10 Ways to Succeed in Retail

Photo of a Nike store
 

By Tricia McKinnon

If anyone says being a retailer is easy they are lying. From labour shortages, to supply chain issues to the pandemic retailers are struggling. Last year alone there were 5,079 reported store closures in the United States. But all hope is not lost. Whether you are new to the sector or have been in the trenches for decades there are many strategies the most successful retails are using to succeed. If you are curious about what to do to take your business to the next level then consider these 10 ways to succeed in the retail industry. 

1. Pick the right location. Every time I see construction for a new retail space where I live I want to scream…no don’t do it! Walking by empty stores as I run errands or seeing stores close down reminds me of the importance of picking a location that has enough foot traffic to support your business. Just because you build it doesn’t mean they will come.

From small retailers to large retailers sufficient foot traffic has never been more important as consumers elect to do more of their shopping online. But it isn’t just online shopping that is affecting location decisions since the majority of retail sales still happen offline. What is changing is where shopping trips are taking place. As big box retailers like Walmart, who are often located in off-mall locations, continue to grow so does the traffic in those locations. With this in mind several retailers are shifting their store network to off mall locations. Gap, a long-time mall staple, is planning to have 80% of its sales from its Gap and Banana Republic brands come from “off-mall, strip, outlet and online formats” by 2024. “Our strategy is rooted in moving away from traditional malls,” said Gap CEO Sonia Syngal. “We have sharpened our real estate strategy so that our stores will be where our customers want to shop today.” 

Signet Jewellers which owns the Kay and Zales chains echoed a similar sentiment. “The foot traffic for off-mall locations is better than what we’re seeing in the mall, certainly in this time. It’s really important, and we see that shift continuing,” says Joan Hilson, Signet’s CFO. Hilson says that its move off mall is “an opportunity for a better economic model.” A survey of retail CFO’s taken last year found that close to a third were planning to reduce their presence in malls. Macy’s is also part of this group with plans to open more off mall locations. “We continue to believe that the best malls in the country will thrive,” said Jeffrey Gennette, Macy’s CEO. “However, we also know that Macy’s and Bloomingdale’s have high potential [off]-mall and in smaller formats.”

2. Invest in your employees. Shake Shack has a history of paying its employees more than industry standard. Danny Meyer, CEO of the Union Square Hospitality Group and founder of Shake Shack believes if you pay employees higher rates they tend to stay longer and are of a higher quality than employees who accept roles at lower rates.

In 2020 as a thank you for working during the pandemic Shake Shack paid its hourly employees holiday bonuses of $250-$400 and it shelled out an additional $6 million in wages. Shake Shack also announced it was increasing staff compensation in total by $9 million by the end of last year. A job at Shake Shack can be lucrative with General Managers at Shake Shack making $115,000 including equity based compensation.

In the past Meyer has said: "one of the things I'm proudest about is just how many of the managers at Shake Shack, who all have stock options, started off as hourly workers, but at a much higher rate than they might have made in the fast-food world." 

We have all seen the retail employee who seems like they would rather be anywhere else than at work. If that employee is avoiding you instead of serviing you then maybe it’s because the company he works for isn’t making it worth his while. If your employees aren’t giving their all then perhaps you have to think of what would motivate them to do so. I could never quite figure out why Starbucks employees seem so happy all the time until I did some research and realized that Starbucks really invests in its employees.

3. Know your customers. Imagine running a business that’s over 20 years old. You have had success in your home market and now it’s time to expand into a new market, the United States. The first question many brands facing this opportunity will ask is how are we going to market our product in the United States? Instead of flooding the market with Instagram and Facebook ads beverage maker Oatly employed an entirely different approach. Oatly conducted painstaking research to identify a set of coffee shops in the United States that could serve as its first set of customers and as informal brand ambassadors for its product. 

Oatly didn’t choose any coffee shops but high end shops that roast their own beans and are local favourites. The process took several years and resulted in Oatly selecting ten coffee shops in major cities in the United States.“If you’re going to get people to try oat milk for the first time, you want to make sure that first trial is the best possible situation,” says Schoolcraft. 

After selecting the ten coffee shops Oatly sent a sales rep to make a quick sales pitch at each location and left the baristas with free samples of Oatly. At first the baristas resisted but who doesn’t like trying something that’s free (think free samples at Trader Joe’s). The strategy worked and Oatly’s product spread through coffee shops across the United States. By the end of Oatly’s first year in the United States its oat milk was in 1,000 coffee shops. "They developed a really strong alignment with baristas, roasters and coffee shop owners — the ultimate influencers for devotees of specialty coffee," said Lori Bartle, president of ad agency MeringCarson. "That's serious word-of-mouth, as these are the people who are more likely to recommend it not as a trend but as a lifestyle choice."

It sounds cliché to say “know your customers” but do you really feel like the retailers you shop from really know who you are? Sometimes it’s something simple like email communication. Recently two organizations started sending me marketing emails. I don’t mind getting an email here or there but one organization started sending an email everyday the other sends multiple emails per day. You don’t have to do too much research to know that a customer doesn’t want daily emails unless they sign up for them.

Make it a goal to really know your customers. Forget the generic survey and contact them, ask them how they are doing and what they are looking for. They will appreciate and remember that you made the effort.

4. Have lucrative brand partnerships. One of the most effective ways to bring traffic into a retail store is to add a popular brand that can pique the interest of your existing customers as well as bring in new customers. Macy’s achieved this by adding Toys “R” Us merchandise to its website in August of last year. Toys “R” Us was a popular brand but it was saddled with debt leading it to file for bankruptcy in 2017. But consumers still love the brand and see it as one of the preeminent destinations for toys for children. That is one of the reasons why both Amazon and Target have sold Toys “R” Us merchandise in the past. 

After adding Toys “R” Us merchandise to its website Macy’s found the partnership attracted many new Millennial parents who after shopping for toys bought higher margin products at Macy’s. Macy’s is now adding small Toys “R” Us shops in 400 of its stores this year. “Our partnership with Toys “R” Us has been instrumental in attracting new customers to the Macy's brand,” said Gennette. “Of the customers that shop Toys “R” Us, 25% were new customers to the Macy's brand, and 93% of these toy customers cross-shopped other categories.”

Store within a store concepts never get old. Target is adding small Ulta Beauty shops to 800 of its stores and Sephora is adding small Sephora stores inside of 850 Kohl’s stores. They are doing this because these partnerships work. 

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5. Consider multiple avenues for growth. To be successful and have longevity you will have to reinvent yourself at some point. Is Amazon an eCommerce company or a cloud computing company or a media company? When most people think of Amazon they think of online shopping but Amazon makes most of its money through cloud computing. In the first nine months of 2021 Amazon’s cloud computing business, Amazon Web Services generated 61.8% of Amazon’s operating income while only generating 13.4% of Amazon’s revenues.

Amazon also has a burgeoning advertising business. Amazon quietly launched this business in 2010 building it up over time, under the radar, similar to what it did with Amazon Web Services. But its advertising business got so large, reaching $31 billion in 2021, Amazon disclosed its size for the first time in the fourth quarter of 2021. If Amazon was content with only being a retailer it wouldn’t have launched these businesses which generate the majority of its profits which then help to subsidize services like fast shipping. 

Amazon is showing the retail industry that everyone literally needs to think outside of the box about not what they are but about what they can be. 

6. Find a way to increase frequency of visits. Unless you are a luxury retailer frequency of visits is the name of the game in retail. If your customers aren’t transacting with you on a frequent basis you will have to continually spend money trying to lure new customers in. This is an issue mattress retailer Casper faces. When Casper launched its cute mattress in a box in 2014 it became Instagram famous quickly. But what the company many not have fully appreciated before it went into business is that the average person changes their mattress once every 10 years. That means once you buy a mattress from Casper you may not be back for another decade. Casper has launched other products to increase purchase frequency but none have taken off causing the brand to struggle. 

Do you ever wonder why it’s so cheap to buy a hot dog at Costco? It’s not because Costco is overly generous it’s because Costco knows you will go to a Costco just to eat a hot dog for lunch then you will stay for a while. Costco’s hotdog combo is actually the same price it was in 1985. Speaking about this Bob Nelson, Senior Vice President of Financial Planning and Investor Relations at Costco said: Costco generates “very little money” on the combo deal, but “we get so much more mileage out of it than we would by raising the price to $1.60 and making a few more million dollars.” Because shoppers believe they are getting an uncommon deal they are likely to spend more.

The reason why Walmart sells groceries and Amazon is focused on growing its food business is because food is a category that generates weekly visits. If you can think of a way to get your customers into your store on a more frequent basis by selling food or coffee or another frequently consumed product your business will thank you for it.

7. Have the right pricing strategy. A trend underpinning the success or failure of many retailers is the consumer’s shrinking wallet. Consumers are struggling and this can be seen by putting a spotlight on Millennials. The Washington Post goes as far as to call Millennials: “The Unluckiest Generation in U.S. History”. The Post writes that “Millennials will bear…economic scars the rest of their lives, in the form of lower earnings, lower wealth and delayed milestones, such as homeownership.” Ouch.

Sad but true and that trend is showing up in the retailers that are succeeding. It is no coincidence that Walmart, a low priced retailer, is one of the largest retailers in the world or that dollar stores like Dollar General are among the best performers in the pandemic. It is also no coincidence that low priced skincare brands like The Ordinary and CeraVe are winning the hearts and minds of consumers. 

If you are a Gen Z consumer or a Millennial you don’t have a lot of discretionary income especially after you pay for a necessity like a mobile phone and data. As technology eats up a larger portion of our budget than in the past there is less money available to spend on discretionary items. That is why it is important to focus on creating real value for money when you are pricing your products. One of the reasons Sears failed is because Walmart undercut its prices. You may not have Walmart’s pricing power but being mindful of whether your prices are too high is important. 

8. Become a savvy marketer. In 2007 Facebook launched its advertising platform. If you were a brand that started advertising on the platform around that time your marketing dollars, with less competition, would have gone much farther. But it’s 2022 and everyone knows about Facebook advertising and uses it to reach customers. It’s a lot more expensive than it used to be to advertise on Facebook and it’s even harder to standout. If you are going to win the attention of consumers with low attention spans you have to think more broadly than trying only to reach people through digital marketing. 

Sometimes the best action is the one most people aren’t taking. Menswear direct to consumer brand UNTUCKit realized this when it tried to figure out how to acquire its first set of customers. In the early days of the brand the company tried the traditional step of hiring a PR agency to gain exposure. But after going down that route UNTUCKit decided to take the unconventional approach of firing its PR agency. It felt that the PR was not giving the brand the exposure it needed. Instead UNTUCKit placed ads on sports radio and in print airline magazines. While these are not the kinds of marketing moves everyone is talking about these vehicles often have more captive audiences than a fast-moving social media feed.

UNTUCKit found that for approximately $350, at the time, it could reach 200,000 potential consumers using radio ads. After its first local radio ad placement in 2013 it had 1,500 website visitors in less than 10 seconds versus a normal level of traffic of 150-200 visitors. Speaking about this approach, UNTUCKit CEO Aaron Sanandres said: "I think that the biggest lesson is to be curious, right, think about the different, maybe nonconventional ways, that you can get your message to the right audience, whoever that audience is for your particular business." "As long as you can measure it."

Often what looks like a challenge (i.e. your Facebook advertising budget is running out) can be a blessing in disguise as it forces you to think of more creative ways to acquire new customers.

9. Sell great products. Think about your favourite retailer. Why do you choose to shop there year after year? I bet they have great products. Apple is the largest company in the world with a market capitalization of over two trillion dollars. Apple did not get there by accident it has great products. Those products keep customers coming back to Apple year after year. Apple also seemingly pays attention to every single product detail, striving for perfection every time. Do your customers marvel at your products or service?

If you are working hard on retaining your customers but your churn keeps increasing have you had an honest conversation about the quality of your products? Are they good enough? Quality takes time, no business is an overnight success. The better your product is the easier it is to retain your customers.

10. Provide service that stands out. When was the last time a sales associate gave you a best in class experience, something you will always remember? I bet it doesn’t happen often. But there are some retailers who are known for their customer service and Trader Joe’s is one of them.

Trader Joe’s was ranked as having the highest customer satisfaction rating among supermarkets in 2021 by the American Customer Satisfaction Index. Like most companies known for providing excellent customer service, Trader Joe’s employees are empowered to do what it takes to ensure customers are happy. Mark Gardiner, author of the book Build a Brand Like Trader Joe’s, took a job as an entry level employee at Trader Joe’s for a year to gain insight into why the retailer is so successful. Reflecting on his experience he said: “even as a new crew member (the lowest-level employee) I was empowered to do almost anything for a customer. Spend 15 minutes in the storeroom looking for a $5 item at a customer’s request? No problem. If I encountered a customer who seemed to be having a bad day, I could give her a bouquet of flowers on my own initiative. Anytime a customer asked, “what are these like?” I could open a package and give them a free sample.” 

Since many retailers struggle to provide memorable customer service why don’t you commit to being known in this area, it will pay dividends.

 

Tricia McKinnonStrategy & GrowthComment