In light of the recent announcement that Toys R Us in the USA are filing for bankruptcy, this article is written to cajole, challenge, and hopefully act as a cattle prod to strategically re-think your business.
The speed of change in the business world is increasing. Global markets and borders, despite Brexit, are opening. There are very few industries that are fully protected from global competition. If your business is established to deliver a local service then you are shielded from the challenges of global competition. However, if you deliver products locally, then beware because the onset of fulfilment houses coupled with improved high speed and low price international post, will eventually have an impact on your business.
Retail has been under threat since the likes of Amazon and ebay launched in the UK. Year on year, online sales have grown from these and other competitors, who now see the internet as their sole source of revenue. According to an article* published in CNBC, Amazon captured 53% of all online sales growth in 2016 in the US, up more than 10% on the previous year. These establishments have the luxury of setting up in significantly cheaper locations. Cheaper building costs, more streamlined storage, retrieval and delivery systems adds up to an ability to take an order and ship products faster and cheaper than before, so it’s no longer a level playing field.
As a business, perhaps in competition with some of the names mentioned previously, there are ways of competing. Certain products on the shelves of high street shops need to be seen, touched or preferably tried on. The challenge is then whether a shopkeeper has the skills to convert the walk-in customer to a sale, rather than allow them to leave the store, shop on their phone outside the store and order exactly the same goods cheaper. The difference is merely time and unless consumer requires the goods to use within the next 24 hours, there is a huge danger the online option will be preferred.
How Do I Re-strategise My Business?
There is a saying in business and sport, “if it can be measured, it can be managed.” It’s important to ask more questions to access the key numbers in your business.
What are these key numbers? Let’s consider you run a retail establishment on the high street.
- Do you know how many people enter your shop on a daily basis?
- What percentage of browsers buy?
- What are your busiest days?
Let’s say that you also have an online shop. Look at the numbers again. With online shopping, you also have the luxury of tracking so perhaps you could establish where most shoppers (traffic) comes from?
With this knowledge, you can look at which part of the business generates the best profits. If the online business is more profitable, what would happen if you closed the high street shop and established a warehouse business in a cheaper location? This is adapting your business to fit known trading metrics.
Toys R Us in the USA had the problem of competing against large online stores such as Amazon, together with the second hand and new market on ebay. With prime locations, the cost of the building, together with the need to employee more staff to run each store, may have resulted in falling profits and a cost base that could not be reduced.
Adapting can sometimes take time. However, innovation may be a different way of tackling your challenges.
Let’s look at the example above again. Rather than simply giving up the high street store, what if the management tested different ways of drawing in and engaging with the prospect as they enter the store.
- What if they found a way to convert more people into buying immediately after they saw/tested a product(s)?
- What if they increased each by just 2%. There are now more people entering the store and looking at products. From these people, a higher percentage are converted into a sale.
- What if, from the sale, the store finds a great way of capturing their data e.g asking for their email address to send the receipt to. Now the store can market to them frequently, inviting them to return to the store for key promotions. In other words, the store develops a better ongoing relationship, which some online business’ are brilliant at.
- What if the store had a workstation so that a visitor could order goods that appeared out of stock? These goods could be delivered to the store for collection or despatched to the customer’s home.
- What if there were more packaged or bundled items?
- What if there were themed days?
- What if there were special loyalty days where there was additional discount to all of those customers who purchased an item within the last three months?
The dangers with many businesses is that they do not engage with a prospect. A retail store is a classic example whereby somebody can walk in, walk around, touch the goods, possibly try the goods and walk out without anybody connecting with them.
An online store makes the relationship a little different. Pop up ‘one-time’ offers, abandoned cart follow ups and other people bought ‘xyz’ style software solutions all increase sales. Prospects look at the goods and then buy, knowing there is a short time to delivery and no fuss. Your task, as a business owner, is to understand what your customers want and need, how they wish to engage with you and give them the best opportunity to do this and feel good about the process.
Most of the above examples show a business that can adapt and innovate to meet their prospects buying patterns. If a retail giant like Toys R Us can file for bankruptcy in the USA, then this should be a warning to all business owners in the UK to adapt, innovate or possibly be prepared to die.