Retail has faced many challenges over the last decade as consumer habits have changed dramatically. However, the early predictions that “retail is dead” have turned out not to be true. Brick and mortar stores can thrive in this omnichannel purchasing environment, as long as they avoid certain mistakes.
Over/Underpricing products
Retailers who mismanage pricing struggle to be competitive in the marketplace. A study from Retail Systems Research (RSR) found that retailers responded to increased competitiveness by continually lowering the price of its products. This strategy has put many retailers out of business and has encouraged customers to demand products at prices that stores simply cannot sustain. Other pricing mistakes made by retailers include starting seasonal shopping too early and offering blanket discounts by taking way too much off the purchase price. Fortunately, retailers don’t have to guess when pricing their goods. Technology can help retailers understand the optimal pricing for their products. Rather than creating mass deals, retail technology can help retailers find pockets of demand for certain products, and then help them meet the demand with a price that is personalized to individual customers.
Retailers can take advantage of price intelligence software that is able to predict the best price and best time to sell. This analytical approach is not just reserved for the biggest retail behemoths; retail technology makes it possible for retailers of every size to monitor how competitors price, forecast the impact of price decisions, and maximize their profits on every sale.
Not having an online presence (social media, website, online store)
It seems like everyone knows that having an online presence is important, but some retailers are still confused about what having an engaging online presence is all about. Being active online is about being visible where your customers are, which means retailers must engage customers on social media, on the store website, via an app, and through an online e-commerce site.
Consumer habits have changed dramatically in the 21st century. The consumer is influenced by digital constantly, regardless of whether they are currently looking to make a purchase. Studies show that digital devices influence $0.56 of every $1 that’s currently spent in physical stores. Retailers need more than just a website, they need a digital marketing strategy that considers how consumers interact with the retailer across all channels. Ideally, a retailer will educate consumers about their brand on every channel. For example, a store can use its online platforms to introduce customers to information about the brand that they would never find in stores. This may include reviews, testimonials, blog posts, and other details that are hard to showcase in store. Social media allows a brand to customize its message and increase brand awareness. A store’s online presence feeds directly into the in-store experience, which then offers customers a chance to touch and feel the products they have already been exposed to online. Retailers should never think of online and in-store as an either/or proposition. The best retailers use both venues to build relationships with their customers.
Not following market trends – being too niche or too broad
When opening a retail store, many people follow their passion, stocking the store with niche goods that they love. The problem with this approach is that it often results in a store that has targeted a segment of the market which is simply too narrow. When you choose a niche that is too narrow, then you run the risk of not having enough customers. For example, if you open a shop that only sells tennis rackets, you may be too niche for your local market. Are there truly enough tennis players to keep a racket store afloat? Probably not. To succeed, the racket shop would need to sell other products and draw in people who do not play tennis. This means stocking shoes, balls, clothing, and other gear targeted at athletes.
This does not mean that your store should sell so many things that it winds up being too broad. When a retailer chooses a market that is already being served and is highly competitive, the store will run into significant problems. It will be harder to stand out among the many other stores which offer the same array of products. To stand out, you will be pressured to severely underprice your products. There will also be price erosion as the competitors try to undercut you in price.
Paul Graham, co-founder of Y Combinator, a business accelerator, said that most of the startups that apply to Y Combinator choose a small, obscure niche in the hopes of avoiding competition. Graham says you must count on having competitors: “You can only avoid competition by avoiding good ideas.” So how can retailers figure out the right balance between too niche and too broad?
- First, focus on which products sell the best. This lets you know where your strengths are and what demand the best-sellers are filling.
- Second, consider what makes your store and its products unique. How do you stand out from everyone else? If your store sells books, how is it different from other retail stores which do the same thing? Maybe your bookstore has a great selection of textbooks, or specializes in rare books, or nonfiction. Perhaps it offers a really great section for local products and books. Identify what makes your store different.
- Third, consider the demographics of your best customers. What do they have in common? What value proposition are they responding to in your store? There are many retail technology apps that can help retailers understand the demographics and purchasing habits of their customers. Invest in them to help define your niche.
- Fourth, do your research. A retail store should always do market research. Learn about the audience potentially interested in your products. Consider the local market, look at data from the Census Bureau, and research your competitors.
Importance of Store Layout
Retail store layout is both a science and an art. If you have ever walked into a store to buy a few items and walked out with more than you intended, then many of your purchases were probably influenced by these store layout secrets.
First Impressions
The layout fun begins with the first impression. If your store has a front window, it should always have a compelling window display that tells a story. For example, if it’s August then the narrative could be about a family preparing to head back to school. If it’s summer, your store window could feature all the products needed for a day at the beach. Never miss an opportunity to create a strong first impression about what a potential customer can find inside the store.
Once a customer enters the store, you want them to immediately be drawn to a display just inside the doors. Target does this expertly with its display of $1 to $5 seasonal items, which are the first thing a customers sees when they enter the store. Target is in the midst of further reimagining its store layout. In 2018 and 2019, the corporate giant will renovate its stores to create two entrances: the first displaying exclusive brands and seasonal moments, and the second devoted to quick Order Pickup, grab-and-go food and a wine and beer shop.
One thing you will not see at Target, Costco and other large retailers are high shelves just inside the door. This is because customers who can’t see over a high rack into the rest of the store may be turned off and leave. Instead, retailers use low shelving that allow customers to see all the way into the rest of the store, where their eyes may land on something intriguing.
To the Right
Most people walk to the right when they enter a store. This is known as the “invariant right” and it is a function of most people being right-handed. Stores can capitalize on this natural tendency by laying out the store so that it directs people to the right:
- Baskets and carts should be on the right side of the store so they are easy to pickup.
- New products, exclusives, and sale items should be displayed to the right of the store.
- Aisles should be wide and move to the right to encourage traffic flow and direct customers on a circular path all the way around the store.
Endcap and Sidekick Displays
An endcap display is meant to hang off the end of aisles, maximizing space and getting the attention of the customers as they browse the aisle. A sidekick display is similar to an endcap, but they are meant to be placed in the most trafficked areas of the store, such as next to the cash register or hanging beside popular aisles. Successful retailers always have display items on the end of an aisle. Creating an aisle that ends at a wall, bathroom, or simply ends is a turnoff to consumers. It also is a missed opportunity to get the customer’s attention by showing them more products. Endcaps and sidekicks are used to encourage impulse buys, clear out inventory, or showcase new products.
Ignoring Local Market Factors
One of the biggest mistakes retailers make is setting a schedule which suits the whims of the owner rather than following the mandates of the market. For example, if you own a convenience store in a location where there are many office buildings, your open and close times should be dictated by the needs of your customers. If they tend to arrive at work around 8:00 am and leave between 5:00 and 7:00 pm, then your store should be open during these hours to accommodate them. Yet many stores in this situation open between the hours of 10:00 am and 4:00 pm, missing out on prime hours where they could be selling products to office workers. Small retailers should also be aware that not being open during the store’s published hours is a huge turnoff to prospective customers. Scheduling can be difficult for smaller retailers since they don’t always have a large number of employees to cover all the hours, but stores in this situation must be open when they say they will be open.
Likewise, some retailers struggle because they do not understand their local market enough to make adjustments. You should know the challenges of your location. If your store gets good foot traffic, then you can probably count on drawing customers who happened to be walking by the store. But if your store is off the beaten path, located in a large building, or out of the way of foot traffic, you will need to spend more time seeking out customers. Don’t assume they will notice your store. Retailers must pull out all the stops to make sure their target customers know they exist.
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