For the year ended Jan. 31, the apparel chain’s e-commerce revenue increased 10.6%. The web accounted for nearly 84% of Gap’s sales growth for ...
(Page 2 of 3)
“If the corporation says it wants to grow 10% this year and figures it can get 50% of that from sales in existing stores, they know they have to add this many more stores to achieve their plans. Then they go looking for locations,” says Bob Antall, CEO of LakeWest Group.
Partly art, partly science, a sophisticated store expansion strategy at that point factors in demographics, market penetration, competition and real estate cost and availability, according to different recipes for success plotted out by different retailers, which in turn depend on the level of data about all of those areas available to the retailer. Home Depot, for example, spent its early years determining exactly what characteristics surrounding a piece of land would make it ideal for rolling out another store. “So early on, there was modest expansion, but once they had it figured out, they could literally roll out hundreds of stores,” says Jim Okamura, senior partner at J.C. Williams Research Group.
To their store expansion strategy, some retailers are now beginning to factor in the cost of achieving the targeted growth goal via the online channel versus store expansion alone. For some retailers, a business case can be made that if the retailer has hit a critical mass in the online channel, the same several million dollars to build a store could go toward a serious upgrade of its web capabilities, whether it’s a new platform, supply chain system, or other need, says Okamura.
More selective consumers
He adds that J.C. Williams already has conducted such modeling on behalf of retailer clients. “If the percentage of boost you get from the e-commerce value exceeds on an absolute basis what you would get in another store, at that point, you should think about decelerating the store growth strategy investment and investing on the e-commerce side, if you believe that growth will continue,” he says.
Okamura adds that’s a valid consideration for regional multi-channel retailers, or specialty lifestyle retailers whose stores are especially expensive to build, such as BassPro’s huge Outdoor World stores, for example. However, the math is much different for mass merchants and big box retailers, where a single Wal-Mart Super Center, for example, may bring in $100 million a year. “You’d have to have a lot more online business to offset what comes in from a store of that size,” he notes.
Consumers aren’t about to stop shopping. But given pressures on the household budget, they’re going to be more selective about how they go about it. Retailers can continue to grow sales and stay profitable-if they adapt to the new realities with a considered multi-channel strategy. “The retailers who are going to win are the ones that have visibility online and product in the store,” says Doiron. “We are helping our clients understand the value of the multi-channel shopping experience and trying to coach them on what that means in terms of merchandising strategy, logistics strategy and how they integrate online and in-store so it’s one presence to the customer.”
How that multi-channel experience translates will vary by retailer. A customer shopping at REI, for example, may be looking for technically detailed product information, with the expectation he can find it readily in whatever channel he uses. A Macy’s customer might place a higher value on broad assortment or inventory status-and consistency across channels, in the channel of her choice.
The web in the store
Forward-thinking retailers are getting added utility out of consumers’ increasing propensity to look on and shop the web by not only making it easier to research or close the transaction online, but also by offering in-store features and functionality similar to what consumers are becoming accustomed to online. In August, for example, The Container Store introduced shop-and-scan technology in its Manhattan store. Store customers using the GoShop Scan and Deliver service get a hand-held device they can use to scan from store shelves the bar codes of items they want to purchase.
Scanning the bar code brings up on the device’s screen a photo of the item (when available) and additional price and product information. The customer can select the items she wants, build a shopping cart visible on the screen, and carry the device to a special check-out area to complete the sale. An associate confirms the order and sets up delivery for a $15 charge. Because the system’s integrated with the store’s inventory database, the associate also can inform the customer of inventory status and delivery times at the point of checkout. Macy’s Manhattan store has a shoe locator service that uses handheld devices allowing the associates on the floor to call for and check the inventory status of shoe models and sizes without leaving the customer’s side.
Elsewhere, that sort of visibility into price, product and inventory information so readily available on the web interface is moving even deeper into a customer’s experience in the store. Doiron cites a Japanese apparel retailer that uses voice over Internet protocol in fitting rooms that leverages the sort of content available online. With a screen in fitting rooms, customers can see what the retailer has in stock in which colors, and using VOIP, have an associate bring it to them without leaving the fitting room.
Doing what it takes
Not only are such applications more efficient for shoppers, they’re potentially a better use of labor for stores as well. With a store associate only a touch of a button away, managers can more efficiently address the customer’s needs. That takes fewer associates on the floor. Store managers could put those associates to better use in tasks such as store recovery until they are called. In the case of applications such as Macy’s shoe locator, the technology puts more product information and sales power into the hands of associates while they stay with the customer, rather than forcing them to go in back to hunt down a shoe.