Retail’s Rage Against the Machine (featuring an interview with Bernardine Wu ’90)
Jonathan Song, Dartmouth Business Journal
“Did you just bring up the A-word?” FitForCommerce CEO ’90 asked me in a playfully disgusted voice. My mention of Amazon was enough to cause a visceral reaction.
As the founder and CEO of FitForCommerce, a boutique consulting firm that helps retailers develop e-commerce channels and digital implementations, Wu is an expert in retail. She has partnered with over 100 companies, including apparel heavyweights like Calvin Klein, Levi’s and Gucci. She is also one of many to recognize the existence of a huge threat to brick-and-mortar profits: a computerized monster known as the e-retailer.
It is no secret that the meteoric rise of e-retailers has eaten into the successes of physical retailers that have long relied on the “in-store customer experience.” Money’s Brad Tuttle reports that one such e-retailer, Amazon, dominated this holiday season at the expense of many department stores: Amazon increased holiday sales by 11 percent compared to 2015’s numbers and was responsible for nearly 40 percent of all online purchases. E-commerce in general had a widely successful holiday season with total web sales exceeding $1 billion almost every other day from Cyber Monday until Christmas Eve.
Large brick-and-mortar department stores, however, suffered greatly this past December. Tuttle reports both Macy’s and Kohl’s have announced plans to close over 100 department stores each. Moreover, Amazon’s success story over the past decade has had a spillover effect on other e-retailers. Companies such as Rakuten, Newegg, and China’s Alibaba are reaping the reward of increased online shopping activity, causing even more competition for physical stores.
According to Kanaru Fukushima, a consultant at FitForCommerce, the issue for traditional retailers is the extent of online and mobile retailing’s popularity, which has contributed to declining figures of in-store revenues. During 2016’s Cyber Five (a nickname for the five-day period of Thanksgiving, Black Friday, Small Business Saturday, Super Sunday and Cyber Monday), consumers spent 15 percent more money online than in 2015 according to a November press release by Adobe. Ana Smith of the National Retail Federation reported that five million more people shopped online compared to 2015, while the number of in-store shoppers decreased by a whopping three million.
Yet should physical retailers completely ditch their brick-and-mortar efforts given the decrease in sales? Wu thinks the answer is no, instead arguing that physical stores can still provide a level of customer experience that e-commerce can never achieve. Mike Cassidy, a Vice President at Google, points out that “in an information era…when e-commerce sites are approaching the limit on how fast they can get a package to a consumer’s home, experience is one of the few places a retailer can stand out.” Wu believes that there is one major area in particular that stores must develop to compete with e-retailers: personalization through technology.
Part of the in-store experience involves a sales associate helping a potential customer find a product based on their individual preferences and needs. Wu believes optimizing this aspect of the in-store experience will make customers willing to shop at a physical store rather than online.
It is also worth pointing out that Amazon and other e-retailers have already made use of personalized online advertisements, which use one’s search history to advertise specific products tailored towards a shopper’s buying habits and previous searches. Wu believes that physical stores must meet, and exceed, this level of technological personalization. Furthermore, it is easy to ignore online advertisements. The same cannot be said for in-store personalized advice, which allows the store associate to directly communicate with a potential buyer.
“If I were a shoe company and I saw moccasins were getting the most views online, guess what I’m stocking my store with?” Wu said.
As for customer behavior within physical stores, she recommends a mobile tracking software called iBeacon, which uses Bluetooth Low Energy Technology to track in-store consumers’ mobile devices. iBeacon records which areas of the store get the most foot traffic and sends tailored promotions and newsletters directly to shoppers’ phones. Fukushima also recommends all stores record customer emails whenever possible, in order to send repeat buyers personalized online newsletters based on their purchase histories.
At the National Retail Federation’s (NRF’s) Big Show for 2017, Wu delivered a presentation on how technology can help sales associates personalize the in-store experience. She asserts that today’s customer expects the sales associate to already know them, since the instant-gratification of technology has made the shopper much more impatient. According to NRF figures, 63 percent of retailers allow associates to look up unavailable items online, 61 percent of retailers offer “buy in store and ship anywhere” programs and 32 percent of retailers offer the option to buy online and pick up in-store. Wu believes everyone should be doing these three things in order to compete with the technological convenience of e-retailers, as well as to create a more personalized experience for shoppers.
Also speaking at the NRF Big Show, Dominique Essig, Chief Experience Officer of apparel company, Bonobos advocated for the integration of a cloud-based mobile platform named Tulip Retail. This software allows store associates to perform important functions while on the job by using an iPad. Tulip includes services to record and store the emails and buying preferences of clientele, to have the entire store’s catalog on demand and even an option to checkout items. This optimized technology not only allows associates to enhance personalization by tracking every in-store and online purchase, but also lets customers “forget about the transaction…and focus on the personal relationship” that differentiates physical stores. After piloting this new technology in January 2016, Bonobos saw a 12 percent increase in average order value, and a 4.7 percent increase in units per transaction.
Other companies have also been implementing different technologies into their brick-and-mortar stores. Emily Bezzant, head analyst at retail technology platform EDITED, advocates that retailers use artificial intelligence to track customers’ shopping histories, social media profiles and interests. Bezzant points out that The North Face and 1-800-Flowers have both implemented artificial intelligence with success. Aubrie Pagano, founder of online women’s clothing boutique Bow & Drape, has used technology to allow customers to design their own items.
“People are looking to be part of the [design] process,” Pagano explained. “For millennials, expression is such a core value…of what we purchase.”
Are the days of the brick-and-mortar department store a thing of the past? Maybe not. A Moody’s report in mid-December still projects that total retail sales in 2017 will be stable with a growth of six to eight percent. While further improvements towards online infrastructure and e-commerce are necessary, physical stores can still thrive by optimizing personalization via technology solutions. Wu also notes that there is a historical silver lining for retailers with nearly-empty stores: online-only retailers, such as Warby Parker, Bonobos and Etsy, have often developed physical plants once they have become successful enough to afford the overhead costs of doing so.
What is almost certain is that traditional stores will need to change their game plans to better compete with e-retailers. While fighting fire with fire may seem counterproductive, retailers must fight technology with technology if they wish to avoid going up in flames.