Winning at Retail

June 27, 2017 at 1:54 PM

by Mark Gibson, June 27, 2017

Much is being written today about the retailing industry in decline. Digital commerce is growing, often at the expense of traditional brick and mortar. As a result, thousands of stores are closing. A similar trend is being experienced in banking, with a net decrease of over 1000 branches over the past year.

And yet, these three stores recently opened in my South Shore Boston neighborhood -- Tesla, Lululemon, and Capital One. What does this say about the state of retail?

First, all three of these are nontraditional retailers. Tesla is a car manufacturer that is so far successfully bypassing the traditional car dealership model, going directly to the wealthy consumer in exclusive retail shopping centers. Lululemon is an athletic apparel designer bypassing traditional retail channels and going directly to the consumer. Finally Capital One is a credit card issuer and retail bank that is using a "cafe" concept to attract prospects across its threshold, through a unique space sharing partnership with Peets Coffee.

Second, all three of these "retailers" have robust digital channels to either lead or support their physical store channel. I would venture to say that 25-50% of their sales are digital, but they understand that from a distribution and branding perspective, they need to have a visible physical presence where their customers shop.

What lessons should this provide to the rest of us?

We need to be creative and innovative about our business model, particularly how we attract new customers. Many of the old channels and media don't work anymore. New channels, partners, and techniques are needed. All three of these "manufacturers" would not have had stores ten years ago, and now they are building stores while traditional retailers are closing theirs. Why? It's all about the cost of acquiring a new customer, and these three manufacturers have clearly found that stores cost effectively expand their customer base.

Finally, as Amazon's surprising purchase of Whole Foods makes clear (Bezos: "Alexa, buy Whole Foods!"), having a robust digital channel is not enough. Even though the typical consumer spends five hours a day on their devices, they spend ten hours a day in the physical world, and a winning brand needs to have a presence there to be vibrant and relevant.

Eileen Sullivan

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