source: fPat Murray/Flickr
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.
source: Forbes/Green Street Advisors
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.
source: Business Insider/Bloomberg/Deutsche Bank
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.
A larger-than-life Kate Hudson adorns the wall of a Southern California Fabletics store. Source: L.A. Confidential
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.
The Starbucks Rewards interface. Source: AppleInsider
The new AI-based Barista chatbot. Source: Starbucks via Geekwire
The Rewards program has gotten much more sophisticated over time. Source: Starbucks via Geekwire
How does Starbucks create a Rewards customer experience that keeps people coming back for more? It offers:
- Digital pay – Loyalty members get a physical debit card that they can add money to, but a digital version is included in the Starbucks app, so customers don’t have to take out their wallet to pay. From the app, they can also place orders to pick up in-store.
- Gamification – Starbucks Rewards is based on a gratifying system of stars that you earn for every purchase and referral made. When you reach gold member status, you know you’ve made it. It’s addictive and fun.
- Personalized promotions via AI – The company recently announced an artificial-intelligence backed suggestion tool that would make real-time offers to loyalty customers based on spending habits and purchase history. “[N]ow, if we would like you to attach a food to your favorite drink, we present to you foods you are likely to select, or that you’ve selected before,” CTO Gerri Martin-Flickinger said.
Despite being the most ubiquitous coffee shop on the planet, nothing about the Starbucks user experience is impersonal. Even if the artisanal place next door roasts their own beans and bakes their own croissants, Starbucks offers the advantage of having your favorite drink waiting for you, prepared just the way you like it. Returning feels like home, especially when drinks are on the house.
H&M – Coolness via collaboration
H&M still gets most sales out of its physically imposing stores, but the mega-retailer might as well be galaxies away from the suburban mall. One source of continuous new business for the Stockholm-based corporation is collaboration with avant-garde fashion designers. H&M has done one collaboration per year since 2004, starting with Karl Lagerfeld. The high brow touch applied to cheap items makes for an irresistible mix for young shoppers who want to be known for good taste.
How H&M keeps collaborations fresh:
- Cutting edge content – For its latest collaboration with industry darling Erdem, H&M released an elaborate promo video directed by Baz Luhrmann, of Great Gatsby and Moulin Rouge fame.
- Figuring in fans – H&M’s most commercially successful collaboration was with Olivier Rousteing of Balmain. 29-year-old Rousteing is hugely active on Instagram, known for responding to comments from fans, and posting photos with celebrity friends. He has amassed 1.4 million followers as a result. H&M doesn’t release sales figures on its collaborations, but on launch day of H&M x Balmain, its website crashed and brawls broke out.
- “Surprise factor” – The designers H&M picks encompass diverse visions, personalities, and price points. The same shoppers are not necessarily drawn to each collection. “We always want to give the customer something they wouldn’t really expect,” Donald Schneider, creative consultant to H&M says, which explains why the uber-glamorous Balmain followed the downtown cool of Alexander Wang.
By collaborating with talented designers, H&M distances itself from its mass-market category, and aligns itself with the values of urban culture mavens. The designer collaborations appeal to the customer who loves to go to art galleries but can’t yet afford to buy a painting for his apartment. Taste, which is often just another synonym for wealth, becomes accessible through these collaborations, breaking through to the core of how customers want to present themselves and be seen by their peers.
Adapt authentically for smooth sailing
There’s no right way to do personalized shopping, and each of these brands have had to develop stronger company identities in order to appeal to customers who are motivated and inspired by authenticity. It’s a step in the right direction, away from a boxy anonymity and towards an adaptable humanity.
Building a strong retail brand in the digital age takes guts, and success requires a willingness to grow and change without giving in completely to zeitgeisty gimmicks. By paying close attention to the kind of interactions customers prefer, retail companies are trading in a one-size-that-doesn’t-really-fit-all mentality to a size that fits you, which is a change everyone can get behind.