BrainTrust Query: Price Transparency - Five Strategies to Address the Paradigm Shift in Retail
Through a special arrangement, presented here for discussion is a summary of an article from the Lenati blog.
Rather than ignore it or try to fight it, retailers need to adjust right along with their customers to the new age of price transparency. They need to add customer-perceived value to their products and services that justify a higher price than an online-only retailer.
To add-value successfully, we recommend five strategies:
1. Offer Exclusive Product - House brands offer built-in protection against showrooming as there exists no direct SKU-level equivalent at another retailer. Retailers from Sephora to Macy's to Supervalu have increased their PL penetration in recent years due to higher margins and anticipated competition in national labels. For small retailers, it becomes even more critical to offer hard-to-find, limited stock items. Uniqueness is a factor for which customers will pay.
2. Take Advantage of Multi-channel - Some retailers are using their online channel to build the value prop of shopping in-store. Nordstrom associates are now equipped with mobile POS devices that give them access to the company's entire inventory, including Nordstrom.com. And by offering free shipping on all orders, regardless if ordered online or in the store, Nordstrom is truly becoming channel agnostic. By actively using the online channel to overcome hurdles that often drive consumers to sites like Amazon, retailers are keeping their sales dollars in-house and providing great service by letting their customer decide how they want to shop.
3. Get Local - A physical location within a community makes it easier to create an authentic connection with a customer. With this understanding, national chains such as Macy's, Walgreens, and Trader Joe's have localization strategies in the effort to make each store unique and become part of the community. But, in order to win over the temptation of online pricing, retailers need to go beyond offering localized product — they need to actively reach out to their consumers and create a community that is specific to the area.
4. Provide a Loyalty Program - A well-executed, easy to understand loyalty program can help brick-and-mortar retail stores retain customers and keep eyes from wandering. Safeway, Chico's, Target and REI are among the many retailers whose loyalty programs offer compelling value. Although each of these loyalty programs are different, what is consistent is that they are easy for the customer and provide enough reward that the customer feels there is more value in spending in one place than shopping around for deals.
5. Bring Online Information In-Store - By using smartphones or touch screen technology, brick-and-mortar retailers could actively bring the abundance of online information in-store, and eliminate the need to research online before checking out the physical product. Letting customers physically explore the product and get all the information they want in-store essentially kills two birds with one stone, and this convenience may give brick-and-mortar retailers added value justifying a higher price.