Editor's note: Robert Sinclair is president of Sinclair Customer Metrics, a San Antonio research firm. He can be reached at robert@sinclair.org or at 800-600-3871 ext. 300. This article appeared in the December 10, 2012, edition of Quirk's e-newsletter.
As many brick-and-mortar retailers are figuring out how to contend with Internet competitors, establish a balance between their own online presence and existing physical locations and survive five years in an anemic economy, there's a lot of moaning going on these days among retailers regarding smartphone technology. The widespread adoption of smartphones, along with the plethora of shopping apps available, has introduced a new challenge to retailers: showrooming.
Although statistics vary between sources, the general consensus is that 45-55 percent of shoppers use mobile apps to compare prices when they cruise retail aisles. In addition, half of those shoppers choose to buy elsewhere once they've compared prices and availability. This figure is up 10 percent since 2010 and is only expected to climb.
Like Amazon's Price Check, which allows consumers to scan barcodes and quickly compare online prices for the same item, these shopping apps are being released weekly. RedLaser is another popular app that lets consumers identify other nearby stores that carry the same item and its (lower) cost, allowing them to price-shop from the convenience of a competitor's aisle.
Best Buy has attempted to combat showrooming by actually replacing standard barcodes with Best Buy-only barcodes that can't be scanned and compared. I think this quote from an article in Forbes magazine discussing Best Buy's strategy sums it up pretty well: "Sheesh! That's a great way to build your brand equity and develop customer loyalty. Confound your customers in an attempt to keep them in the dark."
It's no wonder that some brick-and-mortar retailers are scratching their heads and wondering how they can protect their already-razor-thin margins.
Three most important words
I've been in service measurement for over 25 years and worked with many businesses in retail, dining, automotive and banking. I muse over the fact that brick-and-mortar operators often overlook the three most important words in retail: sell, sell and sell.
Walk the sales floors of most stores today and you are likely to encounter one of two common situations. Either there is not enough help on the floor, in which case they already offer little advantage over the online competition, or they have enough help but execution is woefully lacking - associates do not sell merchandise but merely help customers locate merchandise and check out. Has the retail focus on promotion and merchandising led to us forgetting how to sell?
In many countries less affluent than the U.S., it's not uncommon to encounter children selling in the streets. Some of these children are amazing sellers; they know how to close a sale with a smile. Now consider what is encountered on the floors of most U.S. retailers. It ranges from ineffectiveness to downright apathy. If floor associates at most retailers were trained to be better at selling and less focused on promoting actual sales, retailers could start to climb their way back into the sales arena.
The high end
The business climate is tough all over the retail spectrum and this is especially true at the high end of the market; Nordstrom is no exception. It might be easily argued that Nordstrom should suffer more by lower consumer spending and confidence. I said might. In reality, Nordstrom anticipated a 50-60 percent increase in sales in fiscal year 2012. So what does Nordstrom do better than most retailers do? It sells.
Walk into any Nordstrom and you will quickly see that the company executes with a capital "E" when it comes to selling. Moreover, you will encounter salespeople who are extremely well-trained. They're never pushy and don't make customers feel awkward by hovering over them but they're always there with a soft, friendly and - most of all - helpful demeanor that provides excellent service from start to finish. They make useful recommendations when appropriate but never treat customers as if they are sheep wandering into the wolf pack.
Came to a head
Back in 2007, the issue of poor customer service came to a head at Home Depot. Customer complaints were inundating the company's Web site and they were losing market share because of poor service. Consumers complained about the dearth of help and that any assistance that could be found lacked the useful knowledge for which Home Depot had become known. It was a big problem.
However, Frank Blake, the newly-appointed CEO, invested in fixing the issue by adding thousands of workers and making capital improvements. To frequent Home Depot customers, the transformation was immediately recognizable. Customers could easily get help and Home Depot started to regain market share. Even as homebuilding deteriorated during the years that followed, Home Depot revenue and net operating margins continued to improve.
If you look at Home Depot's stock performance over the past 10 years in conjunction with the American Customer Satisfaction Index scores collected by the Ross School of Business at the University of Michigan, it's impossible to deny that customer service (i.e., sales floor execution) paid off. Today, the company sits in better shape than much of the home improvement industry.
Improve execution
Although measuring customer satisfaction is important, it cannot help you improve floor execution and selling skills like a good mystery shopper program. Customers are not capable of providing the targeted measures that can help retailers improve execution when it comes to selling and engaging other customers.
A common concern for retail operators is the lack of action-oriented information delivered by customer satisfaction data. Working with trained mystery shoppers who go into client stores using prescribed scenarios to gather specific information can reveal objective facts that can be used by store management for training. With customer satisfaction, you are measuring customer reaction to service. With mystery shopping, you are measuring service itself.
Continue to change
Technology will continue to change the way people shop and do business in general. Many technologies, like radio frequency identification, will help retailers improve efficiency and cut costs while others, such as showrooming, will pose more of a challenge. Technology will also create advances in retail but it's important not to overlook the biggest advantage brick-and-mortar stores have over online environments: true, person-to-person customer engagement. Rather than allowing customers to come in and roam with only their smartphones as a companion, engage your potential buyers and sell them something.