ECOMMERCE

Report looks at what drives holiday sales

BY Marianne Wilson

Shoppers will do anything to qualify for free shipping — even spend more money if need be.

That's according to a new report by Radial and CFI Group, which surveyed online shoppers to find out what they expect from retailers during the holiday shopping season. Free shipping is seen as such a priority during the holiday selling season that 65% of the respondents said they are willing to purchase additional items to qualify for it.

Other findings regarding what influences online shopping during the holidays, include the following:

• 76% of shoppers will shop at a competitor's website if a retailer runs out of product.

• 95% will wait up to five days for standard shipping.

• 47% will shop with competitors the next time if a retailer's shipment arrives later than expected.

• 14% use in-store pickup as one of their typical delivery choices.

• 36% prefer live chat for customer service during the holiday season.

To meet these varying customer needs, retailers must have the operational flexibility to offer a variety of fulfillment options, according to the report. Inventory control, free shipping levels, standard shipping guarantees, in-store pickup options, and both phone reps and live chat must all be carefully orchestrated to deliver tailored experiences customers. And reps must be given the latitude to listen to and address specific fulfillment needs of each customer.

"It's about flexibility," said CFI Group CEO Sheri Petras. "If a retailer has all those fulfillment options available, the customer is going to be able to stay within that retail family, as opposed to shopping someplace else."

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FINANCE

Analyst: Home Depot’s Q2 performance ‘very impressive’

After a solid first quarter, Home Depot has posted an even stronger set of second quarter figures. Total sales rose by 6.2% with underlying comparables up by 6.3% overall and by 6.6% in North America. Given the long run of big uplifts in same-store numbers, this is a very impressive performance.

In our view, some beneficial factors are underpinning Home Depot's growth. When combined with the company's operational excellence and the sound strategic decisions it has made, these are driving exceptional performance. In a sense, everything is perfectly aligned for growth.

Regarding the tailwinds, foremost among these is the housing market which, for most of the quarter, remained robust in terms of both transactions and prices. Movers are highly beneficial for the home improvement market: our figures show that, on average, movers spend 68% more on DIY than other consumers. The vast majority of movers — some 84% — say that Home Depot is one of the stores they will use most for their home improvement activities. In essence, Home Depot has been the main beneficiary of a strong housing market.

As positive as the housing market has been, there is a risk that activity will wane. Indeed, the latest numbers suggest that transactions are down slightly — not because demand has dropped off, but because there is a shortage of housing. This both reduces options for those wanting to move and also pushes up prices which restrict the number of first-time buyers. Looking ahead it is likely that supply will pick up and that prices will drop back a little; in our view, the underlying fundamentals of the market do not suggest the sort of bubble we saw before the financial crash.

All that noted, even if housing transactions do soften, the impact on Home Depot will not be immediate. Our data show that home improvement spending remains elevated for up to 3 years after the initial move. As such, even if there is a bottoming out of housing demand, it will be a soft rather than a hard landing for the DIY sector.

Another tailwind is the difficulties of other retailers, especially in categories like appliances. Although this accounts for a much smaller slice of Home Depot's success, we nevertheless see the market share gains across these areas as a sign that Home Depot is advancing in segments that sit slightly outside of the traditional home improvement space. Notably, the number of women considering Home Depot for these categories has increased considerably over the past year.

Alongside consumer market, Home Depot has also made excellent inroads with the pro consumer. The integration of Interline – the commercially focused repair and maintenance products business Home Depot acquired in 2015 — has been beneficial. Initiatives like introducing Interline products to stores and allowing Interline accounts to make payment in stores, have increased the number of pros using Home Depot's shops.

For both pro and DIY shoppers, Home Depot continues to pull out all the stops in terms of range. We, once again, note the company's flexibility in quickly changing displays and assortments in line with the weather, events, or other factors that shift the pattern of demand. We also applaud product innovations such as the new PPG woodcare range introduced this quarter, the new security products, and the new lithium-ion battery technology in outdoor power tools. These things provide reasons to buy and upgrade.

Away from stores, we are very encouraged by progress in the online part of the business. Better and faster online checkout along with more personalization, especially on mobile, are both helping to drive numbers. Although online demand for home improvement is more subdued than for other sectors, it is nevertheless growing, and Home Depot is advancing its share in the digital space.

Overall, we remain confident about the future outlook for Home Depot. There are some small clouds on the housing front, but even if these do grow, they are not yet close enough to affect performance over the remainder of this year.

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REAL ESTATE

Harnessing the Power of Pop-Up Shops

BY Chris Francis

Pop-up stores are a retail trend that shows no sign of slowing down.

The ability to create a brick-and-mortar presence without many of the hassles that come with establishing and maintaining a permanent physical location has become an increasingly attractive option in recent years. The pop-up store concept has transformed into an estimated $50 billion industry — fostering new partnerships, experiential marketing opportunities and a unique way for retail brands to engage with their customers.

From established global brands to independent e-commerce merchants, retailers of all shapes and sizes are utilizing pop-ups as a one-of-a-kind way to experiment within the physical retail environment. High-end luxury brand Louis Vuitton recently generated lots of buzz by promoting its collaboration with skateboarding shop and clothing brand Supreme through the launch of a series of global pop-up store locations.

Retail giants like Nordstrom and JC Penney are also benefiting from the trend via in-store pop-up installations. By lending a portion of their storefront to a merchant like Sephora or Gwenyth Paltrow's lifestyle brand Goop, these retailers have the opportunity to drive in-store traffic while also attracting and engaging new customers.

It’s no wonder a wide range of merchants are looking to capitalize on pop-up shops. Not only do these temporary store concepts offer flexibility but they typically cost as much as 80% and come with far less risk.

Although short-term retail footprints are becoming a mainstay across the industry, that doesn’t mean embarking on the pop-up store concept – and making it successful – comes easy. To make the most of this temporary, limited edition retail offering, there are a few important considerations to keep in mind:

• Focus on Shopper Needs. The pop-up retail environment not only offers flexibility to merchants, but it presents the opportunity to revamp the shopping journey for customers. Part of establishing brand awareness and engaging with shoppers through a pop-up shop is making sure shoppers walk away with an experience they won’t soon forget.

Offering personalized promotions or equipping employees with tablets for looking up inventory, placing orders or even making payments will help merchants enhance their pop-up store offering. Adjusting marketing techniques and customer service tactics can also go a long way in enhancing the retail experience within pop-up environments.

• Keep Payments Simple. The size and format of pop-up shops can vary drastically depending on a variety of factors, including a merchant’s budget and design preferences. In many cases, having a traditional point-of-sale (POS) setup may not provide the flexibility needed to operate in a pop-up space. Rather than trying to incorporate traditional cash registers or checkout lines, many merchants are using pop-up locations as a way to experiment with modern payment options such as mobile wallets and tablet-based POS solutions.

• Get Experimental. Pop-up stores serve as a great way for merchants to test out new products or concepts. Whether a brand is looking to promote a new collection or showcase a unique collaboration, pop-ups create a sense of “limited time only” urgency that attracts and retains the attention of customers. By experimenting with new offerings within a pop-up, merchants also have the opportunity to get on-the-ground feedback and suggestions before taking on the risk of pushing out new products to a larger market.

The exclusive, unexpected and limited nature of pop-ups can offer merchants an alternative way to thrive in the rapidly changing retail landscape. Capitalizing on the trend requires finding the right pop-up model and strategizing to attract the right customers, all while delivering on the unique experience shoppers have come to expect.


Chris Francis is VP of market development at Worldpay US, a global payments provider for all channels: in-store, online and via mobile.

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