Shopping by smartphone
What does seem clear is that as personal computing goes mobile people are buying more via smartphones. Four years ago hardly anyone bought things on their mobile devices but today nearly one-quarter of Gilt Groupe’s revenue comes from smartphone shoppers; on some weekends the proportion reaches 40%. Nearly one-third of people living in America own a smartphone, and 70% of these use it to do searches while they are inside a shop, usually to compare prices. “By 2014 mobile internet will overtake desktop internet usage for shopping,” predicts Nigel Morris, chief executive of Aegis Media Americas.
Although it is getting ever easier to blow your credit-card limit without leaving the sofa, there are some who still see a future for bricks-and-mortar stores. Darrell Rigby of Bain, a consultancy, says customers often still want to touch, feel and taste products. And sometimes when they want something, they want it now, and will not put up with waiting for a delivery.
Order online, pay cash in store
The most clued-up shopkeepers realise that they must make the most of such advantages over online rivals, and that to do so they must make their stores more enjoyable places to visit. Macy’s says it is investing about $400m in the renovation of its flagship store on Herald Square in New York City, which it claims is the world’s biggest department store, with 1.1m square feet (102,000 square metres) of retail space. To this Macy’s will add another 100,000 square feet, part of which will become the largest women’s shoe department in the world. The enlarged shop will also have 22 dining venues and 300 extra fitting rooms.
In 2010 Macy’s launched a training programme for its more than 130,000 sales people, “MAGIC Selling”, which coached them to be more helpful and friendlier with customers. It is tailoring the merchandise stocked in its stores more closely to local tastes. During the holiday season it sells Elvis mementos in its shops in Tennessee and Our Lady of Guadalupe ornaments in cities with big Hispanic populations.
Retailers with lavishly furnished stores and helpful assistants will increasingly have to put up with free-riders who come into the shop to check out the products and get some advice, before slinking off to buy them for less online. Shops’ best defence against “showrooming”, as this practice is called, is to stock more own-label items that are not available anywhere else.
Have you got this in my size?
However, there is no single recipe for retailing success in the internet age. Retailers will need to balance their investment between staff, locations, inventory and online operations says José Alvarez of Harvard Business School. For some expensive products it makes sense to have a low inventory, a big investment in showrooms, elaborate online operations and well qualified sales people. For more commoditised items it is more important to have a big inventory than a flashy display. Things that are increasingly being bought online must be swept off the shelves to make way for products that people still want to examine and compare before buying.
Whatever priorities retailers set, their physical stores are likely to shrink as the share of sales made online keeps rising. Retailers in America have a surfeit of space. Between 1999 and 2009 the amount of shopping space per person boomed from 18 square feet to 23 square feet. The productivity of that commercial acreage slumped after the financial crisis and shows no sign of recovering.
The retailers who will survive the drift online are the ones “listening to the dynamic demands of customers,” says Walmart’s Mr Anderson. For example, his firm recently found out that some of its recession-hit customers want to order on their smartphones but do not have credit cards. So it has let them make their orders online but come into the shop to pay cash.
Walmart’s customers can also now make their shopping list at home by just opening the fridge and uttering “milk, tomatoes and cottage cheese” through voice-recognition software. The list can then be sorted to take account of their local store’s layout, so they can make the shortest possible tour through the aisles. Shopping promises to be more fun and less hassle in future. The best retailers might enjoy themselves too.
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