How local retailers can use big data to bolster growth
The world of retail is changing – Will there be room for brick and mortar?
Amid a shift to online consumer spending, more than twice as many traditional brick and mortar retail outfits have shut shop through the first quarter, compared to the same period in 2016, according to Credit Suisse, which noted roughly 2,880 store closures by early April, compared to 1,153 during the same period last year. This is not likely to be a passing trend; rather, it reflects a fundamental reset in the form of shifting customer preferences and habits amidst surging e-commerce. Amazon's $13.7 billion bid for Whole Foods is yet another indicator of how mobile and non-traditional retailers are changing the dialogue. Amazon is further disrupting Colorado retail with its million square foot fulfillment center that will allow for same-day, two-hour delivery with the goal of 30-minute delivery in the Denver metro area.
As technology rapidly re-shapes the U.S. retail space, Colorado retailers are working to adapt. For many, local markets provide a strong base for expansion, with growing demand for specific goods such as health-oriented and organic products. The key to success lies in building on the Colorado market's "brick and mortar" mystique, while expanding strategically to attract the e-commerce customer as well as those that want the product on their terms. Here, behavioral insights and big data can play a productive role, even for relatively modest sized retailers.
State-of-the-art research is evolving rapidly, too, and now incorporates a broad range of tools to provide actionable data to retailers. This might include everything from consumer panels, customer feedback and online consumer behavior to point-of-sale information. The net results are better insights into customer behavior as well as more efficient and timely product presentation and inventory management, among other benefits. To take one example of how this works in practice, consider research, which finds that a specific product does not sell well on its own. However, pairing that product with one or more complimentary items or accessories can boost overall sales. Target Corporation adopted such a merchandising strategy with products like Kitchen in a Box, a cookware set, which has grown popular among single younger consumers, including college students.
Colorado continues to be an attractive destination for many retailers. In Denver alone, roughly 1 million square feet of retail development was underway to close out 2016, according to local news reports. CBRE Research's 2017 Global Real Estate Market Outlook cites an expectation that the city will outperform many other global retail markets. The entry of Stamford, Conn.-based Vineyard Vines, the Martha's Vineyard-style clothing chain in Colorado's Cherry Creek shopping district this summer is a recent example of a lifestyle brand setting up shop here.
While a rapidly growing population offers retailers opportunities, the cost of doing business at a physical location is often greater than the benefit, particularly when you take into account the increase in property prices and tax valuations. However, local retail businesses can attract more shoppers and maximize the impact of their media spends without necessarily making big investments.
The first step involves addressing their customers' need for the convenience offered by e-commerce shops through better customer experience strategies, including an emotional connection to the local retailer. "Showrooming" – the use of physical store locations as a showcase for online products – represents another potential opportunity to drive growth. Physical stores can support online sales, and vice versa. Both experiences can be improved by more granular customer insight, using data to better understand seasonality, cost sensitivity and other buying patterns, for example. And the data needs to find its way further down in the organization to the store manager level, where it can be used to optimize individual customer interactions.
The world of retail is changing, but bricks and mortar won't disappear. Colorado, in particular, owns a "lifestyle" brand that makes location int he state compelling. And the burgeoning market for marijuana sales is contributing to retail and restaurant growth, too. But in the online world, the old maxim about "location, location, location" as the key to success no longer holds true. A more helpful mantra is "data, data, data" where actionable consumer insights are harnessed to build synergy between channels, supporting the growth of both physical stores and online sales.