Sports Authority cited e-commerce as the threat that took them down after almost 100 years in business. No doubt competition from the internet was a major factor, not only for Sports Authority but for other recent retailers who’ve met the same fate (e.g. Aeropostale, Linens and Things, Borders and Circuit City.)
At the moment, only 15% of sporting goods sales happen online. Is that dip significant enough to destroy a company? Meanwhile, other retailers are thriving. Apple, of course, being at the top of the industry – and, perhaps ironically, a digital company at heart.
So what’s going on? In this increasingly digital world, retailers need to be able to think differently about their value proposition in order to survive. Some have been able to do that and are thriving. Others, not so much.
At FROM, we drive digital transformation by stripping our clients’ value propositions down to their studs, and studying how we can optimize it for the current digitally-enabled age, to make it resonate with the digital customer. We use industry-specific models to support this work.
THE RETAIL MODEL
Retail provides three areas of value to consumers: Convenience, Product Selection and Experience The changing eRetail landscape (and a few other factors) have shifted the relative value of certain capabilities, and retailers who want to remain successful need to adapt.
If you wanted to buy something in the “olden days,” you had to get on your cart and wagon and head to the general store. But the general store had limited inventory, and if you wanted to buy certain items, you had to take the train to the "big city." Then, Sears and Roebuck came along and created a catalog! You could order what you wanted, as long as you didn’t mind paying up front and potentially waiting weeks, or possibly months, for your merchandise.
All of these models had a lot of friction. Pre-Internet, the primary benefit of a local retailer, whether Sports Authority or Macy’s, was to reduce the level of effort to purchase something by moving the merchandise close to the customer. The benefits of this have been greatly diminished by the internet, where so many things can be ordered for overnight or FREE 2-day delivery.
But in some categories, such as Grocery, location is still relevant. In the internet age, every retailer needs to consider what they can do to be more convenient. Wal-Mart now allows you to order your merchandise online, drive up to the front of the store, and have your purchases brought out to your car. This model is a good example of marrying the convenience of internet shopping with the immediate gratification that a local retailer can provide.
Product Selection Process
Retail stores display goods in a way that allow you to browse and sample products easily, and better retailers have knowledgeable salespeople who can guide your decision-making process. The combination of robust informational content and customer reviews coupled with the erosion of expertise most store associates can provide for the transaction greatly reduce this benefit.
I was recently at a Best Buy and asked an associate in the camera department a simple question about a product. She took out her mobile phone and Googled the answer. Don’t get me wrong, I appreciate her effort, but I can do that myself.
Another benefit brick and mortar retailers can capitalize on is that some products are easier to buy when you can touch and feel them. But the use of e-commerce tools like zoomable photographs and videos combined with generous return policies (e.g., Zappos, who pays to ship both ways) continue to reduce this type of benefit, as well. Retailers need to consider how to take FULL advantage of the fact that users can touch and try the product. At Best Buy, for example, the cameras are powered up and available to test, where at Costco, they’re left in their boxes. That’s a step in the right direction!
Another step would be to create an environment designed for customers to test the cameras under different lighting conditions, and then show them the results by printing their photos. Definitely more expensive to maintain, but it’s the type of experience you can’t achieve online. Maybe Sports Authority could have taken a page from high-end golf shops, where you can test clubs and other golf paraphernalia in simulators, and used some of its vast square footage to create areas where customers could actually try the sporting good products.
Retailers like American Girl, Apple, and Zara create a fun shopping experience that's worth the trip. And destinations like Mall of America or Downtown Disney combine shopping with a fun 'day out' that makes it more appealing to get in your car. This is the area that gives physical retailers the biggest potential to beat internet retailers. Many don’t focus on it as a primary differentiator, but they should! One of the challenges of retail is slim margins; ideas to improve the customer experience that adds cost are often hard to swallow. In a world where online businesses that don’t have the overhead of a physical store can compete on price, the traditional retailer has to either find a way to make the “brick and mortar” value proposition worth the trip or just get out of that channel altogether like Sports Authority.
If you’re a worried retailer, take a look around and make an honest assessment. Is your store more convenient than buying online? Does it provide a product selection experience that is better than online content reviews and product photos or videos? Does it provide an experience people want to try?
Convenience, product selection, and overall shopping experience are the three areas in which you can set yourself apart as a retailer in the digital age. If you don’t, Sports Authority will see you on the other side.