Bear it or Bring It?
In recent articles, I've touched on the renewal that is going on throughout retail and since that time, more retailers have announced significant technology upgrades, next-level transformations, or reinventions, including Penney’s headquarter staff reductions and Macy’s just-announced advances in shopper-friendly store technology. Across the pond, Tesco’s chief executive, Philip Clarke, is due to unveil his £1 billion plan for reversing the retailer’s fortunes and securing its future. Clearly, retailers are stepping out in greater numbers as they realize that they can no longer dabble in digital or eke it out with legacy merchant models. “Evolve or die” has become a common theme with retailers and brands that are embarking on these changes. Fearing the retail reaper is a great motivator for change, but it’s the retailers that are meeting the same challenges and opportunities with a "bring it on" attitude that stand out.
The phenomenon called “showrooming” has been getting a lot of attention lately. Shoppers check out merchandise in stores, and then buy on rivals’ websites, often scanning barcodes to get a read on competitive prices. These days, the sight of a smartphone-wielding shopper is enough to make any retailer recoil, and many are portraying it as the latest grim reality of modern retail. In fact, showrooming has become the go-to explanation for Best Buy’s recent struggles, last week’s chief executive scandal notwithstanding.
It may operate in one of the most competitive multi-channel spaces in retail, but Sephora is unfazed by showrooming. In fact, it encourages the practice. According to Julie Bornstein, SVP of Sephora Direct, “The reality is that there’s not a lot of price differentiation in our world and most of our users are loyalty card holders, so showrooming doesn’t worry us.” Bornstein argues that smart phone shopping actually “makes the experience better.” Sephora offers its own app, which allows consumers to track the products they’ve purchased in the past, check reward point balances, and look up product ingredients. So far, the app has a staggering two million downloads, while according to the company, shopping at Sephora through mobile devices increased by 300 percent last year.
Rather than reacting to price transparency, showrooming, and a host of other new-world retail realities with shrugs of resignation or fear and trembling, Sephora is stepping away from groupthink and creatively meeting customers where they stand, arming them with the resources that they need to build stronger bonds.
Sales of consoles and physical video games are facing a major squeeze, as cheap-to-free social and online gaming options proliferate. In the UK, first-quarter physical game sales were down a whopping 30 percent year over year, accelerating the downward spiral of industry-leader Game Group, which filed for court protection in March and was rescued this month by investment firm OpCapita.
In the U.S., GameStop is being pressured by the same forces, and if that weren’t enough, its lifeblood, the used gaming business, could be crippled if Microsoft and Sony launch Xbox and PlayStation consoles that render game trading impossible, as is rumored.
While there aren’t any guarantees that the retailer will overcome the odds, it certainly isn’t taking things lying down. According to executive chairman of the board Dan DeMatteo, the company “saw this coming and prepared for it.”
A couple of years ago, it seemed as though Game Stop’s growth-through-store-count strategy would bring a Game Stop to every corner. CMO Mike Hogan saw the opportunity to direct resources into the creation of a powerful marketing platform that would go far beyond traditional retailer loyalty programs. GameStop’s PowerUp Rewards program has gone on to become the centerpiece of the retailer’s growth strategy. It’s making marketing efforts more productive, as it eschews mass advertising campaigns in favor of game release notifications targeted at interested customers, and it serves as a hub for GameStop’s legacy and emerging businesses, including mobile gaming and downloadable content. According to the company’s CEO, J. Paul Raines, GameStop will realize revenues of over $800 million in 2012 from businesses that did not even exist for GameStop two years ago.
In the company’s fourth quarter earnings call, Raines stated that the company’s “internal rate of change has been greater than the environment around us.” In the meantime, GameStop is maintaining close connections with over 17 million highly-profitable and engaged user/members.
This article originally ran on the International Licensing Industry Merchandisers' Association (LIMA) website.