By
Bob Phibbs
Updated December 23, 2024
Many retailers have embraced digital as the be-all and end-all. Many pundits and retail experts tell us the only way to survive is to bring the web into your store. But I’m telling you - you need to leverage the physical store.
Yes, many retail brands are looking to go direct-to-consumer, maybe even some of the brands you already carry.
But here’s the rub: After taxes, shipping fees, returns, and customer acquisition costs, those online brands operate under a 10% margin.
Instead of selling one to the many through a store, they must sell one-to-one.
It is reported that Amazon typically spends between $150 and $200 to acquire a new customer; that is not sustainable for many other retailers.
An AlixPartners survey for CNBC noted recently that the customer acquisition costs for online retailing also make distribution costs four times higher than in-store methods.
That means...
Clicking is much more expensive for a retailer than visiting a store.
Brick-and-mortar stores are the billboard of a brand and the embodiment of what that brand stands for. Properly executed, stores have lower customer acquisition costs and scales; the busier the store is, the less it costs per transaction.
While you need an online strategy that connects your physical store to your online store so that you can be wherever your shopper is to fulfill their desire for a product, you can’t allow your stores to get the short shift.
Here are 5 steps retailers need to embrace to compete with online stores:
Have a store philosophy with guiding principles and post it for all to see. To be a stand-out retailer in 2024, you must create a branded shopping experience. That starts with an essential DNA of how you and your leadership look at what you give your community and employees.
You must put it concisely so that your philosophy will be embodied by the service your shoppers receive. Many retailers are crying about how hard it is to get good employees.
That’s because today’s Gen Z don’t just want a job. They want to work for a brand that does more for their community than just making money for themselves.
Startup retailers and restaurants are leading with what they stand for to attract both employees and shoppers. This Sweet Greens location in downtown Los Angeles is typical for having a purpose and posting of it in clear sight of everyone.
Operational Excellence. Many retailers say they love their customers or brag about customer service, but I'm skeptical as a whole. I’ve been to some of the toniest of luxury retailers and the newest retail concepts, and they all cry out for a branded experience for the shopper. Leaving your shopper alone to browse is not a strategy.
Having a training director or a director of customer experience means nothing if a shopper does not consistently have the same buying process, whether in one department or another, at two different locations, or with two different salespeople. The war against Amazon will only be won by those retailers who can execute on the sales floor day in and day out.
Pay people accordingly. Currently, Seattle and some other larger cities have a $19.97 per hour minimum wage. I hear retailers say they have to cut labor due to those increases – and many retail gurus are saying the answer is more automation. But what I’m telling you is the exact opposite. The only hope for your store is human engagement.
With that, you can sell more products at higher margins than the online bandits. To get that, you must pay for the trainable talent who can think on their feet and make someone else’s day. Consider it part of your customer acquisition costs if that helps, but make no mistake, you are leaving millions on the sales floor if you settle for kiosks and computers rather than trained associates.
Use your online site to get customers to your physical store. 2024 was the year we stopped saying the store was dead. The smart retailers looked at their physical stores as an asset. Even digital native brands like Warby Parker and Glossier opened more stores. Why?
Because stores are incubators of taste and trend, without that critical mass of information, you’re just another online retailer selling stuff you think is great. Physical stores validate that. With that understanding, you realize that driving the consumer to the store opens choices.
Target is highlighting a message screen that shoppers see each time they go to order an item. The message boldly tells them that this item is available for immediate pickup at their local store. That option not only appeals to many shoppers’ desire to get it faster, but it reduces shipping costs and gives the retailer a chance to sell more products to that customer when they walk through the store. A reported 40% of BOPIS shoppers buy additional items in the store. That doesn’t happen online.
There’s only one metric that matters. Popup shops, kiosks, events, Instagram posts again, most retail experts tell you these are all great at building brand awareness and getting people to talk about you. But I’m here to tell you that no matter what the shiny object is, only one metric as old as time matters – are you selling the merchandise?
None of those matters if you can’t sell enough merchandise at a high enough margin to pay your suppliers and associates and make enough profit to expand or continue.
To compete in 2025, you need to spend time hiring, training, and analyzing their performance on the floor – did the shopper buy more from your brand due to the interaction with your associate, or did they buy less?
Ruthless attention to operational excellence will show where the weakness is, and it often is in believing your store experience is better than the other guys'. Once you have operational excellence and proven sales, you can use all the advertising, social media, and the rest to get more shoppers into your store.
See also, To Compete With Amazon Try This In Your Store Instead Of Coupons Or Discounts
And of course...
You must have an online store that works seamlessly with your physical space. If Covid taught retailers anything it was they had to maintain a way their customers could buy from them whenever they wanted and how ever.
In Sum
We are coming off a strong holiday season, but analysts are worried that retailers sacrificed margins in the drive to compete with online retailers like Amazon. And the boasting of higher online sales will mean higher return rates that will hit the bottom line well into Q1.
I’m off to the National Retail Federation’s Big Show next month, where we’ll hear about the need to innovate. I have news for you: innovation is hard to do repeatedly. It often becomes a distraction to chase the next thing while leaving the shopper who was willing to leave her house, drive through traffic, and find a parking spot to enter your store all alone.
It wasn’t that long ago we were being told that check-ins were the marketing program to embrace. Next, beacons would lead customers through the store to interrupt them, like Tom Cruz's character in Minority Report.
Don’t get me wrong, analytics that can help tell a retailer where consumers are, where they’ve been, and can predict where they’re headed next can be valuable.
But while it is good to add tools to do even better with your goals to sell more product, I’m telling you the answer to higher sales is right in front of you.
With a stated shared purpose and a ruthless focus on operational excellence, with paying associates for their engagement skills, embracing and touting your physical store presence, and focusing on the bottom line of selling more products as a result - you will be positioned to be here next year.
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