Brick-And-Mortar Retailers Must Beware Of Fickle E-Shoppers This Holiday Season 2013

on November 20 2013 5:51 PM
Thanksgiving Day shopping 2013
For 2013, several stores will open their doors on Thanksgiving Day. Kohl's announced it will join Macy’s and J.C. Penney will let mobs of shoppers in early on Thursday, Nov. 28. Reuters

This story has been corrected.

As retailers approach the uncertain but heated holiday season, they must be wary of more than just defectors to Amazon.com, Inc. (NASDAQ:AMZN), so-called "show-rooming," and price wars in consumer electronics.

Holiday sales will be soft this year, according to economics researcher IHS Global Insight. The group said retail sales in November and December, worth $598 billion in revenues this year, could grow by 3.2 percent, down from 3.4 percent growth in 2012. That’s the worst sales growth since 2009.

One extra danger to traditional retailers, aside from fierce e-commerce competition, comes as a startling statistic in a recent survey by workforce management giant Kronos Inc.

It takes just a little more than two negative experiences across any platform, whether mobile, online or in-store, to turn a shopper away from any given retail brand, found the online survey. Many millennials -- those aged 18 to 34 -- desert a brand after just one bad shopping experience.

“Retailers are at risk of losing consumers who never even step into their stores,” said Kronos retail director Liz Moughan to International Business Times. “There’s zero margin for error.”

She said shoppers historically were more tolerant of mistakes, even younger shoppers. That’s partly because there were fewer ways to shop.

“Now the risk is higher for there to be a negative experience,” she continued.

Retailers are wedged between a rock and a hard place. Problematic websites, like healthcare.gov, could cause customers to abandon brands immediately -- but failing to adapt to e-commerce rivals or mobile strategies leaves traditional retailers trailing the pack.

“I don’t know if I’d advise them not to do it [digital platforms] until it’s 100 percent perfect,” Moughan said. “Consumers are expecting to shop omni-channel this season. If they want to make it perfect, they may lose out on a lot of opportunities.”

About 86 percent of shoppers will use their mobile phones while shopping this holiday season, according to research released Tuesday by Vibes, a Chicago mobile marketing firm.

Vibes’ clients, who include major retailers like Sears Holding Corp (NASDAQ:SHLD), the Home Depot, Inc. (NYSE:HD) and the Gap Inc. (NYSE:GPS), have adapted better to the trend of mobile phone use within stores, said Vibes co-founder Alex Campbell to IBTimes.

More people are using phones in-store to review products, rather than to simply show room -- that is, to inspect a product in real life, only to buy it for less later online.

“I’d actually be surprised if it’s two tries,” said Campbell, of the number of bad experiences which retailers can risk. “I think you get one.”

“The consumer is out in front of the retailer as far as the technology goes,” continued Campbell. “The retail industry has a long way to come to deliver what is expected of them.”

Retailers who fall behind with digital platforms and marketing will see consumers turn to Amazon, said Campbell. The e-commerce giant’s shift to Sunday shipping and its goal of one-day delivery should make retailers quicken their pace.

“Consumers are definitely driving this, and we’re starting to see retailers catch on, but it definitely needs to happen faster,” said Campbell.

Last Friday, competitive pricing tracker 360pi said in a report that Amazon offers better prices than rivals on its own products only 80 percent of the time. That means some top retailers are beating Amazon on prices 20 percent of the time.

“Overall, we are seeing that if top retailers try to tackle Amazon one category at a time, they stand a good chance of at least matching, if not beating, Amazon,” said a company spokesperson in an email to IBTimes.

Electronics, especially tablets and televisions, is an area where traditional retailers are fighting tooth-and-nail to match Amazon this holiday season, said 360pi CEO Alex Rink. They’ve had some success.

That may be one bright spot for brick-and-mortar retailers seeking to keep sales afloat.

Amazon said in its latest quarterly results that sales grew 24 percent to $17.09 billion. It expects sales to grow 10 to 25 percent in its fourth quarter, up to $26.5 billion, and will hire 70,000 workers to meet demand over the holiday season.

The world’s largest traditional retailer, Wal-Mart Stores, Inc. (NYSE:WMT), in contrast, said it would likely see flat sales in the fourth quarter. The giant has suffered from weak comparable U.S. sales in recent months.

Profit margins at traditional retailers are expected to be squeezed as they compete fiercely on price this holiday season. Major stores like Macy’s, Inc. (NYSE:M) will open on Thanksgiving Day, flaunting tradition for sales and to keep up with rivals.

Not everyone is downbeat. The National Retail Federation on Wednesday forecasted a healthy holiday season, on the back of strong October retail sales.

The trade association noted: “Retailers will continue to rely on heavy promotions to drive traffic and sales this holiday season.” The group forecast earlier in October that holiday sales growth would increase marginally from 2012, up 3.9 percent to $602 billion.

Barclays PLC (LON:BARC) analysts also said U.S. retail data released Wednesday provided an “encouraging starting point” for a consumer spending pickup in the fourth quarter.

CORRECTION: The article originally read: "...startling statistic in a recent survey by workforce management giant Kronos Worldwide, Inc. (NYSE:KRO)." The article has been corrected to read: "startling statistic in a recent survey by workforce management giant Kronos Inc." The firm is privately held and not listed on any exchange.

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