The new rules of retail: do sales matter anymore?

3 Jan 2018

Before the digital revolution there was a clear-cut way to measure a brand’s success. In the traditional brick and mortar retail model, the metric was sales per square foot — how much sold in a brand’s physical store indicated the success and health of the business overall.

No longer. The way we shop and engage with brands has changed with the adoption of new technology. This astronomic change to our shopping habits means that the health of a brand can no longer be measured on the success of a single channel.

Today, a successful retailer needs to integrate across channels and create a complete, well-rounded customer experience. A store that successfully integrates all of their channels will use their physical locations to acquire new customers, assist with online purchases, allow in-store pickup and returns, and convert digital customers with an interest in trying on a product before buying.

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©Nordstrom

Nordstrom, the high end American department store, knows this well. 2017 saw the launch of the first Nordstrom Local — a petite version of a Nordstrom department store that allows customers to shop online, interact with stylists and personal shoppers, pick up and return online orders, and drop off alterations.

Though Nordstrom Locals carry no product, the location gives them the rare opportunity of interacting with their online customers, allowing them to gather feedback, note desires and frustrations, and generally gather an abundance data that can be used at a later date to market to those same customers. By integrating the online and offline experience, Nordstrom has shown a true understanding of their customer experience and has embraced the undeniable link between physical retail and digital sales.

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©Away

Smart luggage startup, AWAY, embraces this method full on. Launched online in 2016, the brand, founded by former Warby Parker execs, saw near-immediate growth thanks to success on social media and a notable influencer program. AWAY was hesitant to jump into physical retail, but their New York NoHo location quickly proved them wrong. At a sales rate of $3,000 per square foot, AWAY claims to perform better in the traditional retail sense than Tiffany & Co. (Yes, that Tiffany & Co.).

Despite the undeniable success – they now have four U.S. stores – sales in store aren’t a key performance indicator for AWAY. The label doesn’t measure success in traditional retail sales and instead looks at their store as a marketing channel for their website. To measure the success of their stores, AWAY looks at the brand awareness they generate, social media engagement, press mentions, and online sales.

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©Apple

How to follow the new rules of retail success:

  1. Overall brand health must be measured by performance across all channels. Digital sales, social media engagement, marketing efforts, and physical retail sales should be used to determine a brand’s success.

  2. Physical retail and the digital experience are more intertwined than previously thought. People want to have complete access to a brand, when and where they want. In fact, more and more brands are realising that same-store sales numbers don’t account for how a brand’s physical store can boost online sales. Case in point: Only 20% of Apple’s sales happen in store, but 80% of sales online have had an in-store interaction first.

  3. Focus on the complete customer journey, not the destination. Physical stores provide value by playing a crucial role in a customer’s decision to purchase. The sale gives the customer a heightened and more complete experience of the brand, which makes them more likely to return. Following a customer in-store and online also allows retailers to collect more data, and learn to anticipate a customer’s future needs rather than playing a guessing game.

  4. Focus on the “same trade area”, a metric that reviews all sales regardless of whether they were online or in-store and counts them as part of the store’s influence. Retail consultant Kurt Salmon argued in a 2015 report titled “Bringing Store Performance Into Focus” that the “full value” of a physical store cannot be tracked by store traffic and more traditional transaction-based metrics such as same-store sales growth, sales per square foot, basket size and conversion. Nowadays, it’s about so much more.

So what’s to come of this? The game has changed and so have the ways we define success. Sales no longer determine the performance of a store. Instead the true measure of success is the health and growth across all channels. The brands that understand this now will thrive in the future, whether it be digital, physical, or both.

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