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March 28 2013

Commerce Weekly: Reimagining the stages of retail

The basics remain key in our radically changing retail environment

Warby Parker BusWarby Parker BusThis week, PandoDaily’s Sarah Lacy addressed the issue of whether or not brick-and-mortar retail is dead and argued that it’s more “dying as we know it” than dead-dead. Lacy pointed to several ecommerce 2.0 startups — online retailers expanding into brick-and-mortar — who are creating twists, or “tweaks,” in the traditional retail model, eschewing the traditional retail playbook.

Tweaks Lacy highlighted include stores such as Warby Parker and Bonobos employing the showroom model, sort of a reverse-engineered try-before-you-buy — i.e. order online — model; piggybacking on existing retail chains to secure customers and expand reach; and opening pop-up stores or experimenting with physical mobile retail — such as Warby Parker’s experiment driving glasses around the country on a refashioned bus.

Barbara E. Kahn at Harvard Business Review says the strength of these new companies as well as the successful old guard retail chains that remain is their ability to understand how the stages of retail fit into the new and changing retail environment. She looked at Ron Johnson’s grand plan for J. C. Penney and its (thus far) subsequent failure. Kahn described the rise and fall of Johnson’s innovative plan:

“… get rid of nonstop price promotions and introduce boutique ‘stores within the store.’ Surrounding these shops would be wide aisles that Johnson called ‘streets’ that would feature coffee and ice cream bars and places to surf the internet, and all of this would surround a town square for in-store activities and events. Much has been written about the faulty implementation of this strategy. Consumers failed to understand the confusing new pricing, the new stores could not be constructed quickly enough, and sales and stock price declined precipitously.”

Where did Johnson miss the mark? By forgetting that consumers were driven to shop at J. C. Penney by the very prospect of the sales — the “nonstop price promotions” — that Johnson eliminated, Kahn says. “The purchase process is staged,” she wrote. “First, consumers recognize a need, then they search for information about products that might solve that need, they create a consideration set, and finally make a choice. That the purchase process is multi-staged is something we’ve known for years, but in this new age of radical change in retailing and hyper global competition, it is easy to forget the basics.”

Kahn also reviews how several stores, including Best Buy, Warby Parker and Zipcar, are reimagining the various stages of retail to experiment and innovate — and survive — in this new era of retail. You can read her full piece at Harvard Business Review — it’s this week’s recommended read.

Retailers, your desperation is showing

As much as emerging models of ecommerce are branching out into brick and mortar, much of brick and mortar continues to desperately try to keep ecommerce out. In a piece at the Indianapolis Star, Ashley Petry looked at the various ways local store owners are battling the trend of showrooming, such as price matching, offering exclusive products, touting instant gratification, and even peer pressure. Petry reported:

“[Liz Barden, owner of Big Hat Books,] said she occasionally asks customers in her store to stop using their price-comparison apps, arguing that her selection of books represents a kind of intellectual capital. Sometimes, she said, her regular customers step in and chat with fellow shoppers about the importance of supporting local businesses.”

While employing peer pressure and guilt may be misguided attempts to remain relevant in our changing retail environment, a specialty food store in Brisbane, Australia, has taken the showrooming battle a step further, employing a strategy for the what-on-earth-are-you-thinking file: charging customers $5 for shopping without buying. Chris Morran at The Consumerist spotted a link on Reddit to a photo in the store’s window explaining the new browsing toll. The sign reads, “As of the first of February, this store will be charging people a $5 fee per person for ‘just looking.’ The $5 fee will be deducted when goods are purchased.” Morran, Cory Doctorow at Boing Boing and Matt Brownell at Daily Finance have solid outlines of the various ways this strategy is sure to backfire.

Experiments in thrifty retail

It’s looking like online retail is angling to get a foothold in the garage- and thrift-sale markets. Owen Thomas at Business Insider spotted an ad for a new eBay charitable program in the San Francisco area called Sell it Forward, in which a seller signs up to get a postage-paid bag sent to them, sends in their used stuff to eBay, eBay then hands it off to program partner Goodwill, which then tries to sell the items. If the items sell within two weeks, the customer splits the proceeds 50-50 with Goodwill; if not, the customer gets a donation receipt.

In a similar vein, Jessica Leber at MIT Technology Review took a look at a new startup called Yerdle that aims to encourage people to share and reuse items rather than buy new stuff. The startup, founded by former Wal-Mart global strategy exec Andy Ruben and green activist Adam Werback, has a marketplace linked to Facebook, according to Leber’s report, so users can sign in through Facebook to see what their friends have to give away or loan for free. Once an item is found, Yerdle would get paid to ship it between friends.

Leber noted Ruben’s inspiration behind the business model: “Every pound of product corresponds on average with more than 70 pounds in waste, he says, a problem he grew to care about when launching Walmart’s first sustainability initiative in 2005.” Ruben told her, “Just because someone is going to have a Halloween Party, it does not mean that a global supply chain has to be kicked into gear with every item being manufactured, transported and procured.”

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