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BRICK AND MORTAR STORES: NICE OR NEED TO HAVE? Marketplace Insights March 2016 PAGE 1 ARE STORES GOING EXTINCT? WE WONDERED: At the start of 2016, the world’s largest company by revenue, Walmart, announced that it would close 269 locations around the world. With today’s tremendous increase of online stores and the closing of traditional retail spaces, we wondered whether or not the age of the brick and mortar was dead. As the expectation of convenience increases within the shopping space and consumers of all ages begin to feel more comfortable shopping online, do brick and mortar stores still matter? Are they in jeopardy of becoming extinct due to cost-efficient online marketplaces? And while some stores are closing their doors, the country’s largest Internet-based retailer, Amazon, opened it’s first brick and mortar store in it’s home city of Seattle late in 2015. In order to find out more, we surveyed 844 consumers and conducted 82 in-depth conversations with consumers ranging in age from 15 to 65+. HERE’S WHAT WE LEARNED… PAGE 2 ? STORES ARE HERE TO STAY. EXPERIENCING PRODUCTS THROUGH THE SENSES BUILDS TRUST FASTER THAN ONLINE Especially when purchasing products that consumers wear (clothing, cosmetics, shoes), shoppers want reassurance of their purchase through touching items and trying them on in the store. Familiarity with a brand’s fit and styles may result in future online purchases, but the first in-store impression of the brand is critical for building loyalty. 74% Believe it’s important for brands to have a physical store vs. online only. This sentiment is strongest among Millennials and Gen Z. 40% Still make most of their purchases in-store (vs. 26% mostly purchasing online) Net importance of having a physical store: N = 844 PAGE 3 GEN X MILLENIAL GEN Z 69% 65% BOOMER 80% 82% Physical stores deliver: • Trust • Confidence • An experience, not just a product Yes, shopping in a physical store gives me the ability to actually touch the product and see if it meets my needs. Shopping in a store is more of a social event for me. I go with friends and family and run into other friends. I go to physical stores to get ideas more than make a purchase. – Male, Gen X The Store Experience is good for me for returns and actually seeing and touching the products, other than that I would be all for online shopping. – Male, Millennial EVERYBODY’S GOT THEIR SOMETHING. What motivates each generation to visit stores? GEN Z SEEKS REASSURANCE AND TRUST THROUGH THE SENSORIAL Shoppers like trendy fashion stores with good deals. Stores like Charlotte Russe and Forever 21 match their price points and give them an opportunity to try on sizes and styles that are difficult to figure out online. Favorites like Sephora offer samples and demos to provide reassurance before purchase. On top of it all, they don’t want to pay for shipping or have to wait for products to arrive; in-store delivers the immediacy they crave with no added cost. MILLENNIALS SEEK EFFICIENCY, WITHOUT COMPROMISING ON QUALITY Launching their careers and possibly balancing young kids, Millennials feel more of a need to shop. This can get difficult, though, with families and busy schedules. Millennials like big box stores to save time and increase efficiency. They’re spending a lot of money, and lean on coupons or rewards to help. GEN X SEEKS AN ESCAPE AND NEW DISCOVERIES Gen X-ers are likely nearing the peak of their careers and watching their kids get a little older. Life is hectic. While they like big box stores to save time, they also want an escape from the everyday (calm music, coffee, new displays), often looking to stores like Target for this balance. PAGE 4 BOOMERS SEEK COMFORT AND SPACE When deciding on a store, Boomers need a comfortable shopping experience (low music, light scents, seats). Whether they’re retired or they’re still employed, Boomers typically have more fixed incomes or even less household income overall. They’re more price conscious, often saving for future generations, and they want to see and touch products before buying. Furthermore, this sensitivity to price makes them resent shipping costs. GEN-Z: TRUST THROUGH EXPERIMENTATION MEET JESSICA. Jessica is a vocational school graduate who is currently an admissions advisor. When not working, she’s usually with her boyfriend, friends or family. She likes to go out to eat and to the mall. Her favorite stores are Sephora, Charlotte Russe and Forever 21. Jessica thinks Sephora is super fun because she can play with the colors and textures while trying on different products. She loves to try on all the latest styles in Charlotte Russe and Forever 21. These stores have young and trendy clothes that Jessica fell in love with after spending awhile in the dressing room checking out the fit. Jessica is just starting out her career and has to budget her spending (even though she loves to shop and stay in style). That’s another reason she loves these stores the most – the deals! While Jessica may do some shopping online (if she can get free shipping), most of her purchases are at the mall where she can be sure the clothes or cosmetics are just right for her before spending her hard earned money. [Forever21] offers a wide variety of clothing for good prices … they have nice boots and classic sneakers which are usually on sale. Their staff is pretty nice too. Charlotte Russe because their clothes are cute and made well … The store feels open and welcoming. It smells like the perfume they sell and there's a warm feeling coming from the employees. PAGE 5 MILLENNIAL: ALL ABOUT EFFICIENCY MEET JOSE. Jose is an engineer who likes to go to the gym and stay fit and active when he’s not working. Jose and his wife have two children, ages 2 and 4, and one on the way. Since Jose’s wife also works full time, they typically shop on Saturdays with the kids. Sometimes they all go to Costco, and other times Jose takes one child to Best Buy, Footlocker or GameStop to buy specialty items while his wife and the other baby are at Target buying household and grocery items. Jose loves Costco for the variety of products and feels savvy when he can buy in bulk. He also loves Best Buy, Footlocker and GameStop for the quality products and excellent customer service to help him find the right product quickly when he isn’t sure. Jose’s main goal is to shop quickly and efficiently before the kids are tired. But, he will not compromise on quality products to fit his needs for a quick shopping trip. With three kids, he needs to use his money wisely now in order to save for the future. Life is all about convenience and everyone is always in a hurry. If I cant find things at a store, or it takes too long, or even too long to check out, I would rather go somewhere I can get in and out quicker, even if it is a little more expensive. BestBuy has great customer service & for me at least it's easy to find what I'm looking for. Also, they don't overprice their items. They also have a good return policy. PAGE 6 Store experience is huge…I have younger kids who are loud and get bored easy. I need that experience. I don’t need [to get] stressed out more than I already am. GEN-X: SEEKING A PLEASANT ESCAPE MEET ANGELA. Angela is the manager of the Human Resource department for a large corporation. She and her husband work long hours through the week, but manage to keep up with her middle and high school kids’ activities each night. At the end of the work week, they are exhausted. On Saturday mornings, Angela’s husband has soccer practice duty while she sneaks away to do the family shopping. Angela’s favorite store is Target. She feels as though it’s an escape from her busy week. Her first stop is the Starbucks just inside the door. She can sip her latte while shopping as she begins by browsing the dollar section at the front. She loves browsing the aisles to find the new trendy items of the week and even tries on and purchases clothes for herself or for her kids. The relaxing music and homey smells of coffee, popcorn and candles put her in a good mood. Her last stop is the grocery section where she can pick up everything her busy family needs for the week ahead (even fresh organic produce). Angela values this time as a quick escape to refresh for a few hours (while also taking care of family errands). Kohl’s and JCPenney are two other shops where she can have a bit of time to herself. I love to shop in Target and Whole Foods just because they have fast check out and they have a wide variety of organic groceries … Target is very organized and clean. If I’m standing in the store right now I would imagine it being cozy and has a warm ambience and smells nice like scented candles but not so strong that it hurts my nose, but just right that it will make me feel good shopping. [To improve store experience:] Music is calming/soothing and has a tendency to make people stay in the store longer, therefore, spending more $; pleasant smells throughout the store - nobody wants to shop or even be in a stinky environment; associates available if needed - questions can arise at anytime during shopping; clear pricing on merchandise/price scanners in lots of areas - nobody wants to waste time guessing at the price of items. PAGE 7 BOOMER: PRIORITIZES COMFORT AND SPACE MEET MARY. Mary is recently retired and anxiously waiting for her husband to do the same so they can begin traveling. Since leaving the workforce, their combined income has decreased substantially. And with a new grandbaby, their financial advisor recommended they start a college fund for their grandchildren and a travel fund for their retirement. This means Mary has to budget wisely when it comes to shopping. Mary typically shops during the week while her husband is working. She enjoys going to Bed Bath & Beyond, Hobby Lobby, Walmart, Kohl’s and the mall. Mary’s favorite store in the mall is JCPenney. Not only can she can park close to the entrance, but it has wide aisles, clear signs, organized departments, bright lighting to easily view the products, and a comfortable dressing room. She also loves the great deals she finds on her clothes and household items. In general, Mary values a safe, comfortable store with quality products at valued prices so that she can focus on saving for her future with her family. My favorite store to shop at is JCPenney. They have some really good bargains if you take the time to look hard enough, and their products are high quality … they have been around a long time and are still here today in spite of the big box stores. It is clean and the products aren't laid out in straight isles like other stores, but in groups and sections. It doesn't have the “food smell" like the big box stores - it smells like clothes. [Factors of a positive store experience:] The openness of the store, the lighting needs to be true to color, fitting room needs to have a seat and a place to hang your clothes (the seat needs to be secure and solid enough for older people to sit). Check out should be easy and you shouldn't have to search for it. Sizes in departments should be plainly marked so I'm not searching for x large department. PAGE 8 SHAPING THE EXPERIENCE Now that we know brick and mortar stores are critical, how do we go about creating the ideal experience for customers? PAGE 9 WHEN DOES IT MATTER? STORE EXPERIENCE IS IMPORTANT WHEN: SHOPPERS CARE LESS ABOUT EXPERIENCE WHEN: • Buying high priced items • They’re not in a hurry or looking for something specific (just browsing) • Buying specialty items (like a prom dress) • Buying items they need help deciding on, trying out or understanding (i.e. electronics) • In a hurry (especially around holiday times) • Visiting the store for the first time When buying an outfit/dress for an important event like prom. – Female, Gen Z It is important because if it is your first time there and you had a good experience you will go back. If you didn't, you will not return. – Female, Millennial When I need to physically try on clothes, shoes etc. to make sure they fit. – Male, Millennial PAGE 10 • They just need an ‘emergency’ item (as long as they can find it quickly and checkout is fast) • The item needed is only available at one particular store (no competition or choice of stores to shop) It matters less when someone is just browsing because they are not looking for something specifically. – Female, Gen Z It always matters except in cases of emergency. If I need milk for my family at midnight then I will go to the closest place so I can get it done quickly. – Male, Gen X When shopping for store specific items. If something is only available at one particular store, the experience itself means less. – Male, Boomer PAGE 10 DEFINING THE IDEAL EXPERIENCE When imagining their ultimate in-store experience, consumers look to four major categories: CUSTOMER SERVICE PRODUCT INTERACTION 86% CONVENIENCE EASE OF FINDING PRODUCTS CUSTOMER SERVICE 74% 74% QUALITY OF PRODUCTS UNIQUENESS OF PRODUCTS STORE CLIENTELE 86% 81% EASE OF RETURN VALUES & MORALS STORE ENVIRONMENT 88% VARIETY OF PRODUCTS STORE AMBIANCE CONVENIENCE 65% 64% 51% 51% *Percentages represent importance of factors when shopping in-store. N=844 MAKE IT PERSONAL CUSTOMER SERVICE One of the most critical in-store touchpoints influencing purchase behavior and loyalty is customer service. A store can meet shoppers’ criteria by offering desirable, well-priced, quality products, but a poor customer service experience can trump all else – and may result in shoppers walking away from a purchase, or worse, avoiding the store the next time. At the very least, shoppers want to feel respected and welcome, but stores that go above and beyond to gain loyalty offer that extra touch of personalized care, treating shoppers like a trusted friend. BE HELPFUL/RESPECTFUL • At a minimum, retail employees should make shoppers feel welcome (via a friendly smile and greeting when they walk in) – like they are excited by, rather than bothered by, shoppers • Retail employees must be available when help is needed (particularly at busy/peak times), without invading personal space. Shoppers also appreciate when staff walk with them to help locate a product PAGE 12 BE A BRAND AMBASSADOR • Store employees are a reflection of the company, and should embody the brand’s values and personality • While product knowledge is expected, superior customer service comes when employees have personal, first-hand experience with the products they sell • Know the product selection and store well enough to offer details and advice BE A FRIEND • Great retail employees listen to shoppers’ needs and offer real advice and personalized recommendations without pressuring shoppers to buy • Those that truly go above and beyond in generating loyalty remember shoppers’ names and shopping preferences CUSTOMER SERVICE I feel like Customer Service IS the store. If you want my business, then welcome me like a friend. I love it when I know a few employees and they recognize me. It is so much more personal and feels good. Makes me return time and again. – Female, Boomer The [JCPenney] employees are awesome because they don't seem to be there just for the job itself, they reach out to you on more of a personal, loving level … For example, my husband and I went in to look for wedding rings … The lady at the counter was so patient in helping us fit and try/view rings ... Not only did she do her job there, she was so excited for us and asked us many questions about our plans for the wedding, where we're having it ... you know, the more personal questions than just her job ... Long story short, her husband was a pastor, who ended up marrying us, and we bought our rings there with her help ... Before we went to JCP, we went to Kohl's, and the lady there actually sighed when I asked if I could try on a ring ... I was excited to go ring shopping, but her actions just brought me down. – Female, Millennial PAGE 13 PRODUCT INTERACTION ENCOURAGES PURCHASE PRODUCT INTERACTION Perhaps brick and mortar’s greatest leverage over other channels, the in-store, first-hand experience helps consumers feel confident to try and purchase new products. Consumers want: Close-up experiences with new styles and trends Straightforward, reliable return policies that mitigate purchase risk Plenty of mirrors and fittings rooms that are both comfortable and accessible Samples or demos to decide on right product Options to ensure fit/quality (e.g. fitperfecting technology, access to touch/feel products) Shopping in a physical store gives me the ability to actually touch the product and see if it meets my needs. –Male, Gen X PAGE 14 Loving technology like I do, it's almost like a sense of awe and amazement. Finding something new that you never knew existed until you walked into the store and saw it with your own eyes. Getting to actually touch and feel these little technological marvels in the palm of your hand is just awesome. – Male, Millennial CONVENIENCE IS EXPECTED CONVENIENCE Customers of all ages value convenience. While Millennials look for efficiency, Boomers look for stores that are easy to maneuver. Pairing speed and accessibility with personal touches let consumers know that their time spent in-store is valuable. NECESSARY: MAKE THINGS QUICK & EASY • • • • • • • • Speedy check-out process with ample cashiers or self-checkout Employees that can help find items quickly Convenient store hours and parking Dressing rooms that are spacious and well-maintained Wide, clutter-free aisles that allow people to easily move throughout the store Clear and easy to read signage Products sorted and organized into categories Store layout that is convenient and intuitive so consumers can find items and sections quickly and easily EVEN BETTER? ACCOMMODATE THEIR LIFESTYLE • • • • PAGE 15 Electronic order counters Kid friendly (carts, etc.) Nice carts or totes for carrying products around the store Phone charging or reclining chairs for those waiting either on others to shop or for a dressing room to open CONVENIENCE My perfect shopping trip is to get in, get what I need, and get out. –Female, Boomer The ability to go in and get what I need, without people bothering me or trying to push products on me. I can go in and get what I came for, and get out fast. –Female, Gen Z Being a mom of 3, getting in and out of the store easily can be a challenge...so knowing where products are, or should be laid out in the store makes the trips with the kids easier, and less frustrating...it only makes sense to put things that go together – together. –Female, Millennial PAGE 16 ENVIRONMENT IS EVERYTHING STORE ENVIRONMENT While store environment and the sensory experience don’t make or break the purchase decision, the atmosphere impacts consumers’ shopping mindset as well as their perceptions of the brand. LIGHTING • Bright or natural lighting to see products clearly and make the store look clean and vibrant. SOUNDS • Relaxing music that’s not too loud, encourages positive vibes. FEELING • Emotionally, consumers want to feel good about where they invest. Supporting a company with poor values and morals leave consumers feeling guilty. APPEARANCE • • • • Attractive displays and endcaps to encourage browsing. Flowers and/or other welcoming decorations. Modern design with a wide, open feeling. Mostly natural/neutral colors with areas of pastel/muted, bold or trendy colors to catch the eye. SCENT • Clean smell or smells of the perfumes, fabric or food sold. • No overbearing scents of cologne or perfume. • When applicable, new product smell (leather gloves, shoes). PAGE 17 [Stores] should be very up to date with an excellent design in all aspects. In other words, modern. It should have an excellent sound system for music. Big, beautiful dressing rooms and the best racks and mannequins, etc., for displays. It should be fairly neutral in color except for a few places that should have bold colors to attract attention. Flowers in a few places would be nice. Artificial is fine. –Female, Millennial SPOTLIGHT ON BIG BOX STORES What makes big box stores different? They have benefits and drawbacks in three categories. STORE PERSONNEL The upside is that more employees equates to more hands on deck to field customer questions, help locate products, and maintain the store. The downside? Consumers complain that some big box stores have poorly trained employees that are lacking in product knowledge and fail to respect customers. CONVENIENCE Big box stores are convenient for a plethora of reasons. They carry a variety of products, preventing customers from having to drive to multiple stores to get what they need. On the flipside, consumers have a hard time with inconsistency between stores – they expect a similar experience at each, and that’s not always what they find in terms of selection, layout, maintenance, and management. This ultimately causes them to spend more time shopping than they’d like. LAYOUT Larger stores allow for easy navigation. Wide aisles allow customers to navigate a store that’s usually organized by product type in a more logical way than smaller stores can pull off. That said, these cavernous spaces can feel cluttered and dirty if not well maintained on a regular basis. PAGE 18 EXAMPLE: TARGET These three factors (personnel, convenience, and layout) can vary across stores and lead to very different perceptions of the same brand. I love shopping at Target. It's a fun shopping experience for me because I can stock up on all my household supplies like toiletries, cleaning supplies, etc. and then also browse the makeup, clothing, and home decor. It's really a one-stop shop for me. And the prices are low enough that I feel okay buying myself a treat or two every time I go. – Female, Millennial I do not like shopping in Target. They are always very full, and their clothes, and other things are strewn all over, because people set things down that they do not want, and the employees do not put them back. – Female, Gen Z IMPLICATIONS PAGE 19 IMPLICATION SUMMARY EMPLOYEES ARE ESSENTIAL IN BUILDING LOYALTY: INSTITUTE STRINGENT HIRING + TRAINING CRITERIA Store employees are one of the most influential touchpoints in driving purchases and building brand loyalty. Resources should properly be invested to ensure they’re delivering the expertise shoppers desire in an accessible, helpful and respectful way. Hiring employees that are passionate about the brand and industry will translate into better attitudes, better service and potentially increase brand loyalty or sales. In-depth training and employee familiarity with the products equips the team to answer and assist consumers and show them how the product can fit into their lifestyle. ENCOURAGE PHYSICAL INTERACTION WITH THE PRODUCT Brick and mortar stores provide consumers the chance to experience and interact with products. By encouraging interaction and ensuring that nothing impedes their exploration, stores can provide the confidence consumers need to go from browsing to buying. SMALL PERKS GO A LONG WAY TO IMPROVE EXPERINCE Things like free samples, demos, small snacks/drinks, Wi-Fi, phone charging or even in-store coffee shops or restaurants are great ways to help customers relax and enjoy themselves. Delivering value-adds in line with the brand help make shopping a rewarding destination, not just a transaction. WELCOME MILLENIALS AND GEN-Xers BY OPTIMIZING FOR FAMILY VISITS Offering a fun destination for the kids and a relaxing escape for the parents will keep Millennials and Gen-Xer’s browsing in the store longer, purchasing more, and returning to the store more often to shop. DO YOUR HOMEWORK ON STORE ORGANIZATION AND LAYOUT Wide aisles with easy navigation through the store and product categories intuitively laid out within departments greatly contribute to a positive experience and allow consumers to find their products at a relaxed pace. Take advantage of research that’s already been done to educate yourself on what’s best for each type of store. Conducting shop-a-long studies gives brands the opportunity to see their store from consumers’ eyes and generate ideas on how to improve layout, organization, and more. FIND THE LOCATIONS THAT PLEASE AND REPLICATE ELSEWHERE FOR CONSISTENCY Consumers recognize that locations within chain stores are not consistent. These larger brands need to understand what people love about their top locations and despise about their lower-preforming locations. Ensuring that the winning factors are implemented across all locations will improve consistency and therefore experience. PAGE 20 THE METHODOLOGY PROJECT SPECIFICS: iModerate conducted a survey with 844 consumers and followed up with 80 for one-on-one conversations (average duration of 60 minutes). TARGET CONSUMER CRITERIA: • Age 15+ • Even Mix of: • Gen Z (15-20) • Millennials (21-33) • Gen X (34-50) • Boomers (51-65+) • Male/Female • Shop in-store or online at least monthly. THOUGHTPATH™: Our qualitative research is based on a cognitive approach called ThoughtPath. Drawing on theories of cognitive psychology, ThougthtPath enables our skilled moderators to get into each consumer’s head and discover what’s most important to them, what’s not, and why. PAGE 21 QUESTIONS? COMMENTS? SAY HI, WE’D LOVE TO HEAR FROM YOU: WWW.IMODERATE.COM // (303) 333-7880 // INFO@IMODERATE.COM PAGE 22