Following a lackluster holiday shopping season where many retailers — especially department stores — struggled to deliver even modest sales gains, the industry finds itself at a critical juncture.
In C-suites across the market, hard decisions are being made and they include store closures and reviewing real estate holdings. Macy’s Inc. is taking a hard look at operations. J.C. Penney Co. Inc. has trimmed back over the past year. Wal-Mart Stores Inc. is shifting efforts from Neighborhood Markets to its super centers. And that’s just a small sampling from the bigger players.
Simultaneously, there have been stepped-up efforts to deliver a seamless experience for the shopper regardless of where she begins her shopping journey — whether online or in a store.
Department stores in general are working to improve overall in-store experience, which means better service and a more thoughtful merchandising approach as well as some surprises for the shopper — such as Etsy’s concession shop at Macy’s Herald Square.
Here, attorney Giuliano Iannaccone discusses critical issues facing the market and what’s driving retailers to reposition their businesses. He is a partner at law firm Tarter Krinsky & Drogin, where he chairs the firm’s international and retail practice groups and leads its practice with Italian clients.
WWD: What are department stores doing to reinvent the customer experience?
Giuliano Iannaccone: It seems that department stores have recently begun incorporating other new devices as a way of enhancing the in-store experience. All of these new devices appear to be aimed at providing an omnichannel approach to sales. This approach consists of offering the consumer multiple ways to shop and interact with the store, from standard in-store shopping, to online browsing coupled with in-store purchases, to customer service on-the-go and sharing the shopping experience through social media.
Department stores have historically operated their online stores as completely separate entities from their physical locations. Today, some department stores are taking a new approach, permitting customers to search their local branch’s inventory online before coming into the store to view an item in person. The experience can carry through from home shopping, to a mobile app and finally to the store itself, where a customer could interface with other nearby locations to determine if an item is available.
I have been hearing more and more about beacon technology recently, which some brands are using to communicate with their customers while on the go. Beacon technology allows brands to push promotions and notifications to their customers’ smartphones at the precise moment when their customers are in the immediate vicinity of the brand’s store or concession. Brands are also using this technology in conjunction with other analytic tools, so that the brand can not only send a notification to the customer when she’s passing by the store, but ensure that the notification relates to an item that the customer has already shown an interest in. This is an especially targeted form of advertising, and is the epitome of omnichannel, because it lets the customer communicate with the brand without virtually any effort, and seemingly without even knowing it. The customer is feeding the brand data just by having her smartphone in her pocket, and the brand is tracking the customer’s habits so that it can offer her something special — that she actually wants — at the most opportune moment.
Of course, with all of this new technology that seems to allow the free flow of information between the customer and the brand/store, everyone has to be more careful, in every sense. Very important are privacy concerns related to customer personal data. Using beacon technology and other consumer-habit analytic tools has to be done cautiously to avoid the misuse of sensitive information, such as customer personal information, which could constitute a serious violation of applicable privacy laws.
WWD: Some stores are adding eateries and others are opening up interactive spaces with the latest technological gadgets. Do you expect department stores to continue this trend of redesigning internal spaces to re-engage customers?
G.I.: Yes, it seems the traditional in-store model is being turned on its head and I expect the trend will continue. Department stores cannot expect customers to come in simply to browse products and make purchases anymore. So to lure people into stores, there has to be an offer of an experience that the customer may not get through online shopping. The obvious route is to offer a tangible experience, like dining. While department stores have had in-store restaurants for decades, pop-up cafés and high-end food trucks add a new element to the physical-store shopping experience.
I’ve also seen an interesting trend of incorporating art exhibitions/installations into the department store. Mixed among the clothing racks are found objects, paintings and photographs, sculpture and even plants and terrariums, which seem to be super trendy right now. Sometimes they’re for sale, other times they’re simply displays or installations that enhance the look and feel of that section of the store, making it feel as though the clothing is part of the exhibition. This of course makes the clothes seem like special, one-of-a-kind objects, even if they’re plentiful in inventory.
Some department stores are also offering online contests that incorporate the customer’s in-store experience with his or her social media presence. For example, a store may award a prize to the most “liked” photo of a customer trying on his or her favorite item in the store. Likewise, stores can also engage fashion bloggers to post articles about their in-store shopping experiences, which also draws in more customers.
However, as department stores expand their horizons to offer unique experiences to shoppers, they often find themselves engaging in totally new industries, like the technology industry, the food industry or the art industry. It’s important that the stores take the time and effort to really learn these new industries, and the rules and regulations governing them. The concession model in some ways is a great way to step into an unfamiliar industry, because the brand or company running the concession can take responsibility — and liability — for compliance with industry standards and regulations.
WWD: Are department stores working hard enough to maintain a high level of customer service?
G.I.: Customer service is a huge part of what department stores need to focus on in redefining their role in the consumer industry and offering positive in-store experiences to customers. I can’t speak to whether the stores are working hard enough at this point, but I can say, from a consumer perspective, that customer service is crucial in order to achieve success in retail.
Brands that have their own staff in their concessions often can offer better customer service, because the sales associate is better trained for the products, and, historically, luxury brands put more resources into training staff to provide immaculate customer service. I think new technology, like beacon technology, can also help stores offer better customer service. Anticipating a customer’s needs before she walks into the store can help the store offer the customer more personalized service. The stores have to be wary about looking like they’re stalking their customers, but tactful customer service that smartly uses this technology to offer the customer something that will actually appeal to her could really bring the department store to the next level.
Only time will tell whether our privacy laws will adapt to all of this new technology, and in the meantime, stores need to be careful and diligent before making any innovative uses of these apps and data aggregators. However, if department stores want to reinvent themselves as destinations for unique, interactive experiences, and not just points of purchase, they will need to take strides in customer service in order to do so.