Feb 26, 2018 Gina Ashe, CEO

Who’s Responsible for In-Store Sales: The Brand or The Retailer?

Recently, I was reminded of the story of George Saunders, who ran a grocery store in Memphis back in the early 20th century. In those days, each customer would give their shopping list to the grocer, who would head into the back to assemble the order for them. It was a slow process that led to long lines and usually meant only a few customers per day could be served.

In 1916, Saunders changed everything by bringing his inventory out of the stockroom and putting it on shelves, giving customers the chance to shop for themselves. Self-service grocery sounds obvious today, but it was an innovation in its time. Saunders effectively shifted responsibility in the shopping process from himself to his customers, leading to more revenue for his business, and an ‘empowered’ shopping experience for his customers.

The story shows that customer experience has always been a powerful catalyst for change in retail, and it’s still true today. Changing customer demands mean retailers and brands once again have to reconsider how shoppers’ buying preferences impact the way physical stores operate. In fact, those changing buying habits are shifting more of the responsibility for the in-store experience from the retailer to the brand.

Traditionally, retailers made all of the calls. They chose which brands to carry in store and took full responsibility for selecting the assortments, merchandising, driving shoppers to the store, and educating sales associates on product details so they could actually sell it to shoppers. Brands would raise awareness for their products through general advertising and manufactured the products that retailers purchased, but when it came to crafting the in-store experience, they were mostly along for the ride.

But, times have changed, and so have retail dynamics. Hard economics are making it  more challenging for retailers meet shoppers’ needs alone. Although U.S. Census data shows that more than 90 percent of retail sales still happen in-store per, more than 7,600 stores closed shop last year, and those that remained often had to scale back key resources – staff, merchandising, inventory – that contribute to customer experience. Shoppers simply aren’t excited about visiting barren stores with small, unimaginative assortments and no associates to answer questions.

As a result, brands are increasingly stepping up to the plate and assuming more responsibility over in-store space. They’re helping retailers create more engaging retail experiences that get customers excited to visit the store. But, does that relegate the retailer to being little more than a landlord? Where do responsibilities merge, and how can retailers and brands work together to make customers happier?

Shifting Responsibilities

Everything starts with customer expectations. Many shoppers today have already done their product research before they came to the store, and head into a store mainly because they want to try the product in-person or ask questions of an expert. But, education is a pain point for many retailers: 83% of customers feel they’re more knowledgeable about products than the store associates they encounter.

That’s not entirely surprising. The average retailer might carry hundreds or thousands of brands. Even putting aside typical staffing challenges like turnover, it’s a tall order to expect associates to truly know every brand inside and out, so that they can deliver the level of detailed product knowledge shoppers expect.

To plug the knowledge gap, brands are starting to take more ownership over their space within a store. They put their own people on the ground – brand-dedicated representatives who are knowledgeable and passionate about their products, and who are able to answer customer questions. Brand-right representatives can even conduct product training for retail staff, lifting overall product familiarity and knowledge in that store.

In many cases, representatives serve as a brand’s eyes, ears and hands on the store floor. They can track inventory, install merchandising and create the engaging service experiences that drive customer satisfaction and sales.

For example, one leading beverage brand installed a colorful branded smoothie cart, stocked with beverages and staffed by two brand-exclusive representatives, in four grocery stores for one week. The cart drove a 122% increase in sales compared to a non-demo week, in part because it offered a unique experience that grabbed shoppers’ attention and enticed them to try the product. In fact, the flashy smoothie cart was even more successful than a standard tabletop demo, driving nearly double the number of customers engaged, samples distributed, and products sold per hour.

The Future of Retail

For many retailers, this arrangement – unique brand-driven experiences – falls directly in line with their own goals: to create valuable experiences for their shoppers and boost in-store sales. That said, even in the best of circumstances, retailers will not hand over the reigns completely. They must ensure that brand activations in their stores build the retailers’ brand as well, and adhere to their operational guidelines. Today’s technologies enable this kind of collaboration.

This kind of arrangement can free up the retailer to focus more heavily on driving the right type of foot traffic to the right brands, and studying what experiences in their stores bring consumers back again and again. Retailers will do this by tapping into data insights, including population demographics, store traffic patterns, even factors like local weather. Data will influence which brands retailers choose to stock, with an eye toward maximizing gross margins per square foot. Sephora is the perfect example: recently the brand launched its first Sephora Studio in Boston, a smaller footprint store with built-in digital experiences and a curated, data-driven product selection.

Once they’ve selected the right brands for their store, those vendors will be responsible for creating and execute on the immersive in-store experiences that bring their products to life. We’ll start to see these experiences evolve. Gartner predicts that by 2022, all of the top 10 retailers will have at least one “showroom-style store” – a format in which inventory will be kept low, and the priority will be for customers to try out products and interact with engaged, knowledgeable sales associates.

Of course, there will be overlap. Retailers will feed brands with the data they need to improve their strategy. Brands will bolster retail staff with training and sales and operational support. But, together, both parties will drive a new way forward for physical retail, and customers will enjoy the in-store experience they crave.

Published by Gina Ashe, CEO February 26, 2018
Gina Ashe, CEO