Middle-Ground Retail is Dying—But Discovery Shopping Could Save It

Today, shoppers have more choices than ever before, and they also have the technological means to rapidly sift through those choices to find the ones they prefer. As a result, the retail industry is splitting in two, with consumers choosing where to shop based on either price or brand.

Recently, Deloitte divided publicly traded retailers into three categories based on price and discovered that those on either end of the spectrum are still seeing growth, and those in the middle are disappearing. In fact, the stores offering the lowest prices opened 2.5 new locations for each store closing in the middle category, while the higher-priced, premier retailers had one new location open for each middle retailer that closed. Regardless of industry vertical, it’s clear that retailers operating on either end of the spectrum are the most successful, leaving behind those stuck in the middle.

Luxury vs. Value: What About the In-Between?
With the influx of options, consumers are focused on better and better deals. Bargain shopping isn’t going anywhere; in fact, many consumers expect lower prices than ever before.

When it comes to a retailer’s brand, things become a little more intangible. Luxury brands used to get by on their name alone, but these days, it takes something more. Customers love strong brands that have compelling stories, unique aesthetics, and pop culture resonance.

The rise of experiential marketing comes in tandem as retailers try to reach their audience in the current maelstrom of options and the powerful influence of social media, and both e-commerce and brick-and-mortar stores compete to create unique, shareable moments that reach and resonate with their shoppers.

Of course, for middle-ground retailers, it’s unrealistic to compete on price with retailers purpose-built to provide deals or to set out so late in the game to build a cult brand. For example, Bed Bath & Beyond is unlikely to match Walmart’s prices anytime soon, but competing with boutique brands that have built their success on their stories is equally improbable. Instead, middle-ground retailers need another strategy, and discovery shopping could be the answer.

The Discovery Difference
Discovery shopping has been around long enough for dozens of brands to use the concept as their foundation; TJX, Ross, QVC, and even dollar stores don’t always have exactly what customers might intend to buy, but they don’t have to.

Plenty of shoppers revel in the hunt and the enjoyment of the act of shopping, and that is enough to get them in the door — or, nowadays, on the app. They come to spend time, and when they find the right deal, it makes the experience that much better. By harnessing the psychology of discovery shopping, middle-ground retailers could find their footing without necessitating huge price discounts or store and brand overhauls.

Consumers will always have basic needs, like laundry detergent or batteries, and they’ll acquire these goods at price-based stores. Other times, they may want a luxury outfit for a big night out or a special gift for a brand-loyal friend, and premier retailers are in the position to win this share of purchases. But when consumers are just browsing, discovery shopping better meets their needs — making it perfect for those middle-ground retailers.

A study from Penn State illustrates that shopping is often about more than utility; out of a group of shoppers who had bought themselves a treat during a one-week period, 62% had made the purchase in an effort to improve their mood. Shopping can relieve stress and is a pastime for many, and middle-ground retailers can cater to discovery shoppers by increasing the factors of hunting and being surprised within their platform, whether that's digital or physical.

How is it done? In the world of discovery shopping, it is now up to retailers to direct shoppers to products that they’ll want. Retailers need to truly evaluate their customers' experiences and see how those two factors come into play. For example, brick-and-mortar retailers may try creating a store layout that encourages shoppers to explore versus walking directly to what they came for.

The same goes for digital experiences: Do shoppers just take a search-and-buy approach to purchases? If so, retailers must find ways to show them new things, gamify their browsing experience, or use collected data to tailor their experiences to exactly their style or preferences. Doing so creates a browsing experience, even though they're on a retailer's site or app and not in a physical store.

Without a change in course, middle-ground retailers aren’t going to go out with a cataclysmic bang, but if they remain on their current path, they’re destined to fade out quietly. Fortunately, there are options for keeping up amid all the change in the industry.

Businesses that incorporate new strategies to rekindle their appeal and compete with the price categories above and below them will find that discovery shopping is a great way to excite an audience. Those middle-ground retailers that can implement it successfully will reap the benefits and grow as the rest become extinct.

Ashvin Kumar is the co-founder and CEO of Tophatter, an “entertaining” mobile shopping marketplace. More than 20 million shoppers use Tophatter to score deals on jewelry, gadgets, health and beauty, home decor, and more.