RETAIL SEASON

Investors Bet on More Pain for Retailers
(WSJ)

Black Friday pulls in a record $7.4 billion in online sales, as many turn to mobile orders (CNN)

Black Friday is expected to provide retailers with historic revenue streams, reportedly exceeding $7.4 billion. Solid performance. But the question for many retail investors is where those revenues went. Online or in-store.

Retailers still do not provide shoppers with a reason to leave the comfort of their homes to make purchases in person. Long lines, poor customer service, and undesirable shopping environments are no substitute for click of a button purchases. The online channel continues to better serve consumer needs than in-store experience.

Site to store pickups are a good middle for some retailers. But, store staff may still make that channel less than desirable if there are noticeable glitches in the process. Misunderstandings by store associates can make it harder for shoppers to justify entering a store at all.

Not surprising investors are down on retailers whose primary channel is in-store. The future will favor online based retailers and retailers that effectively leverage both channels. Brick and mortar stores may employ a large number of people, but lack the efficiency to maximize returns on investment. As more shoppers head to the web, the issue will persist.

RETAIL PERILS

Retail industry experts expect a tumultuous summer for many retail chains, as they struggle with cost and convenience competition with the larger industry providers. Many are not well positioned in the online sector or even have a viable strategy. Others simply struggle to maintain connection to core customers, while chasing the ever-important millennial.

The increasing number of retailers owned and operated by hedge funds and venture capitalist firms may expedite their downfalls. While many might see improvements in available capital and cashflow, the short-term focus on delivering results on Wall Street will overshadow the need to improve the performance for Main Street. Investors want better returns, but customer need better experiences and reasons to spend their limited time and money in your stores. While investors will flock back to the stock if EPS and other measures improve, customers may not if too many poor in-store experiences consistently occur.

Improving the customer experience is difficult task for the returns minded leadership, as many states increase minimum wage. Therefore, the same sales associates contributing to issues in the experience become more expensive and harder to replace. A big focus needs to be on reducing the reliance on sales staff by improving the natural layout of the store and the ease of item location. Self-checkout should be expanded with the needed security enhancement.

Another area of opportunity for retailers with investments in a network of brick and mortar stores is connecting online purchases with in-store pickup. Providing discounts or other perks for in-store purchases related to an online order picked up at the store will increase revenues and engagement. The goal should be having online customers walk in the door and peruse the aisle for items they might not have thought about previously buying.

Competing against retailers with better established online channels will be difficult and expensive. But, the ability to leverage a well-crafted in-store experience with online experiences may prove viable. The online channel is a must for all retailers. But, improving the in-store experience may be vital to ensure the current customer base chooses the same retailer in both delivery channels.