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Fall of the Big-Box, Rise of the Small & Mid-Sized Retailer

retail operations


Fall of the Big-Box, Rise of the Small & Mid-Sized Retailer – what, to the untrained ear, sounds like a niche horror film is quickly becoming the retail industry norm. These days it seems like everywhere you turn, a large retailer is closing stores, downsizing, or has gone defunct altogether. The infallible mega-store that was once a staple of the North American shopping scene is currently in danger of disappearing altogether. The question is, how did this happen?


Case in point: Best Buy

The best way to illustrate this phenomenon is with an example. Nowadays selecting a case study for a once-flourishing retailer that has fallen on hard times is distressingly easy. A simple Google search will bring up names like Macy’s, Sears, Borders, JC Penney and Best Buy – a who’s who of retail giants from a bygone era.

Let’s focus our attentions on Best Buy. Once the go-to destination for all electronics needs, from DVD’s to home appliances, the super-center seemingly had it all. Shoppers were enticed by an expansive product offering and competitive low prices. How did it all go wrong? Enter Amazon. If selection and cost were the two biggest draws for making your way over to your local Best Buy, Amazon has it beat handily on both measures.

Hardline brick-and-mortar loyalists often bring up the in-store experience as the sole differentiating factor and the saving grace of stores. After all, try as they might, Amazon simply can’t recreate the experience of a friendly Best-Buy employee helping you find the flat-screen TV of your dreams – right? True, but Amazon still manages to maintain its advantage via “showrooming” – where customers browse products in person and then scour the web for a competitor (oftentimes Amazon) that will sell it for a lower price.  It should come as no surprise that the e-commerce giant grew by 27% last year alone, collecting a whopping $136 billion dollars in sales – a testament to their meteoric success.


Too Much of a Good Thing

Then there’s the “paradox of choice” – the psychological concept that having access to too many options actually tends to paralyze consumers, leading to confusion and possibly causing them to walk out empty-handed. Moreover, this phenomenon can also lead to customers feeling dissatisfied with their choices if a purchase was actually made.

This may seem antithetical to everything we thought to be true and it is – hence the paradox. Nonetheless, the theory tends to hold up. Think back to the last time you decided to take it easy and kick back with a movie. Maybe you took a look at your impressive collection of DVDs. More likely, you logged into your Netflix account. But no matter the method, the outcome is often the same: faced with an overabundance of quality content to watch, people tend to freeze or regret the decision they make due to the sheer volume of available choices. Regardless, what was supposed to be a relaxing activity has morphed into quite the ordeal.

Shifting gears back to Best Buy’s retail operations, the connection becomes clear. The endless product selection that was supposed to be one of their greatest assets may have turned out to be a liability, frustrating customers with too many possibilities to choose from. It’s possible that a customer who originally came in to check out the laptops didn’t intend to be bombarded with refrigerators, video games and digital cameras from every electronics brand under the sun.  


For Millennials, Small is Big Again

As if that weren’t enough, big box retailers are also facing stiff competition from an unexpected source: smaller, niche retailers. Just a few short years ago, even the most casual observer of retail trends was aware of one pervasive industry norm: big box stores were taking over and were increasingly putting smaller mom-and-pop shops out of business. Smaller, family-run businesses just couldn’t compete with the massive product selection and lightning-quick efficiency offered by the mega-conglomerate players on the scene. So when one hears that these smaller, niche retailers are once again on the rise, it’s often met with some skepticism. After all, how can such a drastic turn of events have happened so quickly?

The short answer? Blame the millennials. While that word tends to evoke imagery of a financially dependent teenager, the reality is actually quite different. Millennials of today have moved out of mom’s basement and include young professionals in their twenties and thirties, many of whom have families of their own. Not only do they have money, they spend it too. According to a recent Accenture report that surveyed 6,000 consumers, 1,707 of which were Millennials, in the United States alone roughly 80 million millennials account for approximately $600 billion in spending.

When it comes to purchase habits, millennials tend to adhere to the 3 C’s: clever, communal and connected. Bearing that in mind, it’s only fitting that they would prefer supporting smaller local businesses, with a unique service concept and a seamless brand experience, regardless of the channel. And it’s not all about online shopping. Contrary to popular opinion, millennials still like brick and mortar stores. In fact, 82% have said that they prefer them. Millennials care about the holistic big picture behind the retail operations. They value online and mobile channels that are well connected and consistent with the product information, selection and service they receive in person.  

Also contradictory to popular opinion is that millennials actually make extremely loyal customers – provided they feel they have been given exceptional, personalized service. This is summed up perfectly by one of the millennials surveyed in the aforementioned Accenture report: “There is [something] about the product and its cost, but there’s also a big part about being treated like a valued customer.” Think back to Best Buy, where the two core tenets of their retail operations boiled down to product selection and price. Clearly, priorities have changed, and what was paramount as recently as five years ago is no longer at the top of the list.


Fusing Technology and Personalized Service

The trend of intense personalization and custom-tailored service is quickly becoming a mainstay of brick-and-mortar stores as a fundamental necessity. On the surface, this concept seems to hearken back to a long-gone era, where patrons would walk into a shop and were personally greeted by employees (cue the “Cheers” theme song). But, if this sounds outdated, make no mistake – digital plays a huge role in this new retail operations paradigm.

This begs the question – with access to the same technology solutions and resources, why are big-box retailers collapsing while small and mid-size retailers are on the rise? Well, size does matter. Small and mid-sized retailers have the clear advantage of being more nimble at managing change. Expectations set by the millennials required retailers to bring about alterations in the way they run their operations – processes, policies and even basic concepts. For example, for true unified commerce, you need a completely different incentive structure to give credit for online sales fulfilled in store and vice versa. Large retailers simply have too much weight to move around and adapt to new methods of doing business.

Harry Rosen provides a great example of this scenario. A family-run business, Harry Rosen is currently the largest luxury menswear retailer in Canada. They stuck to their value of outstanding customer success from day one and consequently have enjoyed decades of success. When the millennials entered the shopping scene, they immediately responded with creating an online presence and eventually implementing omnichannel retail while maintaining “personalised service” as the crux of their retail operations.

They have managed to strike the right balance by effectively fusing their online and in-store experiences in a seamless and meaningful way. Store associates at Harry Rosen now have access to a wealth of granular customer data at the tap of a button, including basic information like name, phone number, occupation, etc. in addition to more details such as specific measurements and preferences based on purchase history. This allows in-store personnel to provide clients with a custom-tailored shopping experience. This theme of individualization carries through to Harry Rosen’s e-commerce platform, which offers personalized assistance with “Virtual Harry” who helps customers navigate the online store via one-to-one messaging.


The Big Picture 

The main takeaway here is that successful retail operations have always come down to keeping up with the times while simultaneously striving to innovate. The retailers that have stood the test of time are those that have managed to keep abreast of current and future trends, while embracing new technology and all it has to offer and staying true to core brand values. Shopping habits, behaviors and preferences may shift but at the end of the day, customers have always expected a rewarding shopping experience that is consistent with a brand’s unique story, regardless of the channel. Some things never change.

So, for the big-box stores out there, this isn’t necessarily the end. The key is to heed the cautionary tales by deploying a strategy that places the customer at the center and leverages modern technology to weave a seamless brand story through physical and digital realms. That’s the best way to mitigate the current choppy waters and arrive at a point of optimal retail operations, where organizations large and small cater to customers on their own terms. Here’s hoping the sequel to our original film is less horror, more romantic comedy.        



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