Brick-and-mortar retailers like Target, Wal-Mart, and Best Buy have been struggling to find ways to stay relevant in the new Amazon age. After trying to make incremental changes to stem losses, these retail giants are now realizing they have to make fundamental changes to their marketing and business strategies if they want to survive. CNN Money recently reviewed Target’s efforts, and results, in this article. After disappointing holiday sales in 2016, Target allocated $7 billion to modify their marketing mix. The article outlines changes made in every one of the 4 P’s and is a great example of how marketers need to consider all aspects of their marketing mix to create an effective marketing strategy.
The Exaggerated Death of Retail
Amazon is a retail juggernaut. Last year the company was responsible for 5% of total US retail sales (online and offline). Their growth and expansion seems unstoppable at the same time that we see other iconic retailers (Sears, JC Penney, Radio Shack, Payless Shoes, etc.) struggling to stay alive. Given the convenience and potential for cost savings it’s easy to say that the future of retail is online and brick-and-mortar establishments are a thing of the past but this FastCompany article,”The Future Of Retail In The Age Of Amazon“, offers a different perspective. Fair warning – this is a fairly lengthy article but it provides a number of good discussion topics.
The article starts by discussing the decline in traditional malls but talks about investments being made by the Mall of America to attract younger buyers. While online shopping has certainly contributed to traditional store closures, the article also claims over-expansion and lack of investment are significant contributors to decline as well. Even with all of the well publicized store closings there was still a net increase of 4000 stores in 2017 and a higher increase expected this year. The article spotlights Target and talks about some of the investments they’re making to move back to partnered custom products and emphasize visual merchandising in their store design. Much of the article alludes to the idea that a focus on the shopping experience can provide a unique value proposition that allows traditional retail to differentiate itself from online retail.
Students do a surprising amount of traditional retail shopping and you can get some good discussions started when asking them to articulate why they choose to buy in-store as opposed to buying online.
The Collapse of Retail
Every few months there is an article about the end of the brick-and-mortar retail era. Chain after chain disappear, often citing Amazon as the primary driver. This article from the USA Today lists 15 retailers that declared bankruptcy in 2017. Is brick-and-mortar retail truly doomed?
Ask your students what they would do if they were responsible for marketing for a brick-and-mortar chain. Can Target, Best Buy, and Wal-Mart survive in the Amazon age? How? This can lead to a good discussion on differentiation and competitive advantage. Capture those ideas on the board and then ask them to design promotions that can effectively communicate those ideas. What type of promotion? Where would it be seen? What is the message?
If you have time, ask them if there’s anyone that could displace Amazon and force them into bankruptcy. It may sound like an absurd idea but remind them that many strong brands like Blockbuster, Barnes & Noble, Kodak, Macy’s, and Sears were once considered icons that would last forever. How can you beat Amazon? Can Amazon undermine their own success and open the door for competitors?
UPS Adds Holiday Delivery Surcharge
According to this NPR article, UPS is going to add a surcharge to packages delivered around Black Friday and Christmas. UPS says they’re implementing the surcharge to offset their increased costs from hiring temporary personnel and adding delivery vehicles to cover demand which jumps by roughly 50% during this period. The surcharge will run between Nov. 19 and Dec. 2 and then again from Dec. 17 to Dec. 23.
This change can spark a good discussion about how interconnected the links in the channel of distribution are. What are some of the potential repercussions of this surcharge? From a competitive standpoint, is it more likely for FedEx to copy this practice or will they hold price to gain a competitive advantage over UPS? What’s the impact to retailers? Will they pass these increases on to customers or absorb them? If they pass them on, how will they do so? It may not be as simple as increasing shipping costs as consumers are often turned off by high shipping fees and may decide to shop elsewhere if they feel shipping costs are unreasonable. Push the students to think of creative options. For instance, what if stores hold shipping prices constant but avoid the surcharge by delaying shipments until after the surcharge ends on Dec. 2? If packages took longer to arrive than expected but still got to the customer well in advance of Christmas would that be acceptable? Students may be surprised to realize how a change by one company can have a multitude of impacts on others.
The Evolution of Black Friday
Thanksgiving is a time of tradition for Americans – spending time with friends and family, eating more than we know we should, and shopping. Retailers have capitalized on our passion for finding deals prior to the Christmas holiday by creating the Black Friday phenomenon. My wife is about as close as you can get to a professional shopper and Black Friday was always a big day for us. Well, more for her than me. My job was to go into the store and immediately get in line while she did the shopping. This became a tradition for us but that tradition has started to shift over the past two years. The battle between online and brick-and-mortar retail has changed the dynamics of Black Friday. Retailers are looking for any way to capture a sale which means pushing sales earlier, posting information earlier, and offering deals both online and in-store. As a result, the frantic crowds that typified Black Friday in the past are no longer as common.
This change in behavior has led some to declare Black Friday mania as a thing of the past. This article from the LA Times argues just that. The article talks about the reduced crowds in-store but also discusses how this can lead to a better customer experience for those that do show up. Another article on Bloomberg shares some statistics that show the impact of Black Friday is still significant despite the lower in-store traffic. This year 115 million Americans were expected to shop on Black Friday. Online sales are expected to top $5B on Friday, an increase of 16.4% over last year. Whether you believe Black Friday mania is gone or just as alive as ever, these articles show that businesses can never stand still and must be able to adapt to changes in competitors as well as consumer behavior.