Retail has an oversupply problem. For a long time, American consumers wanted more and more, so retailers obliged by expanding stores and product stock. But in order to thrive in this new shopping climate, retailers need to embrace the strategy of less is more.
Turn your store into a brand experience
America has 70% more retail space per capita than Canada, and more than six times that of Europe. That’s about 2,375 square feet per 100 people—23 square feet per person dedicated to your personal shopping whims!
But in the internet age, the reality is that no one needs that much retail space anymore (or if they ever needed 23 square feet each in the first place).
The role of physical stores has changed in the consumer psyche. Shoppers are rewarding nimble digital-first brands, such as Everlane, which practices “radical transparency” in product manufacturing and pricing. They clearly explain how the supply chain works to their customers and where margins are made. Another example is the seasonal Shoe Park in New York City, where customers trade their shoes at the door for a pair from the new collection. They can take the shoes for a test stroll through an indoor park, while enjoying Blue Bottle Coffee and Glossier’s cult-status makeup.
These new models are showing traditional retailers that a physical store should be an extension of the brand story, not a warehouse. In this way, the in-store experience isn’t dead; it’s just returning to its roots as retail theater.
Get more sales with less product
Wake up early on an average Saturday morning and you will see massive lines outside your neighborhood Footlocker. This isn’t a morning running club or surprise athlete appearance; these shoppers are lining up because they’re desperate to buy shoes. And not clearance shoes—we’re talking full-priced shoes.
Nike and Adidas have learned that creating an event around selling fewer shoes as “limited edition” items means more revenue. This model not only eliminates the need to discount surplus stock (and eventually the lost profits from having to store or trash whatever remains unsold at the end of the season), but also creates a social-media bonanza.
Today’s shoppers are inspired by lifestyle imagery on Instagram feeds and Snapchat stories. The result is a strong sense of FOMO—and an urge to be the first to show off a new release. Smart brands have therefore figured out how to utilize consumers’ desires to be ahead of the curve by using “limited edition” as a strategy for sales.
Successfully selling a smaller line of products rather than letting a larger line linger into discount obscurity is the new way of doing business. Limited product availability also creates an experience for the consumer, as the process of securing the product becomes part of the item’s story and increases the buyer’s connection with it. Shoppers are willing to pay full price if that means they’ll be the first to show it off on social media.
Break the discount cycle
Focusing on meeting quarterly budget expectations has caused retailers to overload on sale-based strategies. This means that American shoppers are addicted to regular discounts, and retailers are paying a heavy price in the form of breaches of trust and brand dilution.
Recently, Coach and other premium brands broke traditional protocol by calling out department stores that discount their products as corrosive to their brand perception, and threatened to pull their product from shelves. A few months later, Coach ended up making good on threats and pulled its products from over 250 department stores, sending a clear message that brands intend to take more control over their product pricing in retail.
When discounts are applied, they should be applied to loyal brand fans as opposed to transient shoppers who switch loyalties as easily as opening a new tab on a browser. Department stores need to get back to their roots of discovering new designers and curating unique collections, as well as focus more on private-label brands exclusive to those stores. This strategy has worked well to turn Barney’s fortune around in the last few years.
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In order to create a more sustainable business model for modern merchandise, retailers need to unlock the power of scarcity. The model of throwing more stores, products, and discounts into the market with the hope that shoppers will keep buying is no longer working. Minimalism is here to stay. But rather then fight the trend, retailers can use it to their advantage and craft organizations that create more value, more loyalty, and ultimately more revenue.