Oct 3, 2007

Consumers Vent Frustration with Commoditized Retail Environments

Retailing is a tough business. And successfully creating exciting, consumer-friendly shopping experiences seems more and more elusive as retail sectors commmoditize. Some retailers do a good job. Apple stores are most often mentioned by consumers as a fun, enjoyable and helpful place to spend their money.

Yet Laura Landro of the WSJ writes that U.S. retailers last year lost an estimated $40.5 billion to Shrinkage (shoplifting, employee theft, and other inventory losses); as a percentage of sales fell shrinkage fell just slightly to 1.57% from 1.59% a year earlier...one of the most common forms of theft in retail is "ticket switching" where a shopper removes a price tag from an item and puts it on a more expensive one or switches an expensive item into the box of something lower-price. While many stores now use sophisticated radio-frequency ID tags and multiple tickets on an item to head off ticket switching, tech-savvy gangs can now print new tags on portable printers and slap them on merchandise right in the store.

Some retailers are getting more aggressive in loss-prevention efforts; Wal-Mart recommends that local store officials prosecute shoplifters at age 16 and older rather than the prior age of 18. According to the principle known as merchant's privilege, any merchant that believes a crime is in progress has the right to detain and question a shopper and to conduct a reasonable investigation.

So are consumer experience-destroying theft and "shrinkage" programs simply an unavoidable "reality" of U.S. retailing? I sat next to a retail security expert on a flight recently and asked him that very question. The answer is no, and there are many more options that retailers can chose from that enhance - rather than destroy - the end consumer experience. After all, trying a product and touching a product encourages sales for many products.

Is there anything more baffling than a consumer electronics shelf full of innovative new products wired to the shelf and non-working because batteries have been removed? The retail security guy I spoke with shared that the key is the strategic mindset of the executive team running the retailer. Are they all about cost-cutting (take out batteries; cable the products down, and arrest shoppers) or are they focused on consumer experience and growth (add staff to handle questions and monitor traffic; provide more serviced sales versus self-serve; etc.)?

The excerpts below of WSJ "Letters" on the "shrinkage" article provide a wonderful glimpse of how consumers feel:

It is symptomatic of so many poorly run businesses, particularly retailers
and airlines, to focus on internal operational issues rather than on good
customers. Much like the circumstances of flying in coach class, this form of
treatment by retailers forces consumers to consider alternatives to the negative
shopping experiences encountered today. No, online shopping isn't killing
retail; the retailers are committing their own form of suicide.

[this] article summarizes what many people who shop at scrappy discounters
experience on a regular basis: a degrading interaction when a customer has to
deal with understaffed and improperly stocked stores, inefficient check-out
procedures and, sometimes, overzealous and ill-advised security personnel

The good news is that a new era of pro-consumer retailing is emerging, and is being led by new-style "customer experience" merchants. Short-term strategies built on income statement tweaks at the expense of customers are reaching their inevitable dead end.

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