Consumers are fed up with the quality of service in many stores, at the same time as retailers face ever-growing competition from online and mobile commerce. According to the U.S. Department of Commerce, first-quarter e-commerce sales rose 3.1 percent to $53.2 billion, while total retail sales for the same period were estimated at $1.08 trillion, an increase of 1.7 percent.
ComScore estimated first-quarter 2012 e-commerce sales increased 17 percent from the first quarter of 2011, the sixth straight quarter of double-digit growth. E-commerce is still relatively small, though: Sales in the first quarter accounted for only 4.9 percent of total retail sales.
Even as retailers adopt the latest buzzword — omnichannel — to seamlessly marry physical and online store experiences, they recognize that better service in all channels will separate those who thrive from those who don’t, and they’re investing more than ever to improve service.
“The reality is that in a luxe store, people shop for both product and service,” said Stephen I. Sadove, chairman and chief executive officer of Saks Inc. “Service is even more important than it’s ever been. If I’m going to spend the time and effort of going to a store, the service had better be good.” RELATED STORY: Mixed Signals for Second Quarter >>
There are financial repercussions for letting consumers down, just as there are rewards for satisfying them. According to American Express’ 2012 Global Customer Service Barometer, 55 percent of consumers said they wouldn’t hesitate to leave a store mid-transaction due to poor customer service. On the other hand, two-thirds of consumers said they’d be willing to spend more at a retailer that provides excellent customer service — 13 percent more on average.
Clearly the stakes are high — and companies know it. Almost 67 percent ranked customer satisfaction as the top strategic initiative for 2012. Similarly, 82 percent said customer service strategies will be the top priority in the coming year, up from 75 percent last year, according to a National Retail Federation/KPMG study.
Retailers have gotten some aspects of service down to a science. Saks Fifth Avenue has determined how long a sales associate should wait before approaching a browsing customer and asking, “May I help you?” Saks has also calculated the statistical probability of converting a browser into a buyer. Meanwhile, Target aims to reduce the transaction time at registers to one minute.
Good service isn’t just for luxury customers; even the teen sector recognizes its importance. “The customer experience in stores is key and there’s a need for it to be entertaining,” said Tom Johnson, ceo of Aéropostale, whose 14- to 17-year-old core demographic has a “thirst for newness and new shopping experiences and is more impatient” than previous generations. Aéropostale created a new job description for its stores, called “role model.”
“These kids have to be at the top of their class in school and doing good work in their communities,” Johnson said. “They’re noticeable in the stores. They talk to other teens in the stores and in their high schools. Their job is to connect with them.”
Aéropostale’s new store prototype, opening at the Roosevelt Field Mall in Garden City, N.Y., in October, will have “new technology for shoppertainment and technology that sales associates can use to make shopping a little easier,” Johnson said.
As one of the most successful retailers in recent history with reported sales of well over $4,000 a square foot, Apple’s formula is often guessed at and emulated by other chains. Carmine Gallo, an expert on the company and author of “The Apple Experience,” said the young techies with rumpled shirts and a laid-back manner are far more choreographed than one would expect. “Apple writes scripts for technicians and salespeople describing exactly how to handle different situations and customer interactions, including what to do when someone gets emotional,” said Gallo. The answer is nod reassuringly.
The scripted approach to customer service was developed by Ron Johnson, Apple’s former head of retail, who is now ceo of J. C. Penney Co. Inc. He now plans to implement some of those tactics in Penney’s stores, including improved training and desks modeled on Apple’s Genius Bars where customers can ask questions, make returns and see product demonstrations.
Apple’s approach was largely inspired by the Ritz Carlton’s five steps of service, said Gallo, which include: “approaching customers with a warm, personal greeting; probing politely; presenting a solution they can take home today; listening for and resolving issues and concerns, and ending with a fond farewell and an invitation to return.”
“It’s thinking differently about how you approach the customer,” Gallo said. “One key difference between Apple and most other retailers is that Apple employees aren’t encouraged to sell products, but to create a great experience for consumers. Apple employees don’t make significantly more money, but they are empowered to do what’s right for customers.” Apple in July reportedly bumped up the wages of its retail workers by 25 percent. According to published reports, average Apple Store employees earn $9 to $15 an hour at the sales level and up to $30 an hour at the Genius Bar tech level.
Macy’s is another retailer scripting its sales associates. During a three-hour brush-up training session, commissioned fine jewelry sales associates are told to weave “great words into your selling conversations with customers!” A list of 79 words includes “affordable, alive, rare, lovely, glowing, rich, scintillating, tempting and provocative.”
Nordstrom, long considered a gold standard among department stores in terms of service, takes a more flexible approach than Apple or Macy’s. “[Our] salespeople are empowered to make decisions,” said Erik Nordstrom, president of stores at Nordstrom. “We have one rule: use good judgment. That covers 99.9 percent of all situations.”
Nordstrom said the retailer’s philosophy relies on employees’ common sense rather than “memorizing mission statements and taking training classes. We were able to get more aggressive on service when we freed ourselves up from what that could mean and our business has gotten better. Instead of trying to be prescriptive with a lot of rules, regulations and policies, we don’t try to break down certain elements of service and analyze them and put them into a box.”
Consumer loyalty has gotten a big boost from the company’s generous return policy. “We’ve long known that more than anything else, the message of trust that comes from having a liberal approach to returns is a driver of our business,” Nordstrom said. “Are there some people that take advantage? There may be, but we’ll deal with those few outliers.”
Target takes a similarly flexible approach to its staff and service. “We empower all stores to make decisions on a guest-by-guest basis,” said Carrie Hughes, group director of stores at Target. “It’s whatever makes sense for that guest.”
Target has its own internal lingo, where employees are “team members” and customers are “guests.” Employees receive different levels of training, depending on their assigned department in the store. “In areas such as electronics, we have very specific training for specialty team members we call ‘champion trained’ for their product knowledge and service level,” Hughes said. “[Champion trained] team members use knowledge based on the latest technology to help guests make a decision.”
Job satisfaction at Target seems to correspond to the level of training, and not incidentally, wage increases — which means overall satisfaction can be relatively low given that Target, like most mass retailers, pays many of its workers just above minimum wage. On jobbite.com, a Web site with pages of job reviews written by current and former Target employees, ratings from specialty trained workers were more positive.
It’s a given that training is key, but in general, experts said there are few retailers today that have intensive training programs. “We’re finding that expectations are super high,” said Yana Walton of the Retail Action Project, a member-led retail organization, referring to sales targets for associates. “There’s a lot of pressure to upsell and hit individual sales goals and have personal shopping skills. Retailers are looking to professionalize the work force, but there’s a trend in declining commissions. Also, there’s no career ladder. There’s not a great way to move up the industry. The industry is not investing in the work force.”
RAP has stepped in to fill what it sees as a void in sales associate training, noting that most retailers provide an average of eight hours. RAP’s training classes are held in a Midtown office and taught by former employees of Tiffany & Co., Saks Fifth Avenue and others. RAP offers advanced courses such as a 10-hour customer service course cosponsored by the Consortium for Worker Education and LaGuardia Community College, with a certificate available from LaGuardia.
The Container Store employees get over 260 hours of training, about 30 times the industry average, said Kip Tindell, ceo. “We invest more in training and pay more,” said Tindell. “Full time sales associates earn $44,000 a year and generous benefits such as 401(k) plans with matching company contributions, medical, dental and vision [insurance] plans for full-time and part-time employees.”
The Container Store has a rigourous evaluation process. “We put applicants through six to eight interviews with different people,” Tindell said. “We put more time and effort into hiring than most people. We believe in the radical empowerment of employees. It works better than any other methodology. Our employees are fiercely loyal and our customers are more loyal. We don’t shackle our employees, we liberate them. You get much better productivity from employees who are unafraid to use their instinct and intuition.”
With new technology flowing onto sales floors, retailers are trying to strike a balance between human interaction and electronic efficiency. Omnichannel retail requires engagement on multiple fronts. But what works for one shopping channel isn’t always right for another. Internet users demand speed, which could be interpreted as brusqueness or rudeness in a store, where attentive, unhurried assistance is the hallmark of superior service. “There are different [expectations] for stores and the Web,” Sadove said. “Online, it may be the rotation of product and in stores it may be the personal touch. We’re investing a lot of money in training. For retail to succeed, you have to attract” good people.
That’s been a challenge in recent years given the image among younger workers that retail is a low-paying, nonrewarding industry with little opportunity for advancement. Saks recently launched a “Careers at Saks” page on Facebook, in the hope that the social media giant can expose the retailer to the technology-savvy applicants it’s seeking. Meanwhile, job-hunters have access to the so-called Saks “brand ambassadors” from different parts of the store, who answer questions and provide insight for job candidates. While Saks’ new method of recruiting employees may be creative, retail experts said the tricky part is motivating and retaining them. Sadove said that 90 percent of Saks’ sales associates are on commission, which gives them the potential to earn more than hourly employees.
In the new retail landscape, service can also be a differentiator among e-tailers. Zappos.com’s unique quality is its culture, a cross between the films “The Royal Tenenbaums,” about a brilliant, eccentric family and “The Social Network,” about brilliant, intense college students and twentysomethings.
When Zappos.com in February extended its return policy to four years to accommodate customers who made purchases on February 29th — leap year — some observers thought it was a joke. “As an organization focused on customer service, our number-one goal at Zappos is to make people happy,” said Matt Burchard Sr., director of marketing. “We are not an average company, our service is not average, and we don’t want our people to be average. We expect every employee to deliver wow.” He said Zappos’ full price business has been built by educating shoppers that its service is of value to them. “Consumers don’t demand discounts or promotions,” he said.
In the service of providing targeted merchandise to individual shoppers, retailers are employing technology. Sales associates at Saks can now access the full purchase histories of Saks Fifth Avenue and saks.com customers. Neiman Marcus sales associates are using an iPhone app in the testing phase to see clients’ purchase histories so they can suggest appropriate products. The app, NM Service, also identifies best customers to the sales staff when they enter the store.
“The NM Service app allows the company to take its service philosophy into the digital era,” said Jim Gold, president of specialty retail at the Neiman Marcus Group. Customers can use the app to find out if a favorite sales associate is working and scan QR codes in the store.
Not long ago, sales associates kept “books” with customer contact information that they would use to call customers with news of sales or product arrivals. With the new iPhones equipped with sales-associate e-mail, Neiman’s employees communicate with shoppers via the Internet. A Houston-based sales associate pressed the technology into service when an important client was unable to attend a John Hardy trunk show. The associate used her iPhone to send photos of the products to the interested customer, who wanted to see more images. Throughout the day, the sales associate and client exchanged photos and texts — 48 texts and 20 photos, according to a spokeswoman. When the customer texted her final selections to the associate, her purchases came to $3,000.
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