Social networks and the growth of social commerce, especially among the millennial generation, highlights the importance of relationship retail and the need for retailers to develop a relationship with consumers. Social commerce changes are allowing consumers themselves to focus on developing the relationships that are now reshaping the retail marketplace. Retailers have payed lip service for a long time to the importance of consumer relationships and consumer retention and then their actions focus on cost reductions and reducing the time and resources available to develop a robust consumer relationship. This has not gone unnoticed by consumers and you can see the results as consumers are now abandoning the large legacy retailers in favor of the retailers that have focused on the relationship.
We have always heard that the customer is always right and retailers have professed to focus on customer demands as a means to retain customers. Yet now consumers are shopping and purchasing from other retailers and leaving the legacy retailers at the drop of a hat. Take JC Penney as an example, when they changed their product pricing strategy from recurring sales, discount prices and coupons they lost market share and sales. Penney’s then changed back to their earlier strategy of discounting prices and special coupon offerings. What this tells me is that JC Penney only fills one consumer demand, low price, or more precisely, perceived low price. If Penney’s was concerned with the consumer relationship they would have taken the opportunity dig a little deeper into a broad market research rather than simply reverting their strategy they may have discovered the importance of consumer relationships. Penney’s should have invested in developing consumer relationships when they returned to their old pricing strategy.
There’s an old saying ‘When the only tool you have is a hammer, everything looks like a nail’. The low price and sales strategy is the legacy retailer’s ‘hammer’ and their reaction to every change in the market has been to use that hammer and lower prices to attract consumers. This turns into a downward spiral because in order to survive with lower prices they must lower their costs and this results in reducing staff which in turn then impacts the consumer experience in the stores thereby continuing the cycle. Even the legacy retailers online experience is similar to the store experience with the addition of waiting for delivery.
Millennials have grown up with a different social interaction model and they are infusing their shopping practices with their demands and experiences from this model. They are continuously searching and building new methods to support their lifestyles, including shopping and purchasing. They have blended their work, leisure and shopping into a social practice that supports their demands in the medium, time and place that makes sense for them and do not bend to the rigid practices and capabilities of legacy retailers. These demands and capabilities are expanding in the retail market and changing the focus from a simple low price purchase model to a social relationship shopping model and retailers must now focus on developing the relationship across all channels in order to survive in the future.
And now for the audience participation portion of the show…
ECommerce will have wide ranging impacts on both the retail and manufacturing sectors. How can you focus these abilities to improve the consumer's experience? Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes. In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas. How can you support these continuously changing requirements?