Specialty retailers are using the data from their point of sale and inventory management software to determine the best pricing on all of their products. Without that data, they are playing a guessing game.
Everyone knows how the Internet has changed consumers’ purchasing habits. They have a choice of online or brick-and-mortar stores, often referred to as the omnichannel shopping experience. The omnichannel has created more opportunities for the retail industry to attract new customers.
Technology, transportation, and communication continue to be the primary forces opening new markets for growth and efficiencies. One of the biggest examples of this is online shopping. In recent years, it has disrupted the retail market, but it’s not the first time this industry has evolved new ways of meeting consumer demands.
Evolution of Retail
Historically, retailers have experienced one type of disruption or another. These events created major changes in the way this industry does business. Over a century ago, railroads and mass production allowed department stores to flourish in the big cities. Then, as the suburbs grew, shopping malls and specialty retailers sprouted up to serve customers unable to go downtown on a regular basis. Political deals in the ‘80s and ‘90s opened new markets and cheaper manufacturing, bringing lower pricing and a larger selection for big box stores that became the one-stop shop in the suburbs and rural areas.
Small retailers have always had their challenges when adapting to new market conditions. Many stores grapple with expanding their online presence or adopting a more cautious approach. Why aren’t they following the trend to online shopping? Mostly because, they are using their point of sale and marketing data to influence their pricing and sales strategies.
In-Store Versus Online
The battle between brick-and-mortar and virtual stores seems to be tilting in favor of online shopping. Digital commerce grew almost 15% between 2016 and 2017. There were $105 billion in sales in the first quarter of this year alone, which is typically a slow time for retail.
Looking at total retail sales in 2016, only 8.5% was attributed to e-commerce. This has been a steady trend since 2007, slowly taking 1/2 a percentage point in total retail sales every year. Yet many department and specialty stores have opted to close their physical presence on main street and focus more of their business to online sales.
While brick-and-mortal accounts for more than 90% of all retail purchases, consumers use online shopping to research product info and deals before going in-store to purchase their goods. The importance of a physical presence continues to be the key to reaching customers. There is no denying that small retailers need to address their future plans with online shopping—engaging with the omnichannel. A good place for retailers to start investigating whether an online presence is viable or not is to examine their inventory. They may find an online catalog is better than a store.
People Will Pay for a Great Customer Experience
Retailers need to be on top of what their customers are looking for, and have a system in place to keep those items in stock. It’s almost certain what will happen if they don’t. They also need to continuously research what the competition is doing. These are major components of setting a good pricing strategy while remembering where the products are in the life cycle.
Small retailers need to know what differentiates them from their competition. This creates value in every transaction, especially for gift and specialty item stores. Creating value is the key to consumers spending an extra dime. When retailers establish a connection with their customers, that connection forms a personal relationship. These customers become repeat business, which drives down operating costs and increases profitability.