The Shifting Winds of Retail

(This article was written by Beth Corby for Business2Community).

JCPenney is down to its last cents. In March, the company announced it would close 138 department store locations, and its stock hit an all-time low price of $4.73, less than its opening day price in 1978. Its sales figures have shown a desperate downturn, down 37% from 2006. All roads lead to bankruptcy for the once-respected retailer.

What went wrong?

After the financial crisis, JCPenney was poorly positioned to adapt to changing consumer behaviors. They were dependent on foot traffic from suburban malls, which were failing because too many had been built, people were buying less, and online shopping was gaining momentum. They were loath to build a satisfying e-commerce experience because their core customers skewed older and less tech-savvy. Even now, search “JCPenney mobile” and the first result is a physical store location in Mobile, Alabama.

The fall of JCPenney marks the end of an era of American shopping, one that relied on customers seeking a particular kind of convenience — a one-stop destination where you could get everything you needed, from big-and-tall suits to BBQ brushes, at middling prices. As the megastore dies out, however, new modes of shopping are taking its place.

Welcome to the ‘Death of Retail’

The demise of JCPenney is part of a larger phenomenon that has grim reaper analysts announcing the “death of retail.” With Amazon and other online shopping outlets offering a greater selection of goods than ever before, customers no longer need the bundled convenience of department stores and shopping malls. A forecast from Credit Suisse predicts that by the end of 2017, 8600 stores will close, and by 2022, 25% of American shopping malls will no longer exist. As of March the report seemed to be on track, with 3571 closures announced. JC Penney sits in the troubled company of its competitors, including Sears, Macy’s, Dillard’s and Nordstrom, who are all downsizing. In May 2016, 6,000 in-store retail jobs were lost.

On the other hand, Amazon is seeing enormous growth. In 2015, Amazon announced $82.7 billion in sales, compared with Walmart’s $12.5 billion. Amazon has quite literally eaten other retailers with acquisitions of Whole Foods and Zappos. In an incredible statistic, half of U.S. households have Amazon Prime subscriptions. Industry standards are being reset in Amazon’s image. In order to survive, retail brands have to offer free shipping and returns, lower price points, instant checkout and delivery everywhere.

Consumer preferences don’t indicate that Amazon should be the only shopping option on the planet, however. Buyers still want the personal care and attention that specialty shops offer and the prices that big, efficient businesses do. They want to identify with brands. And finally, they want the shopping experience to be stress-free. The changes in shopping are only making the retail industry more democratic, competitive, and crowded than ever. Yes, the so-called “death of retail” is a misnomer. In fact, where JC Penney reported its worst holiday season ever in 2016, the overall sector saw the best numbers in recent history.

Survival of the Stylish

The best and brightest retail brands have bet big on technology, employing cutting edge methods for more personalized service. Their dedication to modernization has earned them the trust and admiration of a new generation of buyers, who are used to having everything at their fingertips. And while businesses are sweating to keep up, shopping has never been breezier.

So without further ado, let’s look at some of the downright Darwinian adaptations companies have made to stay alive in the face of doom, gloom, and Jeff Bezos.

The best and brightest retail brands have bet big on technology, employing cutting edge methods for more personalized service.

Urban Outfitters – Think big, stay local

Urban Outfitters speaks authentically to millennial customers through hyper-local marketing efforts and behavioral analysis. In early 2017, they sent out a series of push notifications directed at women in cities who like going out. The notification about finding a party dress linked directly to a page in the Urban Outfitters app where users could buy one. The campaign was hugely successful, resulting in a 146% lift in revenue and a 75% increase in conversions.

How did they do it? They:

  • Created segments of women who had checked into nightclubs or bars from their phones in certain cities. To ensure the data was accurate, Urban Outfitters partnered with location marketing specialists at PlaceIQ and mobile marketing wizards Appboy.
  • Sent out a personalized push notification with an emoji for added fun
  • Deeplinked to the dresses page in the app so customers didn’t have to search once they swiped open the notification

The notification was the opposite of disruptive to those who received it. Rather, it provided a brief message in a familiar SMS-like format. It proved that the UO app was worth the download, offering relevant information that was unavailable elsewhere, without sounding like spammy brandspeak.

PacSun – It pays to be social

Once a mallrat staple for surf bums and wannabes, Anaheim-based PacSun has proven that they can keep pace with a new teenage demographic by showing a deft understanding of what makes compelling social media content. In particular, they’ve leveraged the power of Instagram. Through evocative filters, recognizable faces, and crowd-sourced photos, PacSun has amassed over 1.8 million followers on the platform. To get young ‘grammers’ attention and stand out in the feed, they:

  • Invest in famous influencers – PacSun has partnered with Kendall & Kylie Jenner since 2012 on a clothing line, which they promote heavily on Instagram.
  • Invest in microcelebrities –They’ve smartly picked up on the rise of lesser-known influencers, who amass followers on Instagram through a combination of looks, personal style, and je ne sais pas. PacSun always tags models in posts, like Sophia Gasca, who has 45K followers herself.
  • Started a multi-dimensional hashtag – #mygsom stands for “My golden state of mind” and centers around the theme of California cool. The tag has amassed over 206k Instagram posts of surfers, skateboards, sun-drenched afternoons, music festivals, palm trees and mountains from users around the world. The company also launched a content-rich site around the tag, complete with a contest to win a trip, and a rewards program for buyers of PacSun goods.

A strong online identity has the power to shape real-life consumer behavior, especially for young buyers who spend tons of time on social media. PacSun has struck gold with a true-to-its roots, nostalgia-tinged brand identity, and the real people who live out its free-spirited dream. Teenagers naturally want to be a part of it.

Fabletics – Site to store, without breaking a sweat

At first glance, it seems Fabletics is reverse-engineering the death of retail by turning its online business into brick-and-mortar shops. Kate Hudson’s subscription-based athleisure brand charges consumers $49.99 monthly for discount athletic apparel. They recently opened 22 stores with the aim of providing shoppers with what e-commerce cannot: the ability to try before they buy, and an opportunity to bump into other shoppers who embody the fit lifestyle they aspire to.

Their site-to-store strategy is based on a few key factors:

  • Syncing online with reality – “We want to completely mirror the stores to the online experience,” parent company JustFab CEO Adam Goldenberg told Forbes. He also mentioned that 40% percent of Fabletics’ in-store purchases have been made by online shoppers who wanted to try things on in person. If they’re not ready to purchase, or something’s out of stock, customers are able to record what they liked about a product and access that information from the Fabletics site or app anytime.
  • Selling subscriptions in person – Fabletics store employees are encouraged to recruit shoppers to the online VIP program, making the most out of face-to-face conversations.
  • Compare and contrast – Fabletics positions stores next to its more famous (and more expensive) competitors, Lululemon and Athleta, making the association between the brands more apparent.

An e-commerce-first brand like Fabletics may already be a step ahead of other retailers, but by adding stores, the company is committing to its longevity. No matter where the point of sale happens, Fabletics knows that customers crave the personal interactions they have with sales reps, the sense of belonging to a community of healthy people, and the thrilling feeling of finding the perfect fit.

Starbucks – that’s a latte loyalty

Like Fabletics, Starbucks aims for a seamless and personalized digital-to-real life experience. Its strongest digital asset is its industry-leading loyalty program, Starbucks Rewards, which rewards customers not only with free beverages, but also more personal convenience as use increases. In 2016, Starbucks Rewards had over 12 million members and surpassed the $1 billion mark in funds uploaded by users to their loyalty cards. In Q1 of 2017, rewards customers accounted for 36 percent of the company’s U.S. revenues.