We all know it: the Web commodifies the customer shopping experience. Nevertheless, the sheer convenience and unlimited access provided by online shopping continues to draw a greater portion of her spend. So how can mall specialty retailers draw her back into stores, where they’ve deployed the vast majority of their assets? Mōd proposes the following five strategies:
- A differentiated value proposition
- Cut-through visual merchandising and brand standards
- Branded customer engagement
- Performance marketing
1. A differentiated value proposition
Differentiation is Business 101 — but you wouldn’t know it by walking the mall. Success breeds copycats: The Limited and Gap of yore spawned the vast-but-now-shrinking sportswear middle market, from Aeropostale to WHBM. Each concept has its unique angle on fashion and price, but most execute similarly and gravitate towards the same merchandise categories and trends. Those that broke the mold, like A&F, became runaway successes but were quickly copied. More recently, Kors is killing Coach, and J Crew’s hip fashion formula has been co-opted by many. The result is too few mall shoppers chasing too much not-differentiated-enough product.
The best performing retailers are those who sell differentiated product categories – in technology (Apple), activewear (Lululemon), lingerie (Victoria’s Secret), cosmetics (Sephora) – or offer clearly differentiated value – from the very high priced and sedate Tiffany and Louis Vuitton to the very low priced and lively Forever 21 and H&M. Each of these retailers takes a very aggressive position to stand out in the mall. Sustained high performance is not for the meek.
For the rest, peddling sportswear to the middle market is a Darwinian struggle: evolve or die, bury the weak, acquire or be acquired, innovate and diversify, and O+O+O (off-mall, outlets, and overseas) expansion. It’s ruthless, promo-à-promo competition, landlocked far from the blue ocean and galaxies from white space. The list of extinct legacy mall brands grew significantly in the last 6 months to include: Cache, Coldwater Creek, Delia’s, and Wet Seal.
PacSun may be an example of a successful repositioning, albeit one still in progress. The retailer suffered for almost a decade from competition with the “A” teen brands, Hollister, and direct assaults from Zumiez and Tilly’s. PacSun used to be board sport- and male-driven, depending heavily on a handful of legacy surf and skate brands. They’ve since repositioned to a more modern, fashion-driven take on California lifestyle, offering a nimble assortment in an ever-changing mix of the trendiest brands (e.g., Brandy Melville). This merchandising approach makes them unique in the mall and is starting to produce results.
2. Cut-through visual merchandising and brand standards
Stores will earn back market share only if the customer experience offers something better in-store than online. Starting with the store windows and front table, these displays will ideally have a) stopping power, fill the shopper with b) delight and c) desire, d) invite her inside and e) motivate her to buy. Finally, f) each window should reinforce an emotional connection with the brand. This is, again, Shopkeeping 101, but, go ahead, stroll through the mall with that a) – f) checklist…
One exception is Anthropologie, where artists at each store design and execute the key displays. The windows are often quirky and conceptual and may have little to do with the product inside. But most, with their artistic exuberance, invite fellow creative spirits to continue their exploration inside the store.
Taking a completely different approach is the Kate Spade “see-through” boutique, where its bright halogens illuminate its intimate, glass-partitioned interior and reflect off the saturated satins, patents, leathers, lacquers and chromes. It’s a fun, colorful, candy store filled with the designer’s delights.
Both Forever 21 and H&M take a well-trod approach, using multiple, dramatically posed and dressed forms under hot spots to provide focal points amid their scores of racks. Their displays communicate fast, youthful fashion in a way that energizes their core demographic.
3. Branded customer engagement
How store associates engage shoppers is also core to the customer experience and a key differentiator vs. online shopping. Poorly executed, engagement works against the retailer: how many times have you heard a friend say they prefer shopping the website because of the bad service in-store?
Not quite as harmful as negative interaction is a generic one: “Welcome to [store name]. Can I help you find something today? Just to let you know, all [product category] are 40% off today.” You hear the same script in nearly all the stores not too overwhelmed with shoppers (or too understaffed) to greet you. And the retailer has missed an opportunity to begin a personal dialogue with the customer and drive the brand experience.
The formula for effective and differentiated customer engagement depends on the brand proposition. For Apple, Sephora and Lululemon, it is Associates’ technical expertise and can-do attitude that make them stand out. For Chico’s, fashion-savvy Associates style and sell in dressing room common area, where the only mirrors are. At many Victoria’s Secret stores sexy environments and well-trained staff complete the brand promise.
For many retailers, customer engagement happens primarily at the cash wrap, where brand messages should be precise and business-driving. A fast fashion retailer should reinforce purchase decision; item-driven brands should sell add-ons; and promotional brands should reinforce value and promote the upcoming sales.
In all cases, the most successful customer engagement will be from associates who are the most aspirational versions of the brand and who advocate for their customers.
It was not too long ago that fashion cycles lasted years, malls dominated fashion retailing, and major clothing retailers were able to push trends and manage demand. During that decades-long era, the most efficient order quantities were always container loads shipped from overseas.
Now that consumers, online, have instantaneous access to fashion influences and inventories globally, product lifecycles have shortened and retailers have lost their ability to profitably and sustainably push demand. Those trans-Pacific shipments may become obsolete before they land, sinking any chance for a profitable season.
Speed is one solution. A speed program means the retailer buys shallow, reads sales, and reacts quickly enough with reorders to significantly impact in-season sales and profits. (Slow-sellers from the “read” phase, meanwhile, are simply allowed to sell down, mostly at full ticket, over the season.)
L Brands, a leader in speed, reengineered its supply chain so that reorders in the program appear chain-wide in less than three weeks. The company also created new tools, processes and metrics for the planners and merchants. Merchandising strategies have evolved over time as the program’s strengths became more evident.
Speed causes cost per unit and planning headcount to increase, but the payoff is dramatic: Inventory turns and full-price selling grow and markdowns shrink, raising sales and margins. Because inventory risk is reduced, merchants take on more fashion risk. Traffic, conversion and transaction sizes grow as customers respond to the increased fashion and newness enabled by the program.
L Brands continues to devote a greater portion of its assortment to speed. They are the one U.S. retailer intent on closing the “Zara gap.”
5. Performance Marketing
Retailers today promote their omni-channel efforts as a growth strategy, but in reality it is a keep-up-with-customer-expectations strategy. Omni-channel is becoming a competitive necessity rather than a source of competitive advantage.
Omni-channel’s corollary in marketing, however, actually can be a source of true advantage. If a retailer can understand and leverage all the channels, both analog and digital, that influence a target customer’s purchases, it can pretty much own that relationship and in a direct and measurable way – what we call here “performance marketing.”
Performance marketing involves two major components. The first is the single view of the customer, creating a holistic model of a customer’s behavior from awareness through consideration to purchase and loyalty — at individual (where possible) and segment levels. The second is a program that uses this model to:
- position the brand in the consumer’s social/digital consideration set
- convert new customers to buyers through the engagement funnel, and
- keep customers engaged throughout their lifecycle with the brand
Single view of the customer is also the heart of the omni-channel content and personalization engines. For example, a new, young, mobile-savvy fashion customer who only shops sales should get a very different mix of messages and on very different platforms than a loyal, older basics customer who is less price driven.
This has been a long-held vision of marketing executives, of course. But only recently have the technologies and expertise become available to make it cost effective for most retailers.
And Solely by Coincidence…
Mōd Advisors has world-class experts to help you with these five strategies to strengthen stores.