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.
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Regulatory Wrap-Up: Weekly recap of retail-related judicial and legislative developments-Aug. 13
California – A federal judge certified a class action lawsuit that alleges the retailer H&M didn’t pay workers for time spent in security checks after clocking out. The certification follows the recent state Supreme Court ruling that Starbucks Corp. must pay workers for off-the-clock work at closing.
New York City, NY – The city council voted to impose a cap on new ride-sharing licenses for one year and to establish the nation’s first minimum pay rate for app-based drivers. The legislation directs the Taxi and Limousine Commission to “establish a method for determining the minimum payment that must be made to a driver.” The mayor is expected to sign the legislation into law.
Sunnyvale, CA – Some city council members have indicated their support for freezing the scheduled increases in the city’s minimum wage ordinance to bring them in line with the current timetable for statewide increases. The city’s minimum wage ordinance passed in 2015 and increases the rate to $15/hr by 2019, ahead of the statewide schedule of 2022. The city council will meet on Sept. 11 to consider the issue.
Dallas, TX – The Working Texans for Paid Sick Leave coalition is lobbying the city council to place a paid leave proposal on the Nov. ballot because their signature gathering effort fell short. It remains unclear how many members of the city council favor putting the measure on the ballot.
San Antonio, TX – The city council held a public hearing this week on a proposed ballot initiative to institute a citywide paid leave program. The council is considering enacting an ordinance to replace the proposed initiative and may vote on the issue later this month.
Federal – The Justice Department announced a formalized partnership with the Labor Department to “expand collaborations” to discourage employers from hiring temporary visa workers over “qualified U.S. workers.”
Federal – Immigration and Customs Enforcement (ICE) conducted several raids of businesses in Nebraska and Minnesota for employing and mistreating illegal immigrants. The operation raided over a dozen businesses and indicted seventeen business owners and managers for fraud, money laundering and other crimes.
Missouri – Voters repealed an existing right to work law by a 2-1 margin. The law was passed during the 2017 session and allowed workers to opt out of union dues payments. Missouri allows residents to call for a ballot measure on new legislation by collecting signatures from at least 5 percent of voters (over 100,000) from six of the state’s eight congressional districts.
Study – A study from the conservative American Action Forum finds that growth in the hotel industry slowed following in the National Labor Relations Board’s 2015 joint employer decision. The decision classified some businesses as jointly liable for the labor practices of franchisees and contractors. Specifically the study found that the annual franchise employment rate fell by 1.4% and growth in total wage earnings declined by 3.9%. The researchers acknowledge that data from one year (2016) may not be conclusive enough to determine a long term trend.
Arkansas – The Little Rock city council passed a resolution that requests the governor convene a special session to consider legislation to capture sales taxes from out-of-state sellers in the wake of the recent Supreme Court decision in South Dakota v. Wayfair. The governor’s office indicated there were no plans to convene a special session and action will likely wait until early 2019.
California – The governor’s office released draft legislation that would force out-of-state retailers with sales over $500,000/yr to collect and remit the state’s sales tax. The bill also mandates that marketplace providers collect and remit sales taxes on third-party sales made through their platform. The legislature may consider the bill when they return to session from an August recess.
Michigan – The Department of the Treasury released an administrative bulletin establishing certain thresholds for out-of-state sellers to begin collecting and remitting the state’s sales tax. The department indicated that sellers with over $100,000 or over 200 transactions per year must begin collecting on Sept. 30, 2018.
Washington – The Department of Revenue released a notice establishing a threshold of $100,000 or 200 transactions for out-of-state sellers who must begin collecting the state’s sales taxes on Oct. 1, 2019.
San Francisco, CA – A measure has been approved for the Nov. ballot that would leverage a 0.5 percent gross receipts tax on companies that make more than $50 million in revenue annually. The revenue is designated for housing and homeless services, similar to the “head tax” that Seattle considered and ultimately rejected earlier this year. The city’s Office of Economic Workforce Development released a report noting that passage of the new tax could negatively and disproportionately impact employees in mid-level jobs such as retail, grocery and restaurants as many of those industries could potentially cut jobs as a result.
China – The Trump Administration announced 25 percent tariffs on an additional $16 billion worth of products imported from China. The new round will go into effect on Aug. 23 and when combined with the $34 billion already in effect as of July 6, the total amount of products subject to new tariffs amounts to $50 billion.
California – A coalition of various business interests submitted a 20-page letter detailing technical corrections to the landmark data privacy law that was signed in late June and goes into effect Jan. 2020. The precedent-setting law allows consumers to learn what personal information about them is held by businesses and to opt out of the sale of that information. The legislature is expected to take up a technical corrections bill in the fall.
- This week, the Chicago Tribune published an editorial strongly criticizing the scheduling proposal currently under consideration by the city council. The rebuke was comprehensive enough that it should be incorporated into all industry messaging on this issue going forward. Essentially, it called into question the fallacy of trying to legislate predictability in an increasingly unpredictable world. If leveraged properly, it could be an important inflection point in the ongoing dialogue over predictive scheduling.
- The H&M case in California is significant because the wage and hour practices of another major brand (last week it was Starbucks Corp.) are being called into question and leveraged to create new law in that space. Companies have to take into consideration the aggressive approach California is taking with regard to wage and hour compliance and their willingness to creatively redefine “unpaid” wages.
- New York City’s new rules around ridesharing are precedent-setting and while the action does not have a direct effect on traditional entry-level employers, the growing delivery sector could easily come into play. Other policies the city has considered, from banning electric bikes to potentially prohibiting deliveries during rush hour, are all responses to the growing congestion and transportation issues in dense urban centers. Companies need to pay attention as other major urban centers may follow suit.
Legislature Status for Week of 8/13/18
- The United States Senate is in session this week
- The United States House is in recess this week
- Three state legislatures are meeting actively this week:
- CA, MA & MI
Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation’s Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.
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