By Bill Scott, founder of StoreReport LLC & Scott Systems Inc.
Millennials and Generation Y consumers do everything with their tablets, computers and smartphones; and they subconsciously avoid entering areas that sever the links between them and their virtual world. But that’s just the beginning.
The retail store of the future will be a lot different from the stores we know today. The battle for the consumer just got a lot more complicated and it calls for levels of attention and concentration few of us are prepared to give.
All retailers are affected by these changes, but convenience stores interest me mostly for two reasons: 1) I’ve spent most of my productive life servicing customers who have owned collectively, thousands of convenience stores throughout America, including Hawaii and Puerto Rico, and 2) Convenience stores are the canaries in the coal mine for most other retailers. Changes in typical retail operations may take months or even years before we experience the effects; whereas, a change in the convenience store industry can be seen faster, mainly due to the high volume. Convenience stores are mini retailers on steroids.
Look around you. Who can deny that drastic changes are afoot? We’ve had a nice 50 year vacation. Now is the time to go back to work.
Mobile Marketing
A convenience store customer called me last week and he wanted to know how we handle coupons that arrive at the store on smartphones. Shoppers are putting themselves in the driver’s seat. Yet we go on as if nothing has happened. For the past three decades the choice of running a loyalty program has been optional. Well, you can say goodbye to that. Consumers are entering the supply change like never before. What used to be a sellers’ market, with retailers running the show, is now a buyers’ market, and brick and mortar retailers are being forced out.
Making the mistake of too many electronic coupons and too much advertising
There’s a right way and a wrong way, and we have yet to figure out the rules. We know the fastest way to lose a Millennial female is to interrupt her conversation with a friend by advertising. More and more, advertising and poorly constructed promotions are becoming obstructive.
Did you ever have a pesky fly buzzing around your food while you were trying to eat? In the 1970s, I used to drive to a hotel in Boulder, Colo. on Sundays to eat their fantastic Eggs Benedict. It was fly season in Colorado, and flies were absolutely everywhere. I never thought it would be possible, but after 10 minutes or so, I simply quit swatting at them. My point is, that after a while, the flies became invisible. Manufacturers are struggling, looking for new ways to get customers to look for their products, and consumers are looking for more and more ways of avoiding them.
Charging for or not providing Wi-Fi
Millennials and Generation Y consumers are obsessed with their electronic toys. Especially females, who are multi-tasking by nature and can carry on a conversation, shop and text at the same time. Look, I’m a man, and I can’t explain how they can do that, but they can, and if you shut down their access to the Internet, you may never see them again. Texting while shopping is no different from texting while driving. We have a new competitor to deal with, and we need to figure out how to deal with it.
Discounting the need for automation
Automation is going into high gear. Every retailer should set off at least a few hours each week to research how automation is affecting their segment of the market, especially in the fast food arena. The demand for higher wages means servers are legislating themselves out of their own jobs. This may be a hot, political potato, but it is what it is. If history teaches us anything, paying higher wages will become a luxury we will soon be unable to afford.
Automation in the way we handle our inventory is an area that retailers will not be able to avoid much longer. Once you are able to obtain inventory at its cheapest possible cost, and you still can’t make a living, what is your next move?
The supply chain is the next big thing in lowering the costs of carrying inventory, and most retailers do not understand the supply chain at all. However, they will have to learn how to lower their costs associated with buying and selling inventory, or eventually be forced to shut down their stores.
We can’t say we haven’t been warned. How much you are selling pales in comparison to WHAT you are selling, and how much you are profiting from each sale. Most retailers don’t have the resources in place to know that, and most transactional data lays around the office untouched until it’s thrown out. We have accumulated millions of sales transactions over the past 13 years. It doesn’t do anyone any good if management doesn’t have the staff to make use of it.
Asking for feedback
Set up a program to find out what your customers are thinking. Most of us have lost touch with our markets and continue to operate as if we were still in the 1980s. Refusing to make WiFi hot spots available (see above) is just one small example of why many retailers are failing. If you have an Internet connection (and who doesn’t these days), setting up a WiFi hotspot in your store is virtually free, and there is no excuse for not taking advantage of the increase in traffic it will provide.
One of your primary tools should be keeping a close eye on the products that are selling in your area. You’ll never be able to do this by tracking categories. You have to go deeper than that. Tiny variances in what is selling can lead to revelations.
Time constraints on foodservice
“The restaurant business is like oxygen. If you’re alive, you’ll use it,” said Jim Sullivan (postcrescent.com). Americans now dine out an average of 4.2 times per week. By the year 2020, Millennials will make up 40% of restaurant spending, some $1.7 Trillion in spending power. What’s being called “Fast Casual” is overtaking restaurants like Chili’s, Applebee’s and Chipotle by leaps and bounds. Fast food, with quality products and no-tipping is more popular than ever before, and there appears to be no chance of slowing it down.
Poor engagement of staff
Retailers can no longer afford to hire the best, and employees looking for temporary jobs continue to be the norm. We must find a way to find better employees at a wage we can afford. That means fewer employees earning higher wages. Recently, I complained about a waitperson taking my order while talking on their cell phone. You can’t fire them, because you’ll likely get another one, maybe worse than the one you hired to take their place. Digital servers appear to be one answer, putting more people out of work with the result of less spendable income in your market. Quality of service is taking a backseat to speed. Decide which side of the spectrum you want to occupy.
Poor social media programs or none at all
Most social media programs being used by retailers are a complete waste of time. Advertising has been proven poisonous to social media. The virtual tsunami of advertising that most sites attract, makes your messages virtually invisible. If done correctly, it can be a boon to business. You have to develop a following by using good writing skills and helpful information. It doesn’t even have to be about your business at all. For example, an article about growing fresh herbs in your garden, will draw more attention than a 10% off coupon to eat out.
Relying totally on your brand
“If you want to survive, start making friends.” – Nicholas Christakis
Brands can a blessing and a curse. You may be proud of your brand. While your brand is important, customers may easily switch brands for a number of reasons. If your brand says, ‘out of stock,’ ‘shoddy service’ or ‘higher prices’, your brand can often do more harm than good. I think the main disadvantage of major brands is that one misstep can have far reaching effects over hundreds of retailers, usually bad. You need to back up your brand with the proper inventory and better service or your brand can ‘brand’ you negatively.
Not having great deals
Everybody loves deals. The size or value of the deal is secondary to the act of acquiring one. Walmart has made a fortune on rolling back prices. Getting a bargain is probably the No. 1 reason shoppers say they will return to a store. “Wow, I got a great deal.”
Now that we have the ability to change prices in a minutes notice, and systems that program events months in advance, we have the opportunity for deals by the minute, or even by the hour. My earliest memory of impromptu deals goes back to Kmart’s Blue Light Specials, which was discounted only because people were running over each other, causing injures, to get to the aisle announced over the public address system. To be extremely successful, deals must be a surprise. Smart shoppers are mostly suspicious of ‘sales’, but spontaneous deals create excitement in your store, and will get consumers to spend more money every time it’s used.
Be mindful of how you interrupt the mission
Depending on the environment, you need to be careful of how you alter the purpose of a visit, or whether you want to alter it at all. 99.99% of the time, convenience store consumers come into your store focused on a specific two or three items. A simple distraction can terminate a sale. Inventory your customers are unlikely to buy is a distraction. Excessive display advertising can result in no sale at all. Our research shows the average convenience store non-fuel purchase is around $2, not $4, and the average number of items sold in a transaction is 2-3. Customers are going through your stores like tornadoes looking for trailer parks. Get out of their way and attract more of them.
