You may have read that online retailers have usurped the throne of retail convenience, rendering department stores a relic of the pre-internet age. And with former retail giants like Sears declaring bankruptcy, you may think that the department store is a thing of the past. Here are a few department stores that are shaking up their operations, bringing in new tech and experience-based store design - keeping things fresh and relevant in today’s retail landscape.
Nordstrom’s reputation as a high-end department store is supported not only by products but also by a focus on an exceptional in-store experience. Stores are organized and elegant, with attentive customer support. In order to stay relevant, then, Nordstrom’s main focus has been on integrating convenience-based technology to keep customers coming. The store nails omnichannel marketing and retail with innovations on their social media pages and an app that facilitates shopping. Their Instagram and Pinterest pages feature links to items that take shoppers directly to their website to make for easy purchasing, and their app even features a scheduling page for personal shopping and online ordering. Their fusion of tech and brick-and-mortar operations has kept them competitive with online companies who prioritize convenience over a personal shopping experience.
The department store has thrived in recent years, keeping stores open as malls close and even renovating their NYC flagship store in 2018. Their secret? Much like Nordstrom and Macy’s, Bloomingdale’s has developed a successful omnichannel marketing strategy and maintained an excellent in-store experience. Their stores are oriented around customer service, with attentive staff available for consultation and suggestion. Meanwhile, their app is not only attractive and user-friendly; it also features special promotions for app users and a scanner that helps customers find products that are not available in-store. Along with an attractive store design, the company has perfected their recipe for a modern, elegant department store experience.
With the changing retail landscape, Macy’s department stores have struggled to stay afloat. But their stores outperformed expectations in 2018, and continued success shows that this isn’t just a fluke; it’s because of a deliberate strategy to update stores to meet the needs of the modern consumer. Leaving behind heavy-discounting initiatives, the store has focused on creating an in-store experience that makes an outing out of a trip to Macy’s. This initiative means in-store tech, like AI that lets customers view a piece of furniture in their virtual living room, and a renewed focus on store design and layout. Macy’s, too, has recently acquired STORY, an NYC concept store oriented around regular reinvention. STORY’s stock changes every six-to-eight weeks, meaning there’s always something new for customers to see. And the changes are paying off--their 2018 earnings outperformed Wall Street analysts’ expectations, and their stock grew about 25% in the last fiscal year.
Driving loyalty has long been a challenge for retailers. And now that loyalty programs are becoming more ubiquitous, companies are once again innovating to stand out of the crowd. Here are some of the changes we’re seeing in customer loyalty programs in 2019:
Technology = Personalization
Advances in technology mean that rewards programs can be ever-more personal. With the advent of online shopping, app-based shopping, and even just a centralized electronic system for in-store shopping, stores have more data than ever on what individual customers buy, and what they want. This means that loyalty programs can be used to create a personalized shopping experience for customers that only gets more accurate the more the customer buys. A number of stores have done this with quizzes that determine a customer’s “personal style,” or even personal data sections where customers can list their size, skin tone, and other measurements to inform product suggestions. A personalized shopping experience, in turn, leads to greater ease of shopping and a sense of “belonging” that fosters loyalty.
More Rewards, More Often
Most customer loyalty programs are oriented around point-based spending incentives--spend money, earn points, get rewards. But with more rewards programs entering the market, and consumers losing interest in sale-based shopping incentives, businesses are turning towards revamping their points systems to reward loyal customers better and more often. The Kohl’s loyalty program now offers 10% Kohl’s Cash on every purchase when you pay with a Kohl’s card, and 5% Kohl’s Cash for non-members in order to encourage return customers. Meanwhile, the Starbucks rewards program has done away with its 300-point Gold Membership system in favor of a point system that allows customers to get rewards with every purchase, right away (albeit with some miscommunication to customers that caused pushback). It’s clear that when it comes to building loyalty, customers are more interested in special perks than in discounts.
Experience over Products
While perks like free samples and discounts are appealing, the way to really stand out in 2019 is to offer experiences over product-based rewards. This can mean private parties, consultations with professionals, even lessons with activity-based products. Sephora and Ulta lead the way with loyalty programs offering makeovers with in-store makeup artists, and clothing stores like Nordstrom are offering similar rewards with in-store stylists and personal shoppers. Meanwhile, companies are offering access to sales or special products--Footlocker announced a loyalty program that grants early access to sneaker releases, and Fenty Savage, Rihanna’s lingerie line, offers a loyalty program based in first-access to monthly product drops. In a marketplace where cheaper products are always available, discounts aren’t nearly as attractive to customers as exclusivity--and retailers should take note.
We talk a lot about how in-store technology can help keep the retail experience competitive in an increasingly virtualized economy. There are many examples of brands introducing leading technologies intro their retail experience - everything from Sephora and Ulta with virtual mirror technology and golf brands who have created virtual golf courses so customers can work on their swing in-store. While these programs are exciting and innovative, not every brand needs to adopt cutting edge technologies to stay competitive. Introducing retail technology for technology’s sake won’t help in creating a winning retail experience. It’s important to start with and stay focused on your shopper and their experience. Think about what could make their lives easier? Their experience more engaging and memorable?
A relatively easy win is to work on the factors that could make their instore experience more convenient. That’s where self-service retail can play a part. Self Service retail is an avenue to bringing the convenience of online shopping into your brick-and-mortar storefront.
Here are some of the benefits of introducing self service retail in your stores:
Self-service kiosks allow customers to shop their way, and at their pace. Self-service ordering at McDonald’s, for instance, gives customers the option of ordering curbside, ordering through their phones, or ordering for a traditional in-store dining experience, easing customer flow and creating more convenient options for busy customers. McDonald’s CEO Steve Esterbrook said that self-service kiosks provide more options for customers, give them more options for how to engage with their store--and easy sales means happy customers!
Kiosks let customers choose exactly what they want, exactly how they want it. Tablets and other ordering devices can let customers select for dietary restrictions and allergies more easily, and even create more flexibility in preferences. Because kiosk ordering can deliver orders straight to the kitchen without a middleman, there’s more flexibility in ordering which means more options for personalization.
To date, the biggest leg up that online merchants have over in-store sales is the ease with which they can collect consumer data. Every sale is automatically in their online system, allowing for streamlined data collection that can then inform their marketing and merchandising. Self-service technology in brick-and-mortar stores, then, is a great way for businesses to easily collect consumer data without the hassle of multi-step inventory tracking and other consumer data efforts. Kiosks automatically collect information about sales and browsing habits, making it that much easier for brick-and-mortar retailers to know how their consumers are shopping.
In a marketplace oriented towards time-saving solutions, one of the biggest innovations in food retail has been the meal kit. Meal kits, consisting of a recipe and all the ingredients for a two-serving meal, have taken the market by storm as an easy, efficient way to cook fresh and innovative meals. Subscription services such as Blue Apron, Hello Fresh, and Chef’d grew rapidly as meal kits entered the market.
But as the market expands, companies are having a hard time maintaining their growth. For example, market leader Blue Apron’s subscription base dropped by about a quarter in 2018, and its market shares dropped by about 60%. Chef’d, meanwhile, closed shop in August of 2018, only to be revived by packaged food consultancy True Food Innovations. Experts say that the drop is due to an expanding market paired with a relatively limited consumer base; not all consumers are open to such a radical shift in their cooking habits, and the price tag per meal is generally higher than the average shopper’s budget allows. A subscription-based service, meanwhile, requires a commitment that not all shoppers are willing to make, particularly with a product that they may not know how to incorporate into their cooking habits.
In an effort to keep profits up, many formerly subscription-only services are moving to physical retail, entering the grocery store as a meal solution for busy shoppers. The move is intuitive--subscription services are an investment not all consumers are willing to make, and bringing meal kits to physical retail gives consumers the option to buy single kits without the long-term commitment of a subscription service. Stop & Shop, Walmart, Costco, and Kroger have all either made deals with existing meal kit companies or developed their own meal kits in order to capture a market previously limited only to delivery services.
That said, there are challenges to bringing meal kits into the grocery aisle.
First there’s a question of demand: subscription-based services appealed to the busy shopper who doesn’t have time to go to the store, so what will it mean to bring the products to grocery stores? Consumers might be reluctant to change their habits, especially in a routine as essential as cooking dinner. But the meal kits do provide a niche between ingredients distributed throughout a store and pre-made hot foods provided by “grocerants,” and by selling meal kits in brick-and-mortar stores, shoppers have the opportunity to test a single kit without committing to a lifestyle change.
There’s also a question of perishability. Meal kits sold via subscription services don’t need a shelf-life; they’re made to order. In the move to grocery stores, meal kits need to be able to sit on a shelf for far longer than they’d sit on a doorstep. How are companies tackling this challenge? True Food Innovations, which now owns Chef’d, has been working with high-pressure processing technology to preserve food without any artificial additives. The technology is a form of cold-pasteurization that can extend shelf life to up to 55 days.
It’s clear that meal kits will need to keep innovating in order to survive the changing market. A move to grocery stores provides great potential for growth, but also allows for new risks and challenges. The meal kit industry will need to think outside the box in order to meet these risks.