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Latest Issue: Nov/Dec 2018

Has the bell tolled for the high-street?

2018 has marked a difficult year for the high street with many household names shutting stores. Brands such as Carphone Giant, Mothercare, House of Fraser and New Look all closed a number of stores across the country. So, with most reporting proclaiming doom and gloom on the high street, and net profit margins reportedly getting thinner, retailers that are still invested in bricks and mortar are asking themselves a key strategic question - whether physical stores will remain commercially viable?

A number of factors have pushed up costs for retailers over the past few years: discounter and online competition; energy becoming more expensive; rising business rates, minimum wage requirements increasing; and now Brexit fuelled inflation to boot. But it is arguable the factor that has really impacted the longevity of bricks and mortar has been a loss of faith in the physical channel, followed by internal decisions to reduce marketing budgets promoting the in-store experience and too much focus on online and email communications.

Studies provide compelling data to suggest that this is very misguided. Research shows that multi-channel customers are more loyal and spend more than single channel customers[1]and store-only customers have less churn than web only customers[2]. Add to this that traditional marketing such as direct mail is still more effective in eliciting incremental spend from customers than digital channels such as email or mobile, and that shoppers spend 25% more when a business uses a mix of direct mail and email marketing,[3]and it is clear that retailers should not be throwing the baby out with the bath water and making a wholesale migration to digital.

It is also evident that traditional channels still command most attention in terms of recall, response, activity and spend. These non-digital channels are also critical to help manage the cost of acquiring, keeping and growing customers. Retaining and developing high-loyal high-spend in-store shoppers has far higher return on investment than constantly recruiting high-churn, web-only customers – as much as ten-fold according to our research, even factoring in the campaign or communications costs. So fostering multichannel shopper loyalty is clearly the win-win strategy. If stores close, however, customers that prefer bricks and mortar (the majority) are unlikely to change their habits and migrate to online-only.

At the heart of each misguided web-only communications strategy is a failure to focus on marketing intelligence. CMOs tend to start on the back foot within their organisation. Specifically, far too many CEOs don’t trust their CMOs (80 per cent)[4] and the metrics they provide are regarded as not solid. All the more reason, then, to ensure that a holistic view of customer behaviour – in-store, online, mobile, social – is captured and then that marketing intelligence used to deliver compelling, targeted offers that delight customers so they stay and spend more. Increased revenue and margin is compelling to the CEO. The numbers can’t lie.

It is astonishing, therefore, that retailers are still trying to increase revenues through limited period special offers and other blanket promotions. For a start, these promotions are completely visible to the competition, so any short term advantage can quickly be replicated or countered. Also, only certain customers or prospects will be incentivised by any given offer – so blanket promotions give margin away to people who will not be influenced to stay, to buy other products, and ultimately to generate margin. That’s simply throwing marketing resources away. Targeted rewards and offers, delivered through a CRM system and/or loyalty scheme, only incentivise people with the things they find attractive, and do so in a discreet fashion that the competition cannot see.

In an era when customers are increasingly multichannel or omnichannel, too few retailers are yet able to integrate tracking and analysis of how customers interact with them - in store, online, through apps or over the phone. This is criminal. The tools to do so (all GDPR compliant) are readily available. Even something as simple as targeted messaging to re-activate abandoned baskets – based on the customer’s whole profile – can have a profound effect on revenues and margins.

So is the high street on the point of death. Hardly. Certainly, the relationship between physical stores and online/mobile is changing and substantial restructuring (not elimination) of store portfolios is under way. But as with most things, balance is the key, based on careful analysis of the customer’s preferences and behaviour, whether in-store or online, social or mobile. Retail is changing, but will stay strong. The same may not be the case – however - for the commercial property market!

by Andy Wood, Chairman GI Insight


[1] Harvard Business Review, How to Make the Most of Omnichannel Retailing: A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works; Emma SopadjievaUtpal M. Dholakia, Beth Benjamin; January 3rd, 2017

[2] Verint, The Digital Tipping Point, 2017

[3] Marketing Profs, Direct mail Vs Email Infographic, 2017

[4]Harvard Business Review, The Trouble with CMOs, July-August 2017