Brick and Mortar Retail Stores Changing Strategies to Compete with Online Commerce

    

shutterstock_421515661.jpg

Online shopping is becoming the norm. With American consumers spending an average of $2,000 each year shopping online, it's no wonder that big box retailers are responding to the threat of their online competition. These big box retailers are approaching these strategies in different ways.

Cost-Cutting

Macy's response to online competition is to cut back and focus on their digital services. Approximately 100 Macy's stores will close in 2017. The company is rethinking the costs of maintaining physical stores in a society that is starting to prefer to shop online. These 100 stores represent 15% of Macy's 675 full-line locations and $1 billion in annual sales.

Using savings from the closed stores, the company plans to reinvent itself by bringing in more brand shops within the stores, hosting in-store events, and focusing on improving their customers' online experience.

Far from being a last ditch effort, this move allows Macy's to focus on digital investments, with investors seeing this as an opportunity for Macy's to tighten their operations. Although sales fell by 3.9% this year, shares surged by 17%.

In-Store Restaurant and Bar

Some big retailers are choosing to approach the battle a different way: drawing customers offline and back to their stores by offering a social dining and drinking experience. The Urban Outfitters in Brooklyn, Space Ninety 8, has two bars and an Israeli barbecue restaurant. Customers are allowed to peruse through the store while drinking. Urban Outfitters in Los Angeles and Austin also feature bars.

Other retailers have similar approaches. Barnes & Noble traditionally have in-store cafes and are looking to improve their customers' overall experience by opening stores with sit-down restaurants that will have alcohol in the menu. A Target store in Chicago services a Starbuck's Evenings menu with wine and beer, while the accessories retailer Shinola is partnering with a local, Washington-based bar on a drink concept that will open within its store.

The purpose of these changes is simple: it gives people a reason to actually come into the store, an experience that can't be recreated through online shopping. Exhausted customers will have a chance to sit back and enjoy a meal or drink, which makes them more likely to stay in the store and spend more time browsing items. The "buy something and get out" mentality is removed and customers no longer feel pressured to make purchases.

This strategy is tied to the increase in restaurant sales, which between April 2014 and April 2015 was 10%. Compare that to retail sales, which came in between 2-4% growth. This allows retailers to make up sales through food and beverages while giving people a reason to visit their stores even if they're not making item purchases at the time.

Empowering the Budget-Conscious Millennial

To take on Amazon.com, Walmart recently announced that it will spend $3 billion to acquire the start-up Jet.com. Their goal is to use Jet's bulk ordering strategy to grow their e-commerce business and target millennials on a budget.

Jet.com was founded as a direct competitor to Amazon and Walmart, promising customers the Web's lowest prices on over 10 million goods. Savings on items average between 10-15%. Jet.com works through complex algorithms, where discounts start accruing as customers add more items to their basket. The more items they add, the bigger the discount.

Jet.com's strategy fits Walmart's Everyday Low Prices motto and gives customers the chance to be in charge of the prices they pay. Walmart is also counting on the creativity behind the company to boost Walmart's online stores, with innovations designed to appeal to a different demographic than Walmart's usual customer base.

Multi-Channel Fulfillment

Regardless of whether your company needs E-Commerce fulfillment or retail fulfillment, Moulton Logistics offers flexible multi-channel fulfillment solutions for all retailing channels.

r

About The Author

Patrick Moulton specializes in logistics and marketing with 15 years of industry experience. He is currently enrolled in the USC Marshall School of Business Executive MBA program.