“Customers require an easy shopping experience, a focused product assortment, and an experience which connects them to the brand, retailer, or other people.” – Cowen Research, Re-Think Retail: The Store Must Do More
How are you breaking into the new world of retail?
Obviously, times have changed. Consumers have changed. How we do business has changed.
Technology has really changed.
With all this change going on in our world, it’s inevitable retailers must change too. But how can retailers ensure they’re adapting to survive? To succeed? To thrive?
In a recent retail manifesto, Cowen and Company gives their two cents on how retailers are “rethinking retail” as profound shifts in customer expectations continue to force traditional retail business models to innovate and change.
From Cowen’s perspective, it’s all about the store.
Just like the title of the report illustrates, the store must do more to “maximize a customer’s experience” and “minimize tasks” as their purpose has fundamentally shifted. In today’s new world of retail, stores must act as customer acquisition points where convenience, curation, and culture trump all other factors.
A Look at the Data
As retailers right their physical footprint with smaller store formats and more experiential spaces, consumer trends continue to favor shopping in-store. According to Cowen’s Consumer Tracker, about 68% of consumers still prefer shopping in-store.
Not only do shopper’s habits support the importance of brick-and-mortar, but retailers across the industry also continue to invest in their stores:
“We believe the future is physical bricks plus digital clicks. In the last fiscal year, over 50% of our covered companies' (on average) primary usage of capital expenditures were allocated towards “Stores” – with about 28% of mentions indicating they spent on Existing Stores and 26% spent on New Stores.” – Cowen Research, Re-Think Retail: The Store Must Do More
With this in mind, the move to leverage existing stores to embrace today’s new consumer is a major recommendation for success.
One of the biggest areas of investment for retailers really boils down to convenience. A frictionless retail experience from beginning to end.
In short, the report brings it down to one question:
“Is the shopping experience personally friction-less and does it minimize task time which can then be reinvested at the leisure of the customer?” – Cowen Research, Re-Think Retail: The Store Must Do More
Convenience continues to fuel consumer purchase behavior, and this demand for immediacy, according to Coresight Research, is driven primarily through:
- Greater connectivity – shoppers have an unlimited pool of product choice and complete access to on-demand services (thanks to most retailers evolving their digital presence).
- Higher expectations – so many choices are available through e-commerce (thanks Amazon) and more innovative, successful retailers in the physical space continue to increase shoppers’ expectations.
What does this mean, exactly, for a retailer’s store? How can your store do MORE?
Cowen has two near-term suggestions for retailers looking to deliver on the consumer’s need for speed:
- Match supply vs. demand to rapid customer taste shifts
- Delivery quickly
The quicker and easier, the better.
Moving beyond convenience, a focused assortment for your brand is just as important.
While Amazon’s attempt to move into fashion has seen some level of success (mainly through selling basic apparel items and prime members capitalizing on the convenience factor), it continues to struggle for dominance. According to a recent survey by Morgan Stanley, the reason people don’t shop for clothes on Amazon said they didn’t “consider Amazon to be a destination for fashionable clothing.”
With this in mind, the importance of a curated assortment is critical, especially in today’s overcrowded market. The value of a unique brand or product plays into a consumer’s purchase behavior quite heavily – which is evident in Amazon’s roadblock within the fashion arena.
There’s just so much competition. Over time, we’ve seen businesses who struggle and fail fall within a “middle of the road” type of retail offering:
“[T]he stores that are swimming in a sea of sameness — mediocre service, over-distributed and uninspiring merchandise, one-size-fits-all marketing, look-alike sales promotions and relentlessly dull store environments — are getting crushed. A close look at their performance as a group reveals lackluster or dismal financial performance and shrinking store fleets.” - Forbes
As a result, retailers must revisit their brand offering to provide hyper-localized assortments curated specifically to their consumer’s preferences:
“We believe customers will go out of their way to seek out brands or retailers that are offering a brand or assortment that is highly differentiated” – Cowen Research, Re-Think Retail: The Store Must Do More
Making more with less seems to be the way to go. Ultimately, the idea of improved curation will lead to less inventory in-stores (i.e., fewer overstocks, markdowns, etc.) and less cluttered stores.
The experience is huge.
While convenience is tied to the overall experience, we’re talking a little more specifically about the social aspect your store brings to the table. Think Sephora’s beauty classes or Nordstrom’s inventory-free store.
The generation of consumers from millennials to generation Z continue to prove time and time again that experience matters. They’re much more likely to spend on memorable experiences over anything else.
“Our view is that brands will need to embrace, foster, and create communities and tribes around their products or brands - we believe community, tribal forums, or clubs will happen with or without brand support.” – Cowen Research, Re-Think Retail: The Store Must Do More
This means retailers need to get creative. Immerse your consumers in experiential retail, with increased dialogue for product feedback, testing, and innovation. Consumers want to be involved! This relationship will create a community around your brand, as well as reveal untapped consumer needs and opportunities for product curation.
Cowen’s Take on Celect
While improvements for retail success can be easily summarized into three bullet points, the road ahead to actually implement these changes will be challenging, to say the least.
As such, plenty of start-ups are developing truly innovative technology to help retailers meet the evolving needs for convenience, curation, and culture. The first step for many retailers is overcoming the underlying problem tied to all three of factors: inventory management.
It’s so important, yet complex given the consumer desire for immediacy and the inefficient supply chain model retailers traditionally rely on. However, given the omnichannel world we now live in, the biggest way retailers can help their stores do more is by making sure their inventory is on point – which means knowing where to have the right items at the right place and right time.
According to Cowen, doing so, specifically with Celect, will maximize comp store sales and merchandise margins:
“We believe Celect offers retail partners an innovative solution to solving inventory optimization challenges through the use of big data and predictive analytics as retailers work through the merchandising and planning process. In our view, retailers' ability to improve their inventory management systems is one of the most complex problems for management teams to solve for and therefore is both a challenge and opportunity to unlocking operational efficiencies.” – Cowen Research, Re-Think Retail: The Store Must Do More
For the full report, access the Cowen Research library archives here or contact your Cowen Research representative.