with nameplates shuttering doors that include Macy’s Inc., Sears Holdings Corp., Abercrombie & Fitch Co., The Limited, American Apparel, Ralph Lauren Corp., BCBG Max Azria Global Holdings, Wet Seal, J.C. Penney Co. Inc., Tailored Brands, Guess Inc., Gander Mountain Co., G-III Apparel Group Ltd. and Bebe Stores Inc., among others. Hardest hit is the apparel segment.
But shoppers are still shopping.
Indeed, over retail sales (including restaurants) are poised to grow 4 to 4.5 percent this year, according to economists who note that consumers are continuing to pour dollars into the “experience economy” as well as spending more money online. Strong categories include health and beauty while some bright spots have also appeared in apparel and accessories with brands offering more personalized and customized shopping experiences.
Service providers, industry consultants and data scientists are also seeing greater demand for channel agnostic experiences. And when it comes to value propositions, shoppers demand bargains.
Michele Dupré, group vice president for retail, hospitality and distribution for Verizon Enterprise Solutions, said in addition to travel and experiences, “the boost in consumer confidence seems to be benefitting retail sectors, such as home improvement and housewares, where investments can have a longer-term impact. The health and beauty sector seems to booming as well.”
“That being said, retailers of all stripes are focused on improving the customer experience as evidenced by the rise in conveniences such as ‘buy-online-pick-up-in-store,’ which many retailers have been refining since its introduction several years ago,” Dupré explained. “Unlike a pure-play e-commerce transaction, which is primarily behind the scenes and automated from the customer’s perspective, the blending of the human factor with buy-online-pick-up-in-store represents both an opportunity to make a positive impression on a customer, yet also a liability if the final interaction with the associate isn’t good.”
Just this week, Wal-Mart Stores Inc. said it was offering discounts for shoppers who order online and pick up in stores. Other retailers are expected to follow suit. But once in the store, there has to be a compelling reason for shoppers to stay and make additional purchases. Dupré noted that health and beauty firms in particular are deploying tactics “to enhance the in-store experience by turning locations into destinations, which offer personalized services such as photo imagery so that a customer can conveniently sample various styles and shades.”
Linda Kirkpatrick, executive vice president of merchants and acceptance at MasterCard, echoed Dupré’s perspective and said other notable trends occurring in the market include consumers who “demand a personalized, integrated, seamless experience regardless of the channel.”
“That means being able to transition effortlessly from smartphone to personal computer to physical store and jumping between platforms, such as apps to texts, in their quest for the best products and services,” Kirkpatrick said. “Accordingly, consumers are seeking out shortcuts when they reach the point of sale — whether it’s trading out cash for contactless or using [a transaction solution such as] Masterpass to avoid re-entering billing information.”
But there are other, more demanding expectations looming. Kirkpatrick said consumers expect “retailers to create content and experiences based on their unique identities, across all channels. This need for personalization and convergence is due in large part to the continued adoption of connected devices.”
Farla Efros, president of HRC Retail Advisory, said this year the market will continue to see “new retail concepts emerge [and expand] like Tesla, Amazon Stores, Bonobos and Warby Parker.” Efros said these will continue “to squeeze traditional retailers.”
Customized and personalized experiences are also key. “The notion of personalization is going to become more important, with customers looking for experiences versus accumulation, most notably with Generation Z,” Efros predicted. “Subscription services such as Birchbox, Sephora Play, etc. will continue to grow, adding to the need for speed. Smartphones will become the precursor to shopping any store — being used for research, price matching and inspiration. Technology and speed are driving these trends. Customers are more knowledgeable and more savvy given the time they spend searching and reading reviews.”
Whether on desktops, smartphones or tablets, online shopping is poised for explosive growth this year. Sarah Engel, chief marketing officer at Dynamic Action, a retail prescriptive analytics company, said it is important to keep in mind that despite the rash of store closures, “retail is projected to grow to the tune of 4 percent this year, with three times more growth projected for the online channel.”
“So, consumers are indeed spending. They are spending on apparel, and they continue to desire luxury products,” Engel said. “They are just not spending in the same ways, and the retailers who are well down the path of recognizing this fact and reengineering their business accordingly are those who will continue to see their customers embracing their brands and purchasing their products in the years ahead.”
Engel said the “shopping experience is dictated by the consumer. She has complete power over how and where she researches, shops, buys and even returns, and her expectations are higher than ever to win her initial purchase and build long-term loyalty.”
Engel said consumer expectations are being “propelled” by Amazon and others who have simplified the art of shopping to “a few easy clicks.”
“As such, we are beginning to see a divide between retailers who are harnessing their data to get one view of the customer across every shopping channel and those who continue to look at their business through the broken lens of siloed channels and disjointed customer profiles,” Engel said.
In regard to the shift toward experiential purchases, the trend remains dominant this year.
“The ‘experience economy’ is not going away as consumers are becoming more pragmatic about investing resources into things that have a more lasting impact, so the challenge for retailers is to figure out how to link their brands to experiences,” Dupré said. “Brand association can be a powerful selling proposition for retailers. For example, which retailer is your go-to if you’re going to a wedding, going back to school or are a young professional on a budget?”
Dupré said that while pairing merchandise with experiences may not be practical for most retailers, “specialty retailers have an incredible opportunity here to create value, though it’s important to offer services that are accessible to all and not simply those on the high-end. Think: complimentary personal shopping and wardrobe consultation for apparel companies; in-home design consultation if selling furniture or housewares; or, travel recommendations if selling travel services.”
Social media is also playing an important role here — and it may be bigger than retailers and fashion brands imagine. “The reality is that the Instagram- or Snapchat-worthy moment has shifted to become a primary goal for shoppers,” Engel said. “Just showing off a new pair of shoes may not garner many likes, but capturing the moment where you are sipping a latte with friends or dancing at a concert in those shoes? Priceless.”
Engel said for the retailers who are getting it right, “it means interweaving your brand and products into that experience. Just as the consumers’ goals have changed, retailers must shift their mind-sets as well.”
Engel described this trend as another call to action for retailers to transform themselves. And it requires building authentic relationships as well as experiences with their shoppers. “In the case of specialty apparel retailers, they will be able to deliver successful experiential retail journeys by connecting data points from across the organization and identifying the right combination to unlock consumers’ hearts and wallets,” Engel said.
Kirkpatrick said there’s “no doubt we have seen a permanent shift in way consumers shop and behave. Retailers must know their customers better than they know themselves. Success is no longer defined by giving customers what they want, when they want it. Instead, retailers must anticipate what consumers need before they need it, offer the best price and deliver it at the speed of light.”
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