Brendan Witcher, principal analyst, Forrester Research
If you believe what you’ve heard in this year’s earnings calls, retailers are losing every dollar of business to Amazon. Are they? No. They’re losing some, but the estimates on Amazon’s pure, non-marketplace growth don’t even come close to every other retailer’s declines. Amazon’s growth is a symptom of—not the reason for—retailers’ problems. Retailers in decline are also losing sales to the many multichannel retailers that are growing and actually opening stores, as well as new market entrants, including brands selling direct.
The other big industry myth is that online sales are adding to total retail sales growth more than in-store sales. However, last year, retail sales grew $128 billion, excluding items like fuel and autos. Online sales added a healthy $53 billion, but in-store sales added an even healthier $75 billion.
The result of these myths: Some retailers believe they should close stores and compete more online to resolve issues. But this strategy makes their problems worse, and closing stores is likely the first step to ultimately closing the doors.
Retailers struggling today suffer from brand problems, not store problems. They have failed on five main fronts. Specifically, they:
- Don’t focus on solving customer pain points. The ability to win in today’s environment is just a matter of removing customer pain points to improve experiences along the shopping journey. Unfortunately, many retailers make the issue too complicated, and aren’t even aligned on what their customer pain points are.
- Ignore the need to differentiate their store experiences. Unlike digital touchpoints, in-store experiences haven’t changed substantively in over 100 years. Retailers who have failed at hyper-adapting to meet ever-changing customer expectations are now finding those same customers hyper-abandoning their brands.
- Use opinions—rather than data—to drive strategy. Many veteran retail executives think they understand retail based on past experiences. But customer expectations are changing so rapidly that what worked even 5 years ago matters very little today. Making strategic decisions without data is like driving a car wearing a blindfold. As W. Edwards Deming famously once stated, “Without data, you’re just another person with an opinion.”
- Think product assortments matter more than customer experiences. Digitally-savvy consumers know they can choose from any one of a hundred retailers for an item, or at least a similar one. So the more important question becomes which retailer has given the customer a significant reason to shop with them, not just the product offering.
- Allow bureaucracy and culture to stifle their organization. Retail executives often have trouble getting out of their own way. They obsess about what the competition is doing instead of focusing on their own business, while failing to remove the cultural and organizational barriers slowing down true digital transformation.
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