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Struggling Retailers Haven’t Figured Out the Right Digital-to-Physical Mix

Depending on who you ask, retail is either in critical condition or beginning to see signs of recovery. But one thing that’s been clear regardless of which side of that aisle you’re on, is that the U.S. is overstored and under-delivering.

“Retail needs a 12-step program, because there’s some problems out there,” Jerry Inman, chief marketing officer for retail consultancy Demand Worldwide, said speaking at a session during Sourcing at Magic Tuesday.

When things were good at retail, companies opened stores like they were going out of style, and now many are trying to dial that overgrowth back and right-size themselves—though many don’t know what that right size is.

“For every man woman and child in the U.S., we have 7,000 square feet of retail space,” Inman said. In Europe, it’s roughly half.

Last year, 8,642 stores closed their doors, according to Inman, which marked a 182 percent growth year over year. Mall traffic is down 30 percent among teens alone in the last decade, and 20 percent to 25 percent of malls are expected to close in the next five years. Those numbers have more than spooked some retailers, like Bebe.

The women’s fashion brand opted to close all of its stores in 2017 and focus solely on e-commerce, but to Inman, that wasn’t the right answer either.

“What’s important is a brand does need to have a physical face. Ninety percent of all retail is still done in stores,” Inman said. “So, to eliminate all your stores is a big issue.”

In the midst of the mall coming to resemble the morgue, as Inman puts it, some stores are adding locations because they’re actually delivering on current consumer demands. Those stores are Nordstrom Rack, Dollar General, Costco, Dick’s Sporting Goods, Old Navy and Aerie.

“The new department store is now discount,” according to Inman, a fact evidenced by the stores expanded.

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TJ Maxx has been leading the discount sector’s upward trajectory as consumers increasingly commit to finding a deal, and the company said last year that it plans to open 1,800 new stores.

“TJ Maxx is the only retailer I know that has over 500 stores that didn’t shutter one single store last year,” Inman said. “They know their customer.”

The reason most brands are missing the mark, is that they think they know who their customer is, when in fact, they’re only looking at too few—and outdated—demographics to determine who that is. Some companies think they have five different types of shoppers buying their brand when it can really be as much as three times that, yet they are marketing to each one with the same message and wondering why things don’t resonate.

More than categorizing consumers by age and income, it’s now about tribecasting, Inman said.

“It’s the process of performing advanced segmentation, micro segmentation. Where do those people live physically and digitally, who are they, what are their passions and social interests?” Inman said.

There’s a new path to purchase and consumers are doing things radically differently from yesteryear’s shoppers. They’re doing Google searches, reading online reviews, checking out what YouTubers think, following Instagram influencers, and spending a lot of time on social, whether posting their own selfies or perusing others’.

To really know that consumer and what’s making them part with their disposable income, Inman said companies should be doing things like tracking credit card purchasing info, sending Snapchats or visual emails to start communication or texting through chatbots—and each message should be different for each tribe that shops the brand, even if that means 14 different approaches.

“What’s really important right now is really being able to personalize,” Inman said. “No one wants your 50 percent off at Macy’s on Wednesday night.” What they want are deals targeted to them based on things they’ll likely like because the brand they’re buying from is paying attention.

Part of getting that personalization right will be realizing that you can’t compare a 24-year-old millennial to one who’s 38, or risk targeting them the same way.

“You can’t lump all young people as millennials,” Inman said.

Success in today’s retail will also be about product intimacy, brand consistency, local for local production and geolocation enabled experiences—or uncovering key touchpoints in the store.

“You can now heat map a store like you can the web,” Inman said, adding that this will allow for best sellers to be placed right in the front of the store to optimize sales, just as it would be done online. “When J.C. Penney has a hot selling item, they may not know it for two months,” Inman said. And that’s precisely the kind of thing that leaves consumers dissatisfied when they can’t find something in stock, or that leaves inventory on the shelf until it’s marked down 70 percent.

Retail is now facing the IWWIWWIWI era, I want what I want when I want it, and staying slow to change as many traditional companies are, won’t add up to success.

“With the customer in charge, the mobile phone, a new generation of shopper who’s always known how to pinch, zoom and swipe…how you interact and communicate is going to be different,” Inman said.