The challenging retail environment has store executives re-evaluating every aspect of their businesses.
In its annual “The State of Retailing Online” report, Shop.org draws from an industry-wide survey from Forrester to highlight retailers’ new directions and the areas they say still need improvement.
In general, the findings reveal that efforts toward shoring up omnichannel capabilities still dominate the conversation, mobile remains a key area of investment and innovation continues to transform every aspect of retail from the backend to customer-facing interactions.
Store investments
Despite questions about the future of brick-and-mortar retail, Sucharita Kodali, a vice president at Forrester and the lead author of the report, said the survey respondents’ willingness to invest in stores shows they believe in the value of physical locations.
More than half of those polled (55 percent) expect to open new stores this year. Another 24 percent are planning to bow pop-up locations, and 12 percent will open new warehouses or distribution centers. The survey found that 31 percent will be closing doors in 2018.
“This outlook contrasts with claims that the physical retail world is being displaced by e-commerce and is therefore doomed,” according to the report.
In fact, 43 percent of respondents plan to net more stores in 2018, with only 16 percent anticipating netting fewer doors.
Though stores are still clearly important to the respondents, they recognize their locations must be used differently. For 21 percent, that means making omnichannel a top consumer-facing initiative this year. To tie their online business to their physical locations, these retailers said they’re focused on features like endless aisle and in-store pickup. Their other priorities included clienteling and personalization (15 percent), enabling associates (12 percent) and improving the store experience through overhauling formats and layouts (12 percent).
As a part of their plans to update stores, the retailers mentioned point-of-sale as an area in which they can enhance customer experience through capabilities like self-checkout or mobile commerce connectivity for associates.
When asked specifically about online fulfillment, getting goods to consumers faster was far and away the top concern, with 42 percent noting it as a priority. Even though fast shipping is important to this group, few (9 percent) indicated a need to offer same-day delivery because, they said, consumers aren’t demanding it and the economics are too challenging. The group is generally more focused on ship from store and omnichannel fulfillment.
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In the coming year, roughly half of the retail executives polled expect to invest in store design to better showcase products (51 percent) and increase engagement (53 percent), while 61 percent anticipate putting either time or money into training and further developing their store associates.
Most retailers (65 percent), however, are focused on freshening up their product assortments.
“Making inventory work harder is task No. 1 for retailers in 2018, as cost of goods sold (i.e., inventory) is the single largest line item for retailers,” the report authors said. “Retailers are looking to invest more in changes to their retail assortments than just about any other area.”
Workforce focus
Beyond inventory, thoughts turned to workforce.
When queried about how their sales help varied between 2017 and 2016, 39 percent said they had “somewhat more” store associates (excluding temporary and seasonal hires) from one year to the next, while an almost equal number (38 percent) reported the level stayed the same. Just over 20 percent said they have either somewhat or significantly fewer staff.
Whether they intend to add staff or reduce headcount, retailers are looking to technology to help them maximize their workforce productivity. “Retailers recognize that they can automate a number of associate tasks and improve store productivity while lowering operational costs,” the report found. “We expect this trend to continue: Retailers cited workforce management as the second most common back-end priority they plan to invest in this year, second only to their POS system.”
In addition to store employee levels, the participating executives are turning an eye toward how they’re working and how that impacts consumers.
Forrester warns that those retailers that don’t provide associates with automation capabilities risk diminishing customer experience, especially if they’re reducing the amount of help on the sales floor.
Sixty-one percent of survey respondents said their sales associates are currently fully capable of placing orders for items in another store or distribution center but only 23 percent indicated they can reliably access the company’s website, and 14 percent have full access to customer behavior to improve recommendations.
Only 33 percent of respondents are confident that their staff always knows which task are high priority or fully understands how much interaction to provide in order to influence purchase.
Digital investments
When it comes to online, the retail respondents are focused on four areas: mobile, platform overhauls, marketing and user experience.
The first area of focus is mobile with 80 percent of those polled increasing investments in this area. Specifically, executives are attempting to boost conversions, which still lag behind sales on desktops (64 percent) even though mobile delivers more traffic (49 percent). One area they’re pulling dollars from is apps, which deliver just 4 percent of overall online sales.
A third of respondents indicated a focus on replatforming and commerce platform upgrades this year. At 18 percent, site performance was the only other area on which a sizeable number of retailers will focus.
When asked to select from a specific list of other areas of improvement, SEO (79 percent), email marketing (68 percent) and new payment methods and product detail pages (both 60 percent) ranked highest.
Forrester said email marketing is an important and relatively easy area for retailers to improve. “Customer acquisition and retention continues to be a challenge for retailers, and it is an easier lever to adjust because it generally requires little IT or operations involvement,” the firm said.
With conversions in mind, the survey respondents also highlighted onsite experience as a top priority. As a result, they’re taking a look at how their products merchandised and they’re enhancing their personalization tools.
Forrester pointed out one “big miss” common among many retailers: the failure to address shoppers’ concerns around pricing.
“Retailers have numerous opportunities to be more competitive with pricing, to better test pricing, and even to vary pricing by time of day or in different channels to best drive conversion and margins,” the firm said. Despite this fact, few indicated they’re investing in this area.
Price, along with selection, are two of the main reasons why a customer might select one store over another, but the report found that too few retailers are placing an emphasis on sharpening pricing and broadening choice. “Retailers need to position themselves to take a greater share of shoppers’ wallets by making commoditized products price-competitive and by expanding the selection within their biggest categories.
Overall, Forrester encourages retailers to continue embracing innovation. “Celebrate digital successes within your organization, continue to educate top management regularly about consumer expectations, and spread the word throughout the organization about the benefits and wins that come with embracing digital solutions.”