It’s shaping up to be a battle of Amazonian proportions.
As retailers gear up for the holiday shopping season, analysts expect brick-and-mortar merchants to deploy a variety of tactics to help them compete with online-only companies like Amazon.com. The result will be a more complex landscape for retailers and their customers.
Shoppers can expect to see promotions that can be redeemed only online or only in-store, price-matching and location-based mobile discounts. Increasingly, stores blur the line between online and in-store shopping with same-day delivery, ship-from and return-to store options for merchandise.
“Stores include online sales in their comparable-store sales, which hides the probability that store sales are actually declining,” Barbara Wyckoff, managing director at CLSA/Credit Agricole Securities, said via email. "Retailers are aggressively closing underperforming stores to focus on the best [ones],” she said.
Companies still want to get people in the physical stores, because stores are designed to prompt impulse purchases, and associates have the chance to upsell.
“When consumers go into the store they spend more, on average,” said Andrea Woroch, a retail consultant. “They lay out the store in such a fashion to capture consumers’ attention and hopefully get them to spend more than they intended to.”
It used to be that merchants’ biggest challenge was getting people in the door. Now when customers check prices and online reviews while standing in front of the product, even getting them that far doesn’t indicate a likely sale.
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“While shopping in brick-and-mortar stores, consumers refer to digital channels, with 19 percent reporting that they browse their mobile device while in-store” a recent report from software firm Hybris said. Two-thirds of these, it said, are using their smartphones to compare prices.
Since shoppers are going to be pulling out their smartphones to price-compare anyway, retailers are getting smart by using those devices to offer them deals they can only get while in the store. Woroch said consumers can expect to see more discounts this holiday season offered if they take actions like checking in using Foursquare or scanning an in-store code. Coupons that can only be redeemed in-store are another way stores are fighting back.
Balancing physical store and online transactions to keep one from cannibalizing the other will be a challenge, although analysts say having both channels available can give retailers an edge if they mesh the two correctly.
Aside from coupons, more retailers will be using tools like digital wishlists and mobile apps to connect with the customer wherever they are, Anne Zybowski, senior digital analyst at Kantar Retail, said via email. For instance, Target is debuting in-store QR codes on 20 of this year's hottest toys, she said. “The QR code will be scannable for direct purchase while in the store, ensuring the sale even if Target is out-of-stock on the item,” she said.
Retailers such as Wal-Mart are exploring ship-from-store and same-day delivery. “It’s a way for retailers to use their stores almost like warehouses,” said Al Sambar, retail strategist, at consulting firm Kurt Salmon.
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Woroch said shoppers can expect to see more free shipping offers this year with lower minimum purchase thresholds, or free expedited shipping for bigger orders. Also likely to become more prevalent, she said, are free returns or in-store returns.
“It’s getting people into the store, so if they were just planning to return it and get their money back ... maybe something will catch their eye,” she said. “It gives them the opportunity to capture some more sales there. As well, it’s a convenience to the consumer.”
Of all brick-and-mortar tactics, the one that has attracted the most buzz is price-matching. Retailers like Best Buy and Target are trying to beat Amazon and other online-only retailers at their own pricing game by offering to match certain prices. If this works, it could help stores reclaim sales, but it’s a tactic fraught with risk, analysts say.
"It’s an inevitable strategy,” Sambar said. “It’s going to be really important for retailers to match prices on the right items,” like perhaps meeting an online rival’s price on a TV but keeping prices for cables, speakers and other peripherals unchanged.
Although the rise of ecommerce stores that can pass along their lower overhead to customers in the form of lower prices has forced retailers to get more sophisticated, they still need to be selective with how they manage price-match offers and how far they extend it, Sambar said. “If you do this wrong you’re really going to hurt your margin."
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