Retail is Not in the Red. How to Win the Changing Consumer.

By Arundati Dandapani

Retail accounts for $190 billion and around 11% of Canada’s annual GDP, employing about 2.7 million Canadians or about 12% of the workforce.  One in every six Canadians works in retail or wholesale. Canadian retail is thriving with over 195,000 physical stores, generating around $1.23 trillion in annual sales. According to Unifor, large retail outfits are “popping up 2.5 times faster than small mom-and-pop shops” and industry supply chains (including wholesaling and warehousing) are reeling from the “big-box” effect that is transforming customers’ shopping experiences.

Although e-commerce remains well below 10% of all retail purchases, even as more customers flock online to shop (Amazon), big-box retailers continue to consolidate through mergers like Loblaw/Shoppers Drug Mart, Canadian Tire/Forzani and Sobeys/Safeway, adopting cost-saving and job-displacing technologies (self-serve kiosks and automated warehousing). Others go bankrupt like Tip Top Tailors, Jean Machine and American Apparel.

Canadian retail’s good health can be observed in every mall or figures like annual revenues, GDP and labour productivity. Retailers’ ability to understand, research and adapt to changing consumers are reasons for their success and prosperity. In an innovate or bust landscape, Staples Canada’s recent brand transformation to a “Working and Learning Company” showcases excellent foresight in meeting the evolving office and stationery consumer with expanded offerings like co-working spaces in concept stores.

Holiday shopping is still dominated by in-store traffic. Delivery challenges (and these might last at least until autonomous trucks and drones arrive to slash shipping costs), strikes, peaking holiday returns, etc. make the in-store experience a vital link in holiday shopping. And while the health of big-box retail south of the border (in the US) is similar, its appetite and scope differ. In the US, sales from e-retail accounts for 8% of all retail sales, with electronics and non-retailer stores attracting 60% of all e-commerce purchases.

US retailers have easily managed to top foreign penetration of Canadian retail with unique or winning value propositions. Walmart, the biggest success story, is the third largest employer in the world after the Red Army in China and the US Federal government, making it an important partner in the economic health of North America and in global retail. Perhaps this is also why it enjoys such a stronghold on the Canadian consumer, even as it continues to succeed on price and competitiveness. And when US based Target tried to follow suit, it failed!

Foreign Market Expansion Demands Market Research

Target “loved” Canada in 2013, buying up to 133 new store leases then held by Zellers in Canada. Huge expectations and expenditures marked Target’s market entry. Two years later, the retailer faced insolvency and closed. A Community Target offers a reflective post-mortem on Target’s failed market expansion in Canada. Immersive interactive theatre is a great tool to document, inform and grow discussions around corporate fiascos. In a landscape of serial mergers, acquisitions, bankruptcy and closures, layoffs and restructure are the only constant. Robert Mokum’s play begins with the funeral procession of Target organized by Target employees (17,600 lost their jobs in the shutdown since Jan 15, 2015) who held a candlelight vigil, sharing their most intimate in-store experiences from on-boarding, company culture integration, to discount-stocking, and liquidation sale from Target’s last days in Canada.

In the play, CEO Tony Fischer refused to answer calls. His infamous speech had blamed the Canadian consumer for Target’s closure, including millennials who were not shopping in malls anymore and preferred buying “experiences” over “things”. But Canadian brands were already deeply embedded in Canadian minds and routines. And, competing against Walmart’s pricing (or even creative advertising) proved tough. Target did not even mop up after their exit from their rented units, according to detractors.

Empty shelves, poorly stocked warehouses, bad logistics, overspending on real estate, empty advertising, inflated expectations, and poor operations led to its fall. The doom and gloom surrounding the loss of jobs was eclipsed by the greater loss of an iconic brand that had (even in a short span) come to unify thousands of workers in their “love” for employee culture and corporation. Months after Target’s closure, employees were still seeking it in reunions!

Cut to Toys ‘R Us today in the US, and now GM in Oshawa. The history of foreign market expansions and mergers and acquisitions is dotted with discontent. To onlookers, it is all worth mourning. But as industries like retail (and media) shrink-to-scale in the digital, me-first age, how to win on customer experience?

Winning the Canadian Consumer Online and In-Store

Every year I attend Leger’s annual WOW Customer Experience Retail Monitor (Ontario) Event – a consumer report card unveiling of sorts on retailers in Ontario, across categories. This past year’s presentation (hyperlinked above) included a digital retail CX index aside from the in-store CX index. 

Winners of Leger’s in-store CX index are listed above whereas the online customer experience winners were Lee Valley (Gardening and Hardware) at number 1, Indigo at number 2,  and Simons at number 3.

The future of retail is phydigital and omnichannel, relying on a healthy symbiosis of online and offline buyers as we saw in the past month and in DIG360‘s infographic below.

According to the Retail Council of Canada, holiday sales or promotions, free shipping, and convenient return policy are the top three factors influencing retailer choice for 2018 Holiday Shopping. Deliveries are a big part of the customer service online shopping experience and 97% of Canadian shoppers say a good returns experience encouraged them to shop from the same company again.

The World Wants More Deliveries or Experiences?  

If the “future” of retail is increasingly “E”, are we talking about “electronic” or “experience” or both? If Millennials (and Gen Z) enjoy the biggest spending power in North America, then the electronic, virtual, experiential and mobile futures are clearly significant. As digital winds dictate where customers will land their footfalls, more omnichannel retail beckons. If mixed-delivery and mixed-channel are going to pave the future, our retailers are going to have to engineer a seamless and symbiotic phygital presence. Augmented retail will be all about how services and goods co-exist to serve mass and niche markets, and where retailers can compete on their differentiating factors to achieve positive impact in consumers’ lives.

More in-store shopping experiences are preceded by online searches, confirmed the Leger Customer Experience Monitor, with over half of those who visited electronics, equipment, computers and e-entertainment stores in the past year performing prior online searches.  

Canada’s Indigo  opened its debut store in the US this past October as part of a calculated foreign market expansion plan. Will they meet or exceed the success of other Canadian brands in the US like Joe Fresh and Aldo?