Many traditional retailers have been saying “good riddance” to 2017 as they close their books on last year. Who can blame them? Traffic to traditional retailers for 2017, as reported by ShopperTrak, was not pretty: Total traffic was down over -7% for the year and traditional retail lost nearly 9 billion shopping trips in 2017 (on a base of 120 billion). There was only one positive week of traffic – the week before Christmas – which was up just over +7%. Fourteen weeks were down double digits, between -10% and -20% and a staggering forty-three weeks were down -5% or more. Ouch!
Traffic was down, but sales were up. According to the U.S. Census Department, sales at traditional retailers (excluding food service, auto and parts dealers, and pure play online retailers) were UP by almost +3.5%. You read that correctly… traffic was down by over 7% yet sales were up by nearly 3.5%.
Trying to reconcile this traffic decline with increased sales volume is where it gets interesting. We don’t think this was due to increases in average ticket. Our theory is that the trips retail lost in 2017 were not the trips that result in a purchase. The trips lost represent the “educational” trips customers historically took to become familiar with assortments and weigh the pros and cons of the available choices — with the intent to buy at a later time. In essence, retailers lost shopping trips not buying trips.
Why bother leaving your house just to shop? Today’s time-constrained consumers know it’s more efficient and effective to shop from the comfort of their homes via the web. The world of online retail simply has better, more accurate and more easily available information — as a result, online is where the shopping is being done. What appears to be true is the trips traditional retail retained are the ones where web-informed customers came to actually buy.
It’s all about experience. Well, sort of…
If this theory is true, then it means traditional retailers will need to start fighting the war to win customers on two fronts. Everyone has been saying for some time that the in-store experience is key to retaining core customers. But this data implies not all consumers are looking for an elaborate shopping experience – many are simply looking for a frictionless buying experience. If true, imagine how retail must change the work being done to create the in-store experience. For example, if many of last year’s actual in-store visits were used by customers solely to consummate the purchase, then where would a retailer better invest scarce operating dollars in the future – in knowledgeable product advisors… or cashiers to shorten lines? In fancy displays… or easy pay technologies? One thing is certain; the value of getting customers in and out the door with their purchase quickly and painlessly is increasing — because that is what customers who have “pre-shopped” will value.
This is, in fact, the opposite of what most retailers emphasize in their in-store improvements today. Traditionally, retailers have worked toward building an in-store environment designed to convert browsers to buyers. However last year’s data, showing sales up and traffic down, suggests at least some effort should go toward impressing customers who have already committed to a purchase by simply closing the sale more quickly and efficiently than competitors. Having an in-store experience that takes friction out of the act of closing a purchase would become as valuable as the “wow” environment and glamorous in-store experiences retailers are working on today. In short, the data suggests that some focus must shift from convincing to closing transactions. This hypothesis is supported by the strength retailers everywhere are seeing in the “buy online, pick-up in-store” process, which is on its way to becoming a primary fulfillment channel at retailers nationwide.
All of this is part of a larger seismic change in retail — a change in which retailers have lost nearly all power in the seller/buyer relationship with customers who are demanding the ability to interact with the brand on their own terms, regardless of channel, and want to be able to buy anything, anytime, anyplace, at the best in market price. The retailers that will thrive in the future are the ones that recognize these changes now and work quickly and diligently to move their offering closer to customers’ needs and preferences. This change in mindset and process will not come easily, but the data may suggest it’s time to adapt and lead or fall behind.