itim insights | There is nothing inevitable about store closures

There is nothing inevitable about store closures

Ali Athar | 05.09.2019

We seem to be in a defeatist cycle of store closures, but it is not inevitable.  The predicament only exists because the business model we started to adopt forty years ago is now broken. What makes us believe that the business model is broken? Just look at these symptoms.

We have taken the service out of stores – people no longer have a good enough reason to visit.

  • It’s not surprising that customers have moved online – “if there’s no service in stores, I might as well serve myself and wait to have something delivered … it’s so much easier than talking to someone in a store...”
  • We only make money when something is sold and most selling is done is our stores, but our incentive and remuneration systems rarely reflect this.
  • We have disempowered our store colleagues, no longer letting them make decisions or have ownership of customers. But there is talent in every store and they are the only ones who can truly serve customers. 
  • The best time to secure the next sale is when making the current one – but this can’t happen if we aren’t proactively engaging.

We claim to be customer-centric, but we are not.

  • We do not recognise that 10-15% of customers probably account for half our sales (our VIPs) and these people are not cherished.  VIPs typically want service, but they are not getting it.
  • We communicate with customers centrally (anonymously through email) when in fact we have people in stores who could communicate with them personally
  • We think brand loyalty is a points system and that service is spamming people with email and sending them product vouchers. What is customer-centric about that?

We are still product led.

  • We are losing sales but, instead of incentivising our sales people, we pay buyers a lot to buy product that we are then forced to discount and clear.
  • Retailers no longer ask customers what products they think they should stock and sell. Customers are increasingly curating on their own.

We are still operating in ‘silos’ – few things in our business are joined up. 

  • We are happy to sell through the internet to customers who may be in the vicinity of our stores without letting our store colleagues know we are doing so.
  • Our stores are closer to customers, yet we hold more stock in our warehouses and deliver from there.
  • Many of today’s retail executives have never held a sales target or worked in a store or personally serviced a customer.  Many would not get past the Alan Sugar test!  I know no retail founder who did not start his business by operating a store, selling and serving customers.

I won’t go on because it’s too depressing.   And the only conclusion is ‘close the stores’. But it need not be so.

“It will cost too much to change…” I hear you say.  But how do you know?  The whole point about technology is that it works both ways.

It can allow you to do the opposite of all the things I have referred to, at extremely low cost. It’s just that we have given up the desire to fight. 

You see launching an online business, driven by data (where customers are acquired by online advertising and dealt with anonymously), is so much easier and more cost effective.  So why bother with physical stores.

In the absence of an alternative business model, investors are undoubtedly buying into that premise.  It is a self-fulfilling prophecy.  Because the traditional retail business model appears broken and we don’t know how to restore it, it is easy to be defeatist. 

You do not have to be.  There is a new emerging business model for retailing which we are calling ‘unified retailing’.  It is a model which starts with the need to concentrate on ‘sales’ and ‘sales enablement’ through improved, focused, and personalised customer engagement.  It is genuinely customer-centric.  But you have to be prepared to turn retailing on its head.

Get in touch and we will show you how different it can be, and what a difference it can make to your business.