In-Store Holiday Shopping: The Ghost of Christmas Present
Holiday shopping is down all around in 2016, but brick-and-mortar retailers have seen the biggest drop off, thanks to uncertainty in the direction of the economy as well as the steady migration of consumers to online shopping. As stores try to lure customers back inside their walls with bigger and bigger deals, they only end up further reducing their margins of profit. Instead of going overboard with deals, these stores should instead leverage what they already have to offset losses: their personal touch, as well as their reverse supply chain.
The numbers for in-store holiday shopping this year thus far are surprising, even if the reasons behind them are not. At the start of the fiscal year, analysts predicted an increase of 3.6% in holiday shopping amidst a strong economy. With unemployment the lowest it’s been in 9 years, , the housing market having mostly recovered, and with wages finally beginning to rise, this should have been a robust season of spending, both online and in stores. So what happened?
Well, for one thing, the Presidential election happened. The longest, most divisive in generations, the election spread uncertainty to just about everyone in the country, regardless of their political affiliation. That uncertainty caused early shoppers to stay home, as they weighed their personal finances against the turmoil of the political and economic landscape. Despite retailer and financial analysts’ hopes that the industry would bounce back following the November 9th conclusion, that has yet to come to full fruition, with ‘post-election trauma’ causing shopping numbers to remain lower than anticipated, despite a small rise and an initial success in a record-breaking Black Friday.
If the election was the only factor resulting in a slow holiday shopping season for physical retailers, owners and employees could at least console themselves with the hope that next year will see things go back to normal. However, even without the political instability, this is likely the new normal for the industry, thanks to online shopping. The move towards electronic retail has been inevitable since the internet became a part of everyday life, with mom-and-pop and brand name stores alike taking increasing hits.
This year, electronic outlets saw triple the ‘foot’ traffic as physical stores, with mobile shopping finally taking the lead over laptops, tablets and PCs. People are still buying things on the go—they’re just doing it on their phones now. Nothing can slow down or reverse this trend, and it will continue to eclipse physical shopping. Even this year’s massive Black Friday haul doesn’t change the fact that the annual post-Thanksgiving shopping bonanza is on the decline.
Physical retailers have tried to remain relevant during this season by doing all the obvious things: slashing prices, giving out bigger incentives such as free shipping, paring down their inventory, and offering more exclusive merchandise. Although any of these efforts may bring in more shoppers, none of them address the actual issues that are adversely affecting their bottom line. Customers, having grown wise to the reactions of retailers, merely wait them out, holding off on buying, aware that better deals are imminent. In the end, consumers buy more, but spend less. While great for customers, this wreaks havoc on retailers’ margins, and does nothing to counteract the long-term move away from them towards online shopping.
So what should these stores do? One necessary evolution would be to embrace ‘the power of personal touch’. No matter how good the deals they offer, there is simply no beating electronic shopping for convenience. Where they can compete, however, is in the overall customer experience. That may seem counterintuitive, since long line and large crowds are what shoppers are looking to avoid. But the truth is that those same shoppers also crave a sense of festivity during this time of year. Through decoration; entertainment, such as live music and store Santas; and friendly, knowledgeable personal shopping assistants, brick-and-mortar stores can sell the ‘experience’ of holiday shopping that comes with a powerful sensation of nostalgia that online shopping can never hope to reproduce. If they are successful in these efforts, stores can build brand trust and strengthen ties to customers, which will continue to pay off even after the holiday season is over.
The other thing these stores can (and must) do to improve their margins has nothing to do with deals or discounts. They must work to optimize their reverse supply chains, which is a practice that should be observed all year round.
The reverse supply chain is the process by which retailers handle returns and exchanges. It is, in its current form, nothing short of a mess. Overstocked inventory goes unattended for weeks and months at a time, before usually ending up in some landfill, rather than being refurbished, resold, or recycled. The backlog and confusion this results in finds its way to the customer, who simply wants to exchange am ill-fitting sweater their cousin gave them as a gift, and instead finds themselves having to go through an obstacle course, souring them on the retailer. The whole process, as it stands for most retailers now, is bad for business, bad for brand trust, bad for customers, and bad for the environment. No season sees as big a surge in returns as that immediately following the holidays. So brick-and-mortar stores that would like to offset some of the damage done to their margins, by both online shopping and unexpected social turmoil, would do well to take a hard look at their reverse supply chains and find ways to streamline them.
Uncertainty might as well be the word of the year, especially as it relates to this rollercoaster of a holiday shopping season. Yet, there are some good signs on the horizon. Recovery post-election is slow, but it’s there. Indeed, as we move into the final week of holiday shopping, the industry might meet that 3.6% increase projection yet. Whether or not that happens, retailers can start preparing for next year’s holiday shopping season by optimizing both their personal touch, as well as their reverse supply chain. If done correctly, they may have a Merry Christmas and a Happy New Year after all.
