Sears, once the largest retailer in the US, has been in systemic decline for over a decade and recently announced that it is filing for bankruptcy, struggling to pay off its $5.6bn debt. Sears was granted a $350 million loan in a last-minute lifeline, in order to stay open during the holiday season while it attempts to re-organize.
Sears dominated the American consumer retail market from its founding in 1893 throughout the 20th century. Its iconic catalog formed the basis of much of its success. However, high operating costs, a changing consumer base, and lack of innovation have been cited as the root causes of its demise — a downfall many have believed inevitable for a long time.
The fact is, being a strong, high-profile brand no longer equates to insulation against the turbulence of consumer and market changes.
What challenges led to Sears demise, and what can similar legacy brands do to adapt in a competitive market? What specific technologies, data, and strategies can companies use to survive the shifts in economic trends, shopping habits, technological development, and consumer behavior?
Snapshot into consumer behavior today
The shift in consumer behavior from visiting malls toward purchasing online has been a trend that has seen revenue migrate online for a number of years. A trend that looks to continue in 2018 and beyond.
- U.S. ecommerce sales are predicted to increase to $526 billion by the end of 2018 to represent 10% of total retail sales.
- Amazon now accounts for nearly 50% of the U.S. ecommerce market.
- Consumers will spend an estimated $124.1 billion online this holiday season, which accounts for nearly $1 of $6 spent shopping overall during the November-December period.
Sears: from iconic American retailer to bankruptcy
Whether your holiday buying kicks off by standing in line Thanksgiving night for Black Friday, investing your holiday budget with small retailers for Small Business Saturday, doing most shopping online across Cyber Weekend or all of the above, the holiday buying season in the US reached $14 billion in sales in just five short days.
In the middle of all this spending, Sears – who could be designated as a founding father of modern holiday retail season – is determining its future. Will it take on money to build the possibility of a future, will it choose (or be forced) to close its doors on its 125 year history?
Creating a customer-centric shopping experience was one of among many firsts Sears achieved as a retailer, including being the first retailer to be listed on a major stock exchange and being the first retailer to provide an online shopping experience at the dawn of the internet.
So, how does a retail company of firsts that survived the Great Depression, that carries the nostalgia of living generations, and has earned its spot as a company who launched trustworthy brands and a reputation for service, not have a secured position in today’s retail landscape?
A shifting retail environment
Sears failed to embrace the opportunities that existed online, allowing more innovative competitors and digital first retailers to swallow increasing amounts of market share.
Instead of innovating and adapting their marketing strategy, Sears stuck to what it was comfortable with. Many brick and mortar companies have behaved in a similar fashion, all too often a once dominant household name becomes complacent or takes an overly defensive position. Both of these strategies are doomed to fail.
Much of Sears’ success was built on its catalog. In its day the catalog was innovative, it allowed consumers to browse an extensive range of products alongside the prices. Sears removed the power from merchants and placed it into the hands of consumers. It was a bold move transforming the way customers interacted with their brand and the way they brought.
Sears provided consumers with visibility on the retail price, allowing them to benchmark the real price of goods to reveal the margin that merchants added on top. In this sense, it was an earlier version of what ecommerce companies like Amazon now offer.
Instead of evolving this catalog into a digital format that could be consumed online which would have thrived in this price sensitive and data driven environment, they kept it the same and it’s value to customers depreciated.
The catalog had captured the imagination of consumers and developed on Sears’ sterling reputation for quality of product and service. Both could have easily transferred to digital channels and provided Sears with a unique competitive advantage.
Legacy companies are dealing with issues that many of their ecommerce competitors don’t have to deal with, their operating costs are much higher due to rising rents, infrastructure and staffing. On the flip side, they also have some distinct advantages such as brand equity and consumer trust.
In an era where many digital brands lack brand equity and there’s a lack of trust, reputation is key, particularly for post millennials.
Data-driven competitors are winning: Legacy brands have to adapt
Companies that have thrived in the retail space historically did so because they knew how to attract consumers, maintain engagement and build relationships. They realized that brand awareness and retaining customer loyalty were crucial for achieving a high customer lifetime value (CLV). Sears’ “Wish Book” catalog, released in the months running up to Christmas, was an excellent way of engaging customers and putting the Sears ‘brand front of mind’.
While awareness was vital all year round, Sears appreciated that the emotional engagement around the holiday season was key — sales during that period would not only drive revenue, but also generate loyal customers all year-round. Of course, their excellent service, quality of products and engagement in communities were all important elements in driving loyalty.
One of Sears’ key differentiators against competitors was its reputation: customers trusted the brand. Trust has become increasingly valuable today in an otherwise globalized marketplace.
The lesson many brick and mortar retailers can learn from Sears is that companies need to disrupt themselves, focus on the consumer and meet them where are. Complacency is the enemy, rather than digital.
Retailers should not fear ecommerce competitors. Instead, look at what they do best, i.e. leveraging data, and put this to work.
Combined with the many existing advantages that they already have — such as brand equity, consumer trust, a legacy or a track record of doing business, retailers can maintain their footing.
The effect of ecommerce on consumer shopping behaviors
The advent of ecommerce has allowed more competitive prices, reduced shipping costs, and more personal and relevant offers. Online retailers collect data to offer more targeted and relevant content, advertisements and offers. More recent innovations such as voice activated search are providing even faster conversion times.
Consumers are increasingly shopping around specific holidays such as Black Friday and Cyber Monday. Americans spent a record $7.9 billion online on Cyber Monday, up more than 19 percent from last year’s totals, making it the largest digital shopping day of all time in the US.
With as much as 40% of their annual sales happening in this five day period, it’s essential or retailers to have a strategy prepared.
Retail analysts have been looking into foreign holidays such as China’s ‘Singles Day’ as predictive indicators of footfall on Black Friday and Cyber Monday in the Western market. This shopping day started out as an “Anti-Valentines” day in the 1990’s due to the large number of single Chinese men. Thanks to retailers like Alibaba, it is now a huge spending spree in the country.
While it’s unlikely to ever come to Western markets for cultural reasons, it’s a useful way of predicting consumer footfall, as its relies on the similar factors: consumer confidence, debt levels and the ease of credit.
Holidays continue to become associated with offers, deals and as a focal point for buying in the minds of the public. Companies need to ensure that their systems are set up appropriately in the months and weeks preceding these dates to cope with the seasonal demand.
How can legacy companies adapt to today’s digital market?
No one is going to throw a traditional marketing strategy out of the window — but good strategies evolve.
The question now becomes whether the company has a data infrastructure that can provide the customer insights that the marketing department needs to develop and evolve.
How data is consolidated, organized, operationalized and then integrated within a business is key. If the infrastructure is there, the data analytics can be used throughout your marketing strategy to understand where you customers are, which channels they engage with and when.
External data can be overlaid, such as data from foreign holiday shopping days like “Singles Day” in China, to predict interest for Black Friday and Cyber Monday.
It’s this level of data aggregation that is really exciting, as it opens up a world of opportunity to take insights and apply learnings to individual businesses, and drives productivity, efficiency and grows sales.
It’s an evolution not a revolution, much of this analysis can be produced from very basic data analysis and it is not cost prohibitive for many brands that already use first party data.
In our next chapter, we explore how heritage brands can evolve their strategies in three easy steps, master data and unlock the insights to help them acquire, retain, grow and engage their customers.
Leah Eyler is Head of US Growth at Fospha.
The post How legacy retail brands can evolve for today’s digital consumer appeared first on ClickZ.
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