Why Consumers Are Firing Traditional Retailers

Source article: Karen Webster @ pymnts.com (Feb. 3, 2020)

“Jobs to be done” – a theory popularized by the late Harvard Business School Professor Clayton Christensen – is the notion that consumers don’t buy products, but they hire them to perform a task they need done.

Extending that analogy to retail, one could look at the data on the decline of mall and retail store foot traffic, the increase in retail store closures and bankruptcies, and disappointing retail sales and margins in an economic environment of increased consumer spending, and might conclude that consumers aren’t hiring brick-and-mortar retailers to get their shopping jobs done the way they once did.

But it’s more than that.

Consumers are firing brick-and-mortar retailers from the jobs they held years and decades before.

To get their shopping jobs done, consumers are now hiring retailers that make it convenient to do business – anywhere, anytime, through any channel and on their terms. And finding, buying and taking possession of those products is an integrated experience driven by consumer choice and defined by certainty.

It’s why Amazon continues to crush retail sales, why fulfillment is increasingly where the retail battle is won or lost and why – as I have said for years – voice commerce, as a platform, will be a commerce gamechanger. And why 5G networks and connected devices will create entirely new shopping ecosystems and consumer experiences over the next decade.

But it’s also why the physical retail death spiral will continue, as traditional retailers double down on an omnichannel experience that is store-first rather than consumer-first. For all the talk of being digital-first and consumer-centric, most traditional retailers continue to ask consumers to do a job they no longer want to do: take their feet and their business inside their stores.

When Buy Online, Pick Up In-Store Goes Horribly Wrong

Retailers have been talking for years about the need to turn their physical stores into fulfillment centers, leveraging their brick-and-mortar real estate to create a new omnichannel shopping experience for the consumer who likes to discover and buy online and take possession of their purchases in a store that is convenient to them.

It seemed like a no-brainer: A consumer finds and pays for something online and picks it up at the store faster than they could have it delivered. A win-win-win, since consumers and retailers don’t incur or pay shipping fees and the retailer still gets the sale – and maybe even a shot at picking up more sales when the consumer comes in for the pickup. In-store pickup centers once required (some still do) that consumers walk through the store and pass by other products. Several years ago, reports suggested that the one-two strategy was working – of the 60 or so percent of consumers who said at the time that they were buy online, pick up in-store (BOPIS) customers, more than a quarter reported buying something else while in the store fetching their purchases.

Way back in the good old days of 2016, the BOPIS value proposition promised a bit of an advantage. At that time, consumers seemed more accepting of a three-day or longer delivery window. In fact, more than half (56 percent) of consumers in a study done by eMarketer reported that getting stuff from retailers three days later – or even longer than that – was acceptable.

As they say, that was then, this is now.

The “Amazon effect” has moved the delivery goalposts at the same time that it has expanded the depth and breadth of products that can be purchased from their ecosystem and delivered for free in two days, next day, same day and – someday soon – even before it’s ordered.

All of that has raised the bar for what the consumer now expects from any shopping experience, including buying online and picking up in a store from a traditional retailer. Two to three days is no longer good enough – particularly when, thanks to the Amazon effect, retailers have been forced to up their own free, two-day shipping game.

Especially when the same-day pickup option is a disappointing, friction-filled work in progress for many retailers – even after all of these years of pledging allegiance to an omnichannel, consumer-centric way of doing business.

The Heartbreak of BOPIS

Like you, I suspect, I’ve attempted to use the buy online, pick up in-store option on many occasions over the last couple of years. For me, the motivation was to get something the same day. Mostly I’ve tried to purchase clothes or shoes from well-known department stores. But so many of the times I’ve explored the option, a same-day pick up has not been available, nor has there been any option faster than free two-day shipping. As a result, I’ve been trained to not bother clicking on the in-store pickup option.

Until last week.

I was on a flight from Boston and decided it was time to buy a new pair of shoes from the retailer where I usually shop. I found a pair that I wanted to buy and noted that there was an in-store, same-day pickup option, at a location convenient to my meetings. Imagine my delight upon paying for them online, getting a confirmation and order number – all while zipping along at 35,000 feet – and then hopping in an Uber when I landed many hours later to score my new kicks.

When I arrived, I did the logical thing and went to the shoe department, as there were no special instructions provided about where to pick up my shoes. I was then told by a sales associate to go to another place in the store to get them. Pressed for time, I asked whether he might be able to check to see if my shoes were waiting for me there.

He did, and they were not. I was further advised that since all such orders had already been delivered for that day, it was unlikely that my shoes would be available for pickup until the next day. That was a problem since I wasn’t available the next day, not to mention that I had a confirmation stating that the shoes were available in the store that day.

I then suggested that perhaps the reason I was offered a same-day fulfillment option was because the shoes were in stock in the store – as in, the stockroom right behind him – and asked him to check. They were there.

What followed was a painful, 25-minute lesson on the shortcomings of a very large, sophisticated, “digital-first” retailer to nail the omnichannel experience – or even come close.

I was told that since I bought and paid for the shoes online, I couldn’t just take the shoes that were in stock in the store to fulfill my order and call it a day – even though that was obviously from where the online order would be fulfilled. In order to get the shoes that came from the store inventory – the ones that the sales associate and I were staring at in their nice little box – I had to cancel the online order and then repurchase them in the store.

However, I could wait until the online order system had synched with the physical store inventory system sometime later that day and the shoes were delivered to the fulfillment center – which, of course, was a few floors upstairs in that very same store. In that scenario, I would have had to go to customer service to redirect the shipment to my home, maybe three to five days later. All for a pair of shoes that had suddenly become a huge time suck – and that I was starting to like less and less the longer the process continued.

I felt sorry for the sales associate, who just wanted to help, and extremely frustrated by the customer service and shoe department manager, who simply didn’t know how to handle the situation because the rules are the rules and the process is the process. I ended up canceling the online order (the refund, I was told, would take three days to show up on my account) and buying the shoes from the sales guy. I did that, in part, because I was so fascinated by the inefficiency of the experience that I wanted to see how it would all end up – and in part, because I wanted to give the very nice and apologetic sales associate the sale.

A consumer-centric retailer would have done things differently. Perhaps they would have taken my information and offered to deliver the shoes to my hotel later that day once the inventory synching had completed. Or made it their problem and not mine that whatever needed to be synched hadn’t and given me my shoes without all of the cancellation and repurchase gymnastics. Or maybe the online customer service would have offered to expedite shipment to the next city I was visiting. Or done just about anything else to reduce the hassle factor and keep a customer satisfied.

But a store-centric retailer did exactly what this one did: wasted 25 minutes of my time with an experience that I found bad enough to now share with millions of readers.

The Returns Hassle

Maybe that sounds like a high-class problem to you – a little hassle with buying expensive shoes that I really didn’t need from a fancy, luxury retailer. But I think the only difference is that I happened to buy online at 35,000 feet. Yet, it’s just another data point on the failure of retailers, 20+ years after Amazon changed the rules of the game, to recognize that their stores are no longer relevant to how consumers want to use them.

Or don’t.

Some retailers also think that penalizing consumers by charging them exorbitant fees for mailing in a return instead of coming into the store, or making it tricky to opt out of in-store pickups during the ordering process, will force them to comply. Instead, it will only force them to other options, including Amazon, whose return policy now seems to give consumers even more of a reason to standardize on Amazon – no hassle and instant credit within minutes of returning the item to one of many return centers.

And another reason for consumers to fire traditional retailers.

I also think it’s emblematic of the failure of many retailers – including the biggest ones with the biggest budgets, the sharpest minds, the fanciest apps and the most at stake – to recognize that “digital-first” and “omnichannel” isn’t code for somehow tricking consumers to come into their stores.

It’s true that buy online and pick-up-in-store is going gangbusters for retailers like Walmart and Target, representing initiatives that are driving huge investments from each to compete. But those experiences aren’t about picking up stuff in the store but outside of it. Even Walmart’s Super Bowl ad for Pickup was all about the convenience of having purchases handled to shoppers without ever entering the store. Curbside grocery pickup is booming for both Walmart and Target, both of which recognize that their job to be done is to eliminate the friction from grocery shopping by not forcing consumers to do any of it inside the store.

These are among the same retailers that are also installing click-and-collect towers outside of stores and building pickup lockers in the front of stores to give consumers the choice of grabbing and going, or going inside the store to pick up more things.

And that are are investing heavily in same-day delivery to meet consumers on their terms and on their turf.

Analysts dinged Amazon last year when it announced a nearly billion-dollar investment in next-day delivery in Q2 of 2019. They then lauded that investment last week, when Amazon announced a record-breaking Q4 and reported that next-day delivery was a key driver of holiday sales.

Thinking Outside the Store

A consistent theme across the many consumer studies PYMNTS has done over the years is that convenience and choice drive consumer preference and spend.

More so than price – since consumers now weigh the value of their time against saving a couple of bucks here and there on the things they want to buy.

More so than location – since consumers define convenience as being where they are, not where a retailer happens to be. And increasingly, that is their home, a trend we observed for the first time last year when PYMNTS released its third annual How We Will Pay study, with research we did in collaboration with Visa.

Consumers spend more of their time at home now, since they can do many things there that once could only be done outside of it. Everything from going to the movies and watching live sports to eating restaurant food and shopping at their favorite (and newly discovered) stores can all be done more efficiently from the comfort of their increasingly smart homes. 5G and 8K televisions will serve as the catalyst for the virtual and augmented reality applications that will make going to the store a rich, immersive experience, without the need for a consumer to physically step inside – unless they really want to.

What’s Next

Pundits say that physical retail will never go away – it will just change.

Yet many of them are going away – 7,000 stores closed in 2017 (a 200 percent increase from 2016), 5,844 stores shuttered in 2018 and 9,300 shut their doors in 2019. Analysts predict that another 75,000 stores will close in the next five to six years, the hardest-hit sectors being clothing and electronics retailers.

And not many of them are changing.

Retailers have one important job to do: connect consumers with the products they want to buy in whatever way they want to buy and receive them.

Maybe that’s an experience-driven store, or an inventory-less store with a more curated and personalized shopping experience. Or maybe some reimagined version of the traditional retail establishment.

But increasingly, for retailers to be hired and not fired, they will be challenged to think differently and really walk their omnichannel talk. They will need to focus less on how to lure consumers inside their stores as if that were the asset they need to monetize and more on how to invest in data and partnerships that will increase the odds of a consumer finding something to buy — and the logistics that bridge the gap between the consumer’s intent to buy, converting that sale and the sheer delight of making sure that the consumer gets those purchases wherever and however and whenever they wish to take delivery. Where the store works for the consumer — and not the other way around.