Retailers are fuelled by the mistaken belief that consumer purchases are driven by price

Retailers are fuelled by the mistaken belief that consumer purchases are driven by price

Brick-and-mortar retailers are losing massive quantities of sales by dismally failing to provide an engaging shopping environment, writes Emma Birnbaum. Instead, they should be providing a seamless eexperience by creating a personalised and painless purchasing process, and providing as much product and user information as possible.

The shopping experience has transcended the physical store to a virtual world. The once all-pervasive brick-and-mortar store must contend with the now omnipresent internet, a platform rapidly and aggressively developing, expanding and diversifying.

And as e-commerce grows at an unprecedented rate, traditional, brick-and-mortar retailers whither.

Brick-and-mortar cannot compete with the internet, nor should it. Brick-and-mortar has the capacity to provide services the internet cannot. The high street exists in the physical world and consumers buy physical products. For as long as consumers buy three-dimensional items, the epitome of shopping is a tactile, multi-sensory experience. That said, brick-and-mortar is not only dismally failing to provide an engaging shopping environment but it is actively driving shoppers away.

There are two types of stores in brick-and-mortar retail: service stores, where the sales process is actively mediated by an agent of the store; and self-service stores, where, thus far, sales are un-mediated or passive.

Traditionally all shops were service based. The shopper was greeted upon entry and a shop assistant would guide him or her through the store addressing wants and needs by presenting suitable merchandise and riffling through the stock room to find the required size, colour and most importantly, any other pertinent options. Finally, the same shop assistant would ring up the items the customer selected to buy. The personalised selling and buying exchange continues to be employed today, although, in general, it has evolved from a ubiquitous experience to an elite service.

While there remain several service-driven, successful and competitive high-street fashion stores – COS, Massimo Dutti and Intimissimi – the vast majority are self-service.

This is the high street today: SALE, sale ends today, back to school low prices, SALE up to 50% off, up to half price SALE, HUGE INVENTORY BLOWOUT, EVERYTHING MUST GO, up to 70% off MUST END TODAY!, BIGGEST SALE EVER, summer sale, winter sale, Black Friday sale, after Christmas sale, Easter sale, Spring sale, Autumn sale, 20% off for students, free gift with purchase, birthday gift with purchase, buy 1 get 1 free, 3 for 2, don't miss today's deals, SALE!

On entering a typical store the shopper is overwhelmed and over-stimulated by blaring music, unforgiving lighting, piles of indistinguishable merchandise, confusing signage and aerosolised smells. Most of the time shop assistants are scarce, rude or, at best, completely uninformed. Not only is this environment harsh and uncomfortable, but it is intentionally constructed to drum-up emotions and generate desires.

  • Stores are windowless so shoppers lose track of time;
  • Merchandise is intentionally messy so shoppers think items are desirable;
  • Seemingly poorly designed, labyrinth-like floor-plans intentionally confuse and trap;
  • Music blares, inviting young shoppers in while driving older-discerning shoppers out;
  • Scents are aerosolised and disbursed to entice and repel;
  • Deadline discounts generate unnecessary and false urgency.

'LIMITED EDITION,' 'CAN'T LIVE WITHOUT,' 'REDEFINE YOUR LOOK,' 'GET READY FOR SUMMER' bombard and evoke the urgent need to have, own and spend. Shoppers are over-stimulated, desensitised zombies urgently attempting to navigate a time-warped labyrinth of chaotic merchandise by following logistically, financially and emotionally misleading signs.

By and large, self-service brick-and-mortar garment retailers have failed shoppers. The shopper's needs are no longer a factor in the consumer experience. Everything is boiled down to providing the cheapest price.

Last December I was offered a 5% discount on a purchase if I signed up to House of Fraser's loyalty programme. I immediately signed up. Two months ago I received an email: "Up to 50% off at House of Fraser," immediately followed by: "Up to 50% off T-shirts & casual shirts plus many more top offers," "The BIG BRAND SALE: up to 50% off," "Coats and Jackets in our sale from Tommy Hilfiger, Howick and more," "SALE Only 2 days left!," "SALE Only 1 day left!," "Up to 50% off SALE ends midnight" and then…"Up to 70% off in our clearance event!"

This is not a jab at House of Fraser. This is merely an illustration of the high street's ubiquitous routine, fuelled by the mistaken belief that consumer purchases are driven by price; the lowest price will attract more shoppers, which will increase sales and grow profit. This belief is solidified over and over again when shoppers are repeatedly asked: What is the most important factor in their decision to purchase? To which they unequivocally (or at least 72%) respond: price. 

Price does not drive purchases

Herb Sorensen, a leading expert in the culture of the consumer, asked post-purchase shoppers a more poignant question: How much did that item cost? By and large shoppers had no idea what they paid and, when they estimated, their figures were considerably off.

There are three values a shopper is paying for:

  • Intrinsic value: What the item is (T-shirt, trousers, socks, shoes, skirt, dress etc);
  • Added value: The item's attributes, what differentiates it from others of its kind (colour, fabric, design, fit etc);
  • Created value: Brand name (Hugo Boss, Ralph Lauren, Levi's, Versace etc).

A shopper looking for a pair of white Havaianas flip-flops is not going to be swayed by a pair of acid green Crocs simply because the latter is cheaper. It is only after the first three values are met that the shopper takes price into consideration, but then price must contend with other aspects: convenience, return policy, free delivery, brand values, brand trust and over-all shopping experience.

For the middle-income shopper, price is less and less of an issue. Buying second-hand and vintage is mainstream. Today there is very little difference between buying a $2,000 Max Mara camel wool coat from this season and buying a $200 Max Mara camel wool coat from the 1970s. Rather than lowering status, acquiring desirable, used items imbues the shopper with a highly sought-after individualistic mystique. There is a big difference between buying an item you want that is within your price range and buying something simply because it is cheap and available.

By identifying price as the catalyst for consumer purchase, everything that potentially raises costs is affected. This mentality becomes all encompassing, influencing everything: IT infrastructure, store environment and the supply chain.

Well-trained, knowledgeable employees and person-to-person customer service are the first to go, as is quality store lighting, flattering mirrors and clean changing rooms. Brand value and identity is leveraged for low cost manufacturers and suppliers and, inevitably, core competency is replaced with the dominant concern: producing generic products, which are sold at an artificially reduced rate through the implementation of one of two strategies: One, every day low price. Two, high-low pricing. This is an attempt to convince shoppers that they are getting more for less in the hope that they will increase their purchases.

Retailers take a passive role in the buying and selling exchange. Sales at self-service stores are un-mediated, meaning that the stores are void of an infrastructure fundamental to the act of autonomous shopping. Potential consumers who enter the store are expected to navigate, find, select, and determine the most suitable items and make purchases all on their own. This is the equivalent of driving through the countryside, without a map or GPS, expecting to reach your destination. The success rate: slim to none.

Stores are a public rat maze, where everyone enters but very few actually succeed in finding the cheese. By and large most shoppers visiting a store have a single item in mind. In fact, most shoppers have the same items in mind.

If shopper #1 wants a pair of black skinny jeans most likely shoppers #2, #3 and #4 will want black skinny jeans. Retailers plant unwanted merchandise between the shopper and her desired purchase. The notion being, as the shopper travels from point A to point B she will gather other merchandise resulting in her making many more purchases. This is not what happens. Shoppers are left wandering and bemused, overwhelmed by options, eventually, arriving at the till either with something they do not want and do not need or, at best, with their, single item. In some circumstances the shopper abandons the shopping basket and leaves the store entirely.

In general, retailers identify the bulk buyer as their core consumer; single-item buyers are dismissed as not serious. Retailers implement the method of product dispersal in an attempt to convert all shoppers into bulk buyers. Very few people make bulk purchases, but many, many people make multiple single-item purchases. In fact, all single-item buyers are bulk buyers; they just buy one item at a time.  

On average 80% of the time a shopper spends in the store is wasted on searching and aimless perusing, not selecting and purchasing. Retailers are losing massive quantities of sales on shoppers not making decisions because they are unable to find the products they are looking for.

Big hit retailers

The most successful stores are big hit stores, which only carry the products shoppers want to buy. Zara is the apotheosis of the big hit store. It tests the market, identifies what sells and only produces the items shoppers desire. If a blue sundress is not selling in Brighton, UK the entirety of the item in stock is flown to Valencia, Spain where the item is already flying off the shelves.

Zara's success is in its ability to aggregate and process minute-to-minute global store and consumer data and distribute product accordingly. Zara understands that it is not just the absence of a product that decreases sales, but that the availability of the wrong products prevents shoppers from accessing the items they are looking for.

While Inditex-owned Zara is undeniably successful, its strategy is missing half the puzzle. All of the information it aggregates is harnessed internally; none or very little of the information is reflected back to the shopper. Today, the act of shopping is propelled by research and reviews, being in the know. People want information; if stores do not provide it shoppers will compile it themselves.

Informed perspective

The demand for an informed perspective is not a new phenomenon. Information, aka professional opinion, is and always has been the infrastructure of a service-driven store. Selfridges, recently voted the world's best department store, is defined by the quality of its employees.

The interaction between the consumer and the organisation determines the way the consumer relates to the product and the store. The intimacy of Selfridges' customer service is at the organisation's core, and cannot, and should not be reproduced by self-service driven companies. Not only would it be a financial fiasco, but it contradicts the self-service paradigm. That said, hiring competent and knowledgeable staff in addition to tailoring the shopping experience to the individual is paramount to success.

The online retailer, Amazon, exemplifies this strategy. Amazon has replaced employees with highly sophisticated algorithms and databases. Upon entering the website every Amazon customer is greeted with a list of potentially desirable items, which are based on their personal past views and purchases.

Clicking on an item leads to the product information page, on the right side of which is "1-Click?" – allowing the customer to instantly buy the item they are looking at. Scrolling down immediately reveals two lists: Items frequently bought together, all of which can be instantly added to the cart, and "customers who bought this item also bought…," an easy-to-peruse list of products others liked and purchased. At the bottom of the page is the highly acclaimed and somewhat controversial user review section.

Amazon provides a seamless shopping environment by both creating a personalised and painless purchasing process, and providing as much product and user information as possible. You do not need to go anywhere else to reach an informed decision.

Self-service brick-and-mortar stores need to preform these functions by recognising that the consumer is not stupid and in fact strives to make choices based on knowledge and insight, and transforming the shopping environment into a fluid experience where products, product information and competitor information is readily available and accessible.

Seamless experience

Shoppers are already rigorously researching their purchases. Stores must integrate an information infrastructure into the shopping environment and create a seamless experience:

  • Determine the items in stock;
  • Determine where the stock is located in the store;
  • Access up-to-date item reviews;
  • Access other, similar, item options;
  • Access stock inventory at other locations;
  • Identify combinations of items other shoppers purchased;
  • Identify trending items;
  • Compare product user experience;
  • Compare item price;
  • Compare other brand options;
  • And, most importantly, purchase products instantly.

Unequivocally, brick-and-mortar has a future, for as long as the items we purchase are tangible, physical interaction is integral to a complete and satisfying shopping experience. However, consumers are all grown-up and they know how to access the information required to make an educated purchase.

Anyone standing in their way be damned. The technology and know-how to develop a highly functioning self-service infrastructure exists. It is time that brick-and-mortar wake up and meet the consumer halfway.

In-store and ecommerce revenues for select US apparel retailers, January 2015:

In-store sales (millions)Ecommerce sales (millions)Total revenues (millions)Ecommerce % of total revenues
Lands' End$234.60$1,320.6 (1)$1,555.4084.90%
J. Crew (2)$1,714.20$826.2 (3)$2,579.7032.00%
Free People (Urban Outfitters)$147.20$157.8 (3)(4)$530.8029.70%
Anthropology (Urban Outfitters)$980.80$403.4 (3)(4)$1,384.3029.10%
Urban Outfitters$989.90$395.2 (3)(4)$1,385.1028.50%
Lilly Pulitzer (Urban Outfitters)$57.20$46.50$167.7027.70%
Abercrombie Kids (Abercrombie & Fitch)$238.00$83.4 (4)$321.4025.90%
Abercrombie & Fitch$1,082.70$367.2 (4)$1,449.9025.30%
Ann Taylor (ANN INC)$750.90$201.9 (4)$952.8021.20%
Victoria's Secret (L Brands) (5)$5,700.00$1,507.0 (3)$7,207.0020.90%

Note: Figures depict annual results over a full year ending 31/01/2015; numbers may not add up to total due to other revenue streams not shown (e.g., wholesale); (1) includes catalogue, digital and in-store kiosk sales; (2) other revenues consist primarily of shipping & handling fees and revenues from third-party sellers; (3) includes digital and catalogue sales; (4) eMarketer estimates; (5) includes only US and Canada operations, 22/05/2015

Source: eMarketer calculations, 22/05/2015.

I would like to thank two individuals without whom I would not have been able to write this article: Alan Penn for explaining IKEA's secret to success and Herb Sorensen for sharing his profound insight into the consumer.