As holiday retail sales for 2013 showed gains of only 3.8 percent while predictions were for a 3.9 percent uptick from 2012, retail experts and analysts have singled out a batch of problems retailers must confront -- and directions they must go -- in 2014. Some of the major changes retailers must confront in the next three to five years that will "redefine the industry" include: Consumer price sensitivity, perpetual competitive pressures, channel conflicts, providing unique and engaging customer experiences, mastering competitive pricing strategy, promotion adjustments, privacy issues, shipping, etc. Here are some of the problems:
1. Customer engagement missing as eCommerce makes huge inroads
In 2013, online sales outpaced physical store revenue gains. We just wrote how $300 Billion in online direct sales expected in 2014 overshadowed by the projection that an additional $1.4 trillion in web-influenced retail sales is expected in 2014. Despite this meteoric growth, more than three quarters of retail transactions are still made at brick-and-mortar locations. Showrooming now seems over as a challenge -- but in-store experiences have been diluted to transactions, with little engagement between brands and shoppers. Shopping needs to be an experience, and retailers should take advantage of their physical assets to build a connection between consumers and their brand.
2. Conversion to sales lagging when mobile used for shopping
Retailers know smartphones are a great place from which shoppers can browse items, but conversions to sales via this method are low. As a result, many retailers are exploring new ways mobile devices can be used in-store, such as mobile apps that track customers as they shop, sending them tailored offers when they reach a certain section of the store; recommending items based on past purchases; or allowing shoppers to program automated shopping lists.
3. Privacy concerns mount as personalization and breaches grow
Using personalized information for sales, promotions, recommendations, and coupons raises all kinds of privacy questions—especially after recent industry-rocking data breaches at Target and Neiman Marcus.
4. The flip side: How much personalization is a good thing?
How much information is a shopper willing to share? For example, millennial are much more accustomed to sharing data. According to a study by Cisco, 52 percent of shoppers are willing to share information with retailers if they get a discount on their next purchase. Another interesting note: Shoppers are more willing to share information with high-end stores. When implementing a mobile strategy, respect shoppers' boundaries. Set up methods to allow consumers to opt out of these services.
5. Discounting is a common point of concern
Discounts plagued retailers this holiday as lower foot traffic caused stores to slash prices. On the other hand, customers are psychologically transfixed by the sales signs, and enjoy the thrill of the "search" (8 Retail Pricing Strategies To Satisfy Shopper Needs For Thrill Of The Hunt). If retailers use Pricing Intelligence and Assortment Intelligence solutions wisely, they will be on the road to solving/confronting most of these problems.
6. Customers confused by a retailer's half empty or half full shelf
Store retailers, confused as to what to actually stock in the store vs what they might carry on their website (if they have one), have to overcome the sense the consumer has that shelves are empty. Customers want what they want when they want it; they don't understand and don't really care about the retailer's complex backstory of ordering, receiving, distributing, and replenishing the merchandise. This is a tough, complex problem.
7. Industry basics like shipping, delivery & service are of great importance
Service, shipping and delivery are still big reasons for getting and keeping consumers. In-store delivery means immediate gratification; on-line shopping means days. Amazon and others are working on the shipping and delivery.
8. Retailers worried about where to assign the sales credit when an order is placed online and fulfilled in-store.
Who cares? Get over it. Companies need to be holistic, pull together and cooperate, not worry about who gets credit.
9. Retailers have to overcome trust as a group
Data breaches not only have an impact on the stores that were directly affected, but on the industry as a whole. "…In the end if you don't have trust, you don't have that consumer," said a Deloitte executive.
Bottom Line For Retail's Bottom Line
Statistics and analyses by companies, as well as consumer behavior and reactions all indicate the sea change in the retail industry -- greatest since the invention of "modern retailing." Retailers must continue to wrestle with the importance, influence, problems and solutions related to competitive pricing, assortment, shipping, shopping, mobile, omnichannel, general competition, and the law. In short, retailers still seem to be a long way from the finish line, and that line keeps moving.