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2013 Retail Lessons

Dr. Stephan Liozu shares his opinion on the most notable retail lessons that have emerged from 2013.

With 2013 holiday shopping drawing to a close, the experts are starting to deliberate this year’s retail winners and losers. An undisputed winner this holiday season is the consumer with store discounts up 13 percent from last year – the highest level since 2008, according to financial services firm BMO Capital Markets. The following four major retail trends have emerged from this year’s headlines:

1)    Discount fatigue:How low can you go” discounting has had unintended consequences. Shoppers become immune to the deals, so retailers must offer bigger discounts to keep them coming into stores. That erodes retailers’ sales since shoppers aren’t buying things for regular price. It also eats away at retailers’ profit margins. Still, analysts say retailers have created a cycle of constant discounting that they’ll have to continue in order to attract U.S. shoppers, many of who are still dealing with stagnant wages and rising costs for things like health care.

2)    Traditional retailers can win with non-traditional tactics: Some brick-and-mortar retailers have taken a drastic, innovative approach to fight off their online rivals and are succeeding. Best Buy is clearly in that category. Others have not fared as well and losses are mounting prior to the all-important fourth quarter. This is the case for Toys’ R Us, which saw degradation in its financial results during the third quarter 2013.

3)    E-commerce wins again: Black Friday web sales rose 21% from 2012, as reported by IBM. Retailers catering to smartphone and tablet users benefited the most, with mobile traffic accounting for 32% of site visits, a 45% gain from a year earlier. Smartphones drove 24.9% of all online traffic. Cyber Monday Mobile traffic grew to 31.7% of all online traffic, increasing by 45% over 2012. Mobile sales were also strong, exceeding 17% of total online sales, an increase of 55.4% year-over-year. So overall, e-commerce is projected to be the bright spot of this holiday season, marked by the first Black Friday-weekend spending decline since 2009. While Internet sales may climb as much as 15%, more than three times faster than overall retail growth, they still account for just 14% of the total, according to the National Retail Federation.

4)    Omni-channel is the name of the game: The consensus is that the answer to the ever-increasing Amazon domination is through omni-channel strategy. Home Depot, Macy’s, and others are pouring billions of dollars in technology to respond to shifting consumer shopping behaviors and to improve the overall customer experience. 65% of retailers declare making investments in this strategy to better compete. An omni-channel platform must include price intelligence technology to be able to offer price-matching programs.

So is traditional retail in a death spiral? Depends on the expert asked. The desperation of brick and mortar retailers fighting for share continues. This is what retail expert Robin Lewis of the Robin Report calls “the race to the bottom”, with massive, seemingly permanent discounting. “The spiral kind of perpetuates itself,” says Lewis, “because everybody is using discounting as a strategic weapon of choice. It used to be tactical to get rid of excess merchandise. Now it’s an everyday thing.” No doubt retail is as tough a business as any: competition is fierce, customers are fickle, and an ill-timed storm can crush a critical selling period. But not all news is negative. 2013 proves that traditional retailers can survive and thrive in the e-commerce tsunami and learn from rich sources of practical insights for any executive who is willing to listen, learn, and lead.

Let me share a practical example of the future of retail: on Saturday 12/21, I walked into an L.L.Bean store in Western Pennsylvania eager to spend $150 on a nice pair of winter boots. I did not find the style that I liked in the store. So, a well-trained and courteous sales associate walked me to the information kiosk to show me more models on the L.L.Bean web page. She had checked my boot size and we quickly found a style I liked. In a matter of seconds, we had ordered a better and pricier pair of boots for $239 that was delivered to my house on 12/24. That is a great customer experience and excellent service. This is the power of the omni-channel concept. This might be the future of the retail experience.

About the Author
Stephan Liozu is the Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He also has a Ph.D. in Management from Case Western Reserve University and can be reached at sliozu@case.edu.