Retailers Develop Strategies to Fight Online Competition
WASHINGTON, D.C. — It’s no secret that the retail industry is becoming increasingly competitive. However, a new report from Applied Predictive Technologies (APT) with research and analysis from The Economist Intelligence Unit, has found that brick-and-mortar are taking steps to combat e-commerce competition.
According to Brick-and-Mortar Retailers Fight Back: Winning Strategies to Compete with Online-Only Players, the rise of online-only competition has led 60 percent of retailers globally to shut their doors in the past three years.
"E-commerce has taken its toll on traditional retailers and, as our survey reveals, six out of 10 respondents have closed stores in the past three years as a result of online-only competition," said Pete Swabey, editorial director, EMEA Thought Leadership, The Economist Intelligence Unit. "But the survey also reveals the strategies that retailers are adopting to fight back.
"These include increasing their product selection, reducing prices, and expanding loyalty programs to better understand customer behavior. They are also emphasizing the unique strengths of the in-store shopping experience, in particular through an increased focus on staff training," he added.
According to the report, some of the strategies brick-and-mortar retailers are implementing to stay ahead of the curve include:
Increasing online investment. Traditional retailers are facing online competition head-on, with three-quarters of respondents saying that they have increased their investment in online channels.
Empowering employees. Seventy percent of retailers say that they've trained their employees to be more knowledgeable as the most common in-store response to online competition. Fifty-eight percent have also trained them to be more customer service-focused.
Growing product selection. The majority of retailers have responded to the infinite inventory of the internet by expanding their product selection, with 68 percent growing their in-store assortment.
Introducing loyalty programs. To deepen their customer ties, more than half of respondents (54 percent) have introduced loyalty programs and 24 percent plan to do so in the future.
Lowering prices. In response to price pressure from online-only rivals, 44 percent of retailers have cut prices, and 12 percent plan to do so in the coming years. Among the retailers who have closed stores but successfully recouped revenue, almost three-quarters (72 percent) implemented price cuts.
The report also outlines four key strategies from APT for brick-and-mortar retailers to adopt in the face of e-commerce competition:
- Make your store associates core to the in-store experience.
- Use customer insights to drive incremental profits, not just offer promotions.
- Take a surgical approach to store closures and remodels.
- Focus on measuring everything across channels.
"In such a competitive environment, it is critical that brick-and-mortar retailers not just adapt, but adapt smartly,” said Jonathan Marek, senior vice president, APT. "This report contains valuable information for all retail executives, breaking down the threat of e-commerce both globally and in the U.S., as well as which responses have proven most effective for retailers combating these competitive pressures.
"With so many initiatives to try across so many different areas of the business, those that can most quickly and effectively implement winning ideas will be the victors in the age of e-commerce," he added. "While there are many methods retailers can use to inform decision-making, in particular, findings show that among the respondents that leverage scientific testing to evaluate new ideas, 60 percent have either not closed stores as a result of online competition, or have recouped more than half of sales lost from store closures."