Everyone understands that the power and leverage in retail has shifted from manufacturers and merchants to customers, with sometimes dire results: the retail bubble bursting, manufacturers losing market share, grocer margins declining, and seemingly every consumer category under assault by Amazon, seemingly the sole company able to capitalize on this trend due to its longstanding indifference to turning a profit. How can retailers escape the cycle? First, experts argue, by recognizing the new reality; and second, by finally and definitively connecting their online and offline worlds.
By Rick Ferguson
Over at CRMwire, contributor Gerry McGovern frames the change in power dynamics. Money quote:
"Today, I believe more strongly than ever that we have entered a customer-centric universe, that the revolution involves a shift in power from organizations (religious, government, commercial) to customers, people, communities... The customer universe is not a comfortable universe. It's not a predictable one. There are no certainties. The planets that circle the customer are Empathy, Flexibility and Simplicity. The customer at the center is very demanding. We who serve the customer must have great empathy for them. We must be constantly thinking about their world, not our world."
For retailers, what does it mean to think about "their world, not our world?" Despite the seeming predominance of online retail, customers - even those dreaded Millennials and Centennials - still prefer the in-store retail experience. As Forbes contributor Barbara Thau points out, nine of the top ten U.S. retailers are traditional physical retailers. Despite the bursting of the retail bubble, physical retailers are more profitable, while no dominant pureplay internet retail has emerged beyond Amazon and eBay. Meanwhile, traditional retailers are snapping up ecommerce brands, while Amazon has placed a big bet on physical retail with its purchase of Whole Foods. Money quote #2:
"Brick merchants are buying click merchants because online-only is not a viable retail model, according to 'The Death of Pureplay Retail,' a report from digital think tank L2. For one, 'walk in traffic doesn’t exist online,' while stores can generate organic traffic. And expansion builds brand equity, the report says. That's why online players from Amazon to eyeglass merchant Warby Parker have been scrambling to open stores. They've 'been quick to recognize the value of a brick-and-mortar presence.'"
Another Forbes contributor, Tom Popomaronis, believes that the answer to thriving in the age of the customer lies in retailers finally doing what customers have been demanding since Jeff Bezos was still selling books out of his garage: uniting their physical and digital worlds. Money quote #3:
"As shoppers take advantage of the ease and convenience of shopping and researching by mobile, both traditional and online companies are rethinking the apps they're creating. Successful programs are bridging the gap between offline and online choices. By bundling loyalty and options like Order & Pay, for example, Starbucks' app commands approximately 19 million monthly active users. The app has been so successful that their mobile app sales account for nearly 30 percent of total sales at rush hour, with order ahead actually increasing wait times for regular customers. And overall, retailer apps are downloaded tens of millions of times each week, with about four out of 10 consumers (43%) interacting with companies through those programs on a weekly basis."
The fuel for thriving in the age of the customer is, of course, data - data that flows through the organization to build relationships through relevant, personalized, and differentiated reward and recognition delivered through both online and offline channels. If customers now have all the power, they are at the very least benevolent dictators; meet them on their own terms, and they will reward you with increased lift, yield, retention, and lifetime value.
Rick Ferguson is Editor in Chief for the Wise Marketer Group.