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The Burden of Convenience: Reshaping The Retail Value Proposition

Posted by Simon Stuchlik on May 14, 2017

You might have heard about the perceived death of the retail industry. News of store closures by big box retailers from J.C. Penney to Kmart appear almost daily. Traditional business models are threatened by technology-focused online counterparts, with Amazon at the forefront of it all.

In the high-competition environment of retail, adaptation is key. Big box retailers are beginning to realize that even operations that worked 5 years ago might no longer be sustainable. Consumers are getting used to the convenience of the internet and home delivery. So, to survive, some of the nation's largest brands are reshaping their value proposition and strategy.

Staples Prioritizes Delivery Services

The brick and mortar operations of one of the biggest office supply companies in the world are struggling. To compensate for lost revenues, Staples recently announced a renewed focus on the midmarket delivery services that were a core part of its brand as it first rose to prominence.

The result is a new emphasis on an existing division. Currently, the retailer only has less than a 5 percent market share among businesses with fewer than 200 employees. To up that share and increase its revenue, Staples plans to work with an increased business sales staff, regional distributors, and wholesale business accounts including an easy online order form.

In other words, Staples is shifting gears. Recognizing that consumers are looking for online opportunities to fulfill their office needs, it looks to tackle the business market - where an in-person touch through office supply ordering and delivery is still valuable. Even its new slogan, from Make More Happen to It's Go Time, emphasizes that new focus.

J.C. Penney Adds In-Home Services

Similarly to Staples, J.C. Penney has experienced a significant downturn in the revenue from convenience items in recent years. As its market share in towels, bed sheets, and similar product continues to drop, the retailer is looking for new opportunities that cannot be easily replicated by its online competitors.

The solution: in-home services. Last December, J.C. Penney began to partner with heating, ventilating, and air conditioning systems specialist Trane to sell its heating and cooling products. The retailer has also expanded into offering bathroom remodeling, plumbing and even window blind installation services.

Similar to Staples, J.C. Penney is looking to take advantage of value opportunities its online competitors simply do not have. We may soon live in the world in which Amazon offers installation services, and its appliance sales take off. Until that point, big box retailers like J.C. Penney have a crucial advantage in regional knowledge and personal touch, and they're not afraid to use it even if it means changing their value proposition. 

Retail_Customer_Experience.jpgWalmart Builds a Grocery Pickup Infrastructure

Finally, even the biggest retailer in the game is looking to increase its services and hold on to its market share. Last year, news organizations were full of stories that decried Walmart's loss of revenue and losing battle against Amazon. As it turns out, these stories (and the underlying trends) were not lost on the retail giant, and it is beginning to take action.

Perhaps the most notable update to its business model is a hybrid online and in-person model: grocery pickup. The concept is simple. Pick out your groceries online or via app, set a pickup time, and have them waiting curbside (and even loaded into your car). Suddenly, the weekend grocery trip becomes much less time intensive.

Walmart began rolling out a pilot version of the service last year, and continues to expand it to more stores. Its ultimate, moonshot goal: to eliminate the physical grocery aisle altogether.

On its face, Walmart is simply expanding its services and will still sell the same products. But beneath the surface, this change is a radical departure from its traditional value proposition. Instead of saving money, customers can increase their convenience, and get personal service to boot. In its first month, stores have made a conscious effort to build up that personal relationship through welcome bags and manager introductions for first-time customers.

The Increasing Importance of Convenience

Combine the above initiatives by big box retailers, and a theme begins to emerge: traditional stores have to account for increasing consumer expectations of convenience. Across industries, the same exact trend is currently taking place. In the restaurant industry, for example, companies like Postmates and even Uber are getting into the delivery game.

That, in turn, requires businesses to ask one question above all: does your current value proposition adequately address increased expectations of convenience? Can you account for a growing number within your audience that expects your product or service personally delivered, as soon as possible?

Existing e-commerce companies naturally have an advantage in answering this question. But even then, seemingly simple updates like free shipping and an intuitive checkout process with a wide range of payment possibilities are becoming increasingly crucial.

For brick and mortar, stores, of course, the question becomes more difficult to answer. Changing your value proposition in the way Walmart, J.C. Penney, and Staples have done may require a significant update on your business model, accounting for delivery options or hybrid online and in-person service models.

Our environment is constantly changing, and the internet as only accelerated the innovation curve. With that curve come new standards, which your audience begin to expect and you have to adhere to. Building a marketing, sales, and delivery strategy that is both flexible and convenient is absolutely crucial to survive and beat your competition, both now and in years to come.

 

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Topics: Amazon, Retail, shopping, J.C. Penney, Disruption, Staples, Walmart, Convenience

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