Adapting to retail’s ‘seismic shift’
Starbucks CEO Howard Schultz made an interesting observation the other day: Traditional bricks-and-mortar retailing is at “an inflection point.”
Pointing to the reduced crowds that many retailers — including Starbucks — saw over the November-December holiday season, Schultz said it wasn’t that consumers failed to shop, but that they went online rather than to a store.
“Holiday 2013 was the first in which many traditional bricks-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way,” he told analysts in a conference call late last month.
Starbucks, though, had a successful holiday quarter, he said, due to such digital initiatives as online promotions and a smartphone app that lets customers pay electronically. They position the company well for “the seismic shift under way,” he said.
But Schultz wants to do more. In fact, he’s so convinced the tide has turned that he announced management changes a few days later that will free him up to focus on “the convergence and integration of our retail and e-commerce, digital, card and mobile assets around the world.” Newly released data underscore his holiday assessment.
Overall retail sales rose in November-December, up nearly 4 percent from 2012 to $601.8 billion, according to the National Retail Federation, an industry trade group. But foot traffic, as measured by retail consultant ShopperTrak, dropped nearly 15 percent for the season.
Bill Martin, founder of ShopperTrak, attributed some of the traffic decline to bad weather on two key weekends in December that kept shoppers out of the stores — and perhaps online instead.
Indeed, the Retail Federation reported that so-called non-store holiday sales — a proxy for online sales — grew 9.3 percent over the period to $95.7 billion. That was a drop in the bucket compared to overall sales, but its rate of growth was faster.
Martin, noting that “an overwhelming majority of all retail sales” still occur in physical stores, said that retailers “who deliver a seamless customer experience both in the store and across all channels will emerge ahead of the rest.” Sanjay Putrevu, a professor of marketing at the School of Business at the University at Albany, would agree.
The trend to online shopping “has been happening over a period of time,” he said. “It doesn’t mean that malls will go out of business, that stores will be irrelevant — they are relevant.” But online shopping is “much more convenient to a lot of people,” said Putrevu, who studies consumer behavior. Early security concerns with online shopping have been alleviated, he said, and some consumers may even see it as more secure in light of the credit- and debit-card hacking that marred the 2013 holiday.
While online-only retailers are less likely to add a physical location, he said, bricks-and-mortar sellers that subsequently go online know it’s “very important” to maintain a commitment to both.
“It’s not a question of one or the other,” Putrevu said of the latter. “The expectation is that both will continue.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at firstname.lastname@example.org.