Retail purchases were down on Black Friday. I’m not surprised. Retailers think that having an app where customers can purchase merchandise whenever, wherever with the push of a key, is cool. It might be cool, but encouraging customers to make purchases on their phone is not the wisest decision.
According to Justin Norwood, an IBM strategist, those customers who make purchases on their smart phones tend to purchase fewer multi-items compared to buying on their laptops, tablets or desktop computers. Anuj Nayar, a PayPal spokesperson said consumers are “snacking” on their mobile phones, meaning they are making smaller purchases or browsing in short bursts throughout the day, instead of placing larger orders at one time from their computers.
Overall, the retail industry is in big trouble. The smart phone is not the source of the problem; it’s that the retail industry has forgotten the adage, where’s the beef? In this case, the beef is the human connection. In real estate, the most important consideration is and will always be ‘’location, location, location.” Successful retail businesses require repeat customers. In order to generate repeat business the key priority must be “relationship, relationship, relationship.”
Up until the 1970’s, most retail sales were rung at your neighborhood stores. There wasn’t a need to train associates about the importance of building relationships because store owners lived in the same town as their customers, kids went to the same schools and everyone saw each other at local events. Then came the era of the large retail mall. Many of the retailers did a good job of replicating the service at the neighborhood store by employing seasoned sales people who knew the merchandise and understood the importance of customer engagement. My mother worked at Bloomingdales in a large mall in New Jersey; she was a great salesperson and an even greater mom.
Then retailers thought the magic ingredient to become more profitable was to replace seasoned sales associates with kids who might have been trained to be helpful, but unfortunately lacked the maturity to create relationships. They also worked part time and only for short durations.
The Internet arrived in the 1990’s but ecommerce didn’t grab hold until the 2000’s. Retail again made another strategic mistake. Instead of consolidating brick and mortar with ecommerce, separate departments manage each channel and frequently compete with each other. It should be a consolidated effort with the main focus on the customer, no matter the channel. The relationship ingredient is the pivot. In the ecommerce world, relationships cannot be substituted with Internet Spam. Daily email promotions will not keep customers coming back.
Now we have smart phones; most likely managed by a third silo that is now competing with their own brick and mortar and ecommerce channels.
As we said before, smartphones are not the problem. Retail has lost its mojo. Where’s the beef? The key to repeat business is relationship, relationship, relationship. Technology is cutting edge if it enhances the customer experience. Businesses must find a way to build a human connection, own the relationship with the customer and use technology to supplement and improve that connection. Those companies that own the relationship will have control over pricing and distribution. Those that eliminate the relationship from retail will see their customer base dwindle and in turn, their profits.
By nature, I’m an optimist. I don’t like writing blogs that lack hope. But I feel it’s like the Emperor Who Had No Clothes. I think someone must suggest to the Emperor, in this case whose kingdom is retail, that three critical pieces are missing: relationship, relationship, relationship.
What do you think?