Fast Forward

Thanks to technology, the landscape of retail is changing by the day. Are you ready for what's next?
by : 

Janine DePaulo

May 1, 2012

Five years ago, Apple founder and CEO Steve Jobs stood before a convention audience in San Francisco and revealed the very first iPhone. Fast forward to today: Jobs is no longer with us, but his legacy lives on in the fifth generation of his company’s ground-breaking invention, the iPhone 4S. And rumor has it, the iPhone 5 isn’t too far away.

Imagine that—it’s only been five years, and I would venture to guess you know at least one or two people who own an iPhone or its big sister, the iPad. Maybe you have one or both yourself. And that’s just one segment of the market. Apple’s primary smartphone competitor Android has also saturated our population, along with BlackBerry and others.

What’s my point? Things are changing—fast. And it’s not just that we have fancier tech tools and toys to play with. New technology is transforming the way we live, work, and shop, even how we communicate and socialize with one another. For retailers, some of these changes are beneficial, others neutral but important to be aware of, and some are flat-out challenging.

The difference between being out in front of the trend and being left behind in its wake is a combination of awareness and action. In this article, I will spotlight a few of the advances that have proven themselves to be more than a fad, how they may impact you and your business, and what you can do to ensure you’re ready to ride the wave to success.

Going mobile

The popularity explosion of the iPhone and other smartphones is important because these devices have changed the way many of us get our information and purchase products.

According to digital marketing, media, and commerce analysts at eMarketer (www.emarketer.com), mobile commerce sales, while currently a small slice of the e-commerce market, will grow dramatically over the next few years, reaching an estimated $31 billion by 2015.

“Mobile commerce is growing at a fast clip,” says the principal analyst for eMarketer, Jeffrey Grau. “And it’s acting as an engine of overall e-commerce growth by converting potential brick-and-mortar sales to digital sales as consumers use their smartphones while shopping in-store.”

This, he says, is a shift that will continue as consumers go from researching products on their mobile devices and then buying in-store to using brick-and-mortar stores as places to research products and then buying online.

But as the trend develops, smart retailers will adapt by offering more online purchasing options of their own. “If a retailer has robust mobile offerings,” notes Grau, “it can steer in-store shoppers to look online for more information or find out-of-stock sizes and items on its own mobile site or app, retaining the sale via a different channel.”

For smaller, independent retailers, this may mean optimizing your website to make it mobile-friendly (for tips and tools on this, visit the Google-sponsored site www.howtogomo.com). It may also mean partnering with vendors and distributors to develop drop-ship and virtual inventory options (e.g., affiliate programs) in your online store, which can expand your offerings and give customers another way to continue buying local, even if it’s online.

Additionally, the behavioral trend of researching in-store and later buying the same items through a different online outlet, such as Amazon, assumes the items can be found elsewhere. One advantage of being an independent retailer is that you’re able to tailor your inventory and feature more products from smaller, more specialized vendors, as well as stocking one-of-kind and limited-edition art, giftware, and jewelry. Other items, such as crystals and stones, lend themselves to being purchased in person, rather than remotely. By emphasizing the fact that much of your merchandise can’t easily be found or readily purchased elsewhere online, you can turn challenge into opportunity.

Going social

It’s not exactly a newsflash that social media sites have changed the way we relate to one another, build community, and do business. In particular, Facebook and Twitter (845 million users and 100+ million active users, respectively) currently dominate the online social universe, but that’s far from the end of the story.

Relative newcomer Google+ (plus.google.com) launched in mid-2011 and already claims to have 90 million users, and growing. As a competitor in a crowded field, it has its work cut out for it trying to carve out a point of differentiation—right now the main ones appear to be its “Circles,” a more nuanced way to categorize and communicate with one’s contacts, and the fact that Google+ is fully integrated with Google’s search engine and other services. Will this revolutionize the world of social media? Probably not, but it does illustrate that the field is constantly shifting, thanks both to consumer demand and news and innovations from the industry’s major players.

One example: Facebook announced in early 2012 that it would soon go public, selling shares of the company in an initial public offering (IPO) that could break records. More importantly, by becoming a publicly traded company, some speculate Facebook may have to shift its focus slightly away from enhancing the user experience and toward building greater profits for shareholders, which could mean less cutting-edge innovation for the industry giant, but more room for its competition.

Upstarts such as Pinterest (www.pinterest.com, see sidebar on p. 13), which focuses on sharing photos of favorite “things,” are offering new, unique approaches to the world of online connection. In short, the landscape of social media is evolving, and its potential is perhaps only in its infancy.

Booz & Company, a leading global management consulting firm, predicts social media sites will emerge in the near future as the next generation of e-commerce as more businesses establish storefronts on Facebook and other sites. And this is no coincidence—these businesses are responding to customer demand and cashing in on an opportunity. In a 2010 survey, the organization found 27 percent of consumers said they would purchase goods through social networking sites. While this venue for selling products online is still a small slice of the e-commerce pie, it does represent a growing trend toward the dominance of social media as a tool for business.

Luckily for independent retailers, establishing a Facebook or Twitter or Google+ page isn’t hard—and it’s free. The only thing social networking requires is your time.

A storefront may cost you a small amount every month, but it’s relatively easy to set up. Establishing a storefront on Facebook, for example, currently involves using an app such as Payvment (www.facebook.com/payvment) or Storefront Social (http://storefrontsocial.com). But considering the opportunities social media sites present now (free marketing and community building) and their potential uses in the future (possible new sales channels), the payoff for small businesses appears to be well worth the investment.

Going digital

You can’t run a store that sells books or music these days without being aware of the impact of digital downloading. It sometimes seems to be everywhere. Instead of “What’s your favorite band?” the question people now ask is “What’s on your iPod?” Instead of “How soon can you get that book in stock?” customers say, “Oh, I’ll just download it to my Kindle.”

But, in spite of the way digital music and e-books have dominated the popular news media, reports of the imminent demise of CDs and paper books as salable items are premature, to say the least.

Let’s start with e-books. Before Amazon’s Kindle came along, with its paper-and-ink-like screen and user-friendly format, electronic books had a hard time getting off the ground. For most people, they simply didn’t compare to the ease and comfort of holding a real book in your hands. And when Kindle first launched in 2007, the price of the e-book reader was steep: $399. Even so, Amazon sold out of the devices within five-and-a-half hours.

Since then, the technology has improved and prices have dropped considerably: You can get a basic Kindle for $79 and the new color tablet reader, Kindle Fire, for $199. Add to this Kindle’s primary competitors—Barnes & Noble’s Nook and Apple’s iPad, among others—and you have some idea of how accessible e-readers (and, consequently, e-books) have become for consumers.

This is supported by polls such as one from Pew Research Center’s Internet & American Life Project, which showed the number of Americans owning at least one tablet computer or other digital reading device rose dramatically over the 2011 holiday season, from 18 percent in December to 29 percent in January of this year. And, as reported by the Association of American Publishers, sales of e-books themselves in 2011 increased 117 percent over 2010, while print sales of adult hardcover titles, for example, fell by 17.5 percent and trade paperbacks by 15.6 percent.

What the numbers won’t tell you, however, is the other side of the story—the increasing importance of and need for independent stores to sell books in a way that puts them into context for the customer. Imagine downloading a beautiful, full-color photographic coffee-table book about a spiritual journey to Tibet. You can’t, right? That’s not the kind of book anyone would want to see in a digital format when they could have the real thing in their hands. Imagine receiving an e-book about the history of tea as an electronic gift via email. Again, that’s not nearly the same experience as unwrapping a real book, and perhaps also receiving a handcrafted teapot to go with it.

Retailing Insight contributor and owner of Harmony Works, a gift store and craft gallery in Redondo Beach, Calif., Royce Morales recognized this key difference between real and virtual books and made changes to her inventory. “I started to notice the trend toward people downloading books onto their Kindles and other handheld devices and realized the need for books could become obsolete,” she says. “Instead of panicking, I noticed the kinds of books that sold best for us were the inspirational and gifty ones. So, I started to really emphasize them in my shop, showing them mixed into other displays, encouraging customers to think of books as a perfect gift when they’re stumped about what to get someone.”

Although Morales wasn’t sure the strategy would work, her book sales numbers showed it absolutely did, and she thinks she knows why. “Who wouldn’t love a wonderful book to sit on their coffee table, mantel, or desk? There is nothing warm and fuzzy about a Kindle, and I don’t think there ever will be, so unless they come out with something that has the same feel as holding an actual book, I have no fear about being irrelevant.”

Books are, to a large degree, about the experience, and the significance of feeling connected to something real and tangible in an era of “cloud” information storage and virtual networking should not be underestimated, especially in the body-mind-spirit industry. First, consider your store’s demographics. According to our own 2011 survey, our readers estimate 87 percent of their customers are between the ages of 41 and 70. These older generations do not adopt new technology at nearly the same rate as those 30 and younger.

All of these points are equally valid, if not more so, when it comes to selling music. With the advent of the iTunes store in 2003, the ability to purchase music in a whole new way—downloading tracks to a small, portable device (iPod, etc.) or your computer—kicked into high gear. And the download revolution hasn’t stopped there. Subscription-based services such as Spotify, originally established and wildly popular in Europe, recently have come on the scene and, along with similar services such as Rhapsody and internet radio providers like Pandora, are giving music lovers even more digital options.

Whether for convenience, space-saving, or the endless choices available online, the public in general seemingly has moved en masse toward digital downloading of music. Or has it?

“Even in the mainstream, CDs are still between two-thirds and three-quarters of recorded music sales,” says Steve Gordon, co-founder of Sequoia Records. “For the specialty retailing niche of your readers, CDs have more longevity due to the demographics and lifestyles of the customers who shop in their stores. For example, customers in their 40s through 60s are much more likely to prefer buying a CD to a download.”

Neil Worgan of Paradise Music & Media USA makes a similar point: “Many retailers forget that 75 percent of music sales value is physical CDs, and in our market it is probably nearer 85 percent (my guess). I see both our download sales income and also our income generated from physical CD sales on a worldwide basis—I would rather live on the latter than starve on the former. There is still a massive market for sales of physical CDs and will be for many years.”

These conclusions are supported by a recent study of the consumer music market in the U.S. from The NPD Group, a market research firm. It shows that after years of declining sales, caused by many consumers who simply stopped buying music, the total number of CD buyers increased for the second consecutive year, growing 2 percent to 78 million.

“CDs are the gifts that keep giving, which proves that even in an increasingly digital age, consumers will respond to quality content and strong perceived value,” says Russ Crupnick, senior vice president of industry analysis at NPD. “The CD still has a powerful attraction for both older, mainstream consumers who listen in their cars, as well as to super fans who enjoy owning the package and assortment of songs from their favorite artists.”

Additionally, both Gordon and Worgan point out that CDs offer certain advantages over downloads. Some are physical—the ease of giving CDs as gifts, and the fact that liner notes and the artwork that accompanies them add greater value and understanding of the music. Others have to do with sound quality (MP3s, to most trained ears, have less depth and poorer sound quality than CDs). Still others are harder to define, but tie back to the original point about the experience of the music.

“Listening to a CD on my music system is an ‘event,’” says Worgan. “Listening to a download on my iPod is convenient but routine.”

Gordon also believes music helps create an emotional bond between a store and its customers: “Music is a big part of the New Age/wellness/spiritual lifestyle and connects customers with stores in ways other products do not. Every time a customer listens to an album they buy from a small retailer, they feel a kinship with that retailer because music connects with people at a deep level.”

While the movement toward downloading both music and books is undeniably happening, it’s important to be aware of the differences between the more popular, mainstream market (think mass-market paperbacks and top-40 music) and the body-mind-spirit retail market. One lends itself toward downloading, while the other is less convenience-driven and more connection-driven. And this may present opportunities for independents that didn’t exist in the past.

“There is no brick-and-mortar retail competition in this niche,” says Gordon. “Borders is gone; Barnes & Noble only stocks top-40 now, and the record retail superstores have closed. New Age stores that stock CDs are providing a product that is not available anywhere else other than online.”

He also offers suggestions for how to take advantage of this change in the market: “Everything that is true for CDs is also true for selling books. The best response to the competition from downloads is to have a good selection that includes new releases and perennial favorites, engage your customers by displaying books and CDs in areas of interest or themes, and create an enjoyable experience of immersion for browsing and listening.”

In short, think about what would appeal most to you as a customer. Choose and highlight books and CDs that are most likely to be purchased in a store environment where the experience of the product reigns supreme. Surround books with giftware items that match it in theme and color to create irresistible vignettes. Do the same with music or spoken-audio CDs. For example, prop a CD of serene flute music among bath-and-body products for a spa effect; or feature a fiery drumming CD with a grouping of drums and one-sheet flyers for your next drumming class; or place your favorite world music CD on a display of fair trade gifts.

Emphasize the experience only your store can provide—the authenticity, the connection, and the expertise—and you can turn big challenges into big success for your business.


The Future Squared

One sign the mobile lifestyle is more than a flash-in-the-pan fad is the fact that QR (Quick Response) codes are popping up on everything from billboards to ice cream. If you’re not familiar with them, QR codes are those funny-looking squares that function similarly to a UPC symbol, except they can hold much more data, and they’re only useful if you have a smartphone that can read them.

QR codes originated in Japan, where they’ve been widely used for over a decade. Why are these printed symbols helpful? Unlike typical barcodes, they are two-dimensional, enabling them to communicate much more complex information, such as extensive URLs for linking to a particular page on a website. They are basically a shortcut, a way to allow those with camera-enabled smartphones and a “reader” app to quickly access additional product information, videos, a social media page, a map, or other online features that enhance the user’s or shopper’s experience.

From the business owner’s point of view, placing QR codes on your marketing materials and in-store signage offers several advantages: It can help simplify messaging on printed materials by redirecting people online for more detailed information. It can help you build your online traffic and track (via Web analytics) how much mobile activity your customers are engaging in around your business and your products. And, with a service such as Likify (www.likify.net), you can make it into a “like” button for your Facebook page, enhancing your social media presence.

Still not convinced? Consider this: You probably have at least a few hyperlinks on your website—with one click, customers can go directly to your email sign-up page or your “About Us” page or directions to your store. But they have to already be on your website to click those links, and usually that means they’re on a computer, likely at home. QR codes function as hyperlinks, but they’re accessible when people are out and about in the real world. It’s all about convenience for your customers.

How do you make your own QR codes? Many free generators are available online, such as Kaywa (http://qrcode.kaywa.com). A quick online search for “QR code generator” will give you plenty of options.


Just Pin It

When I first heard about yet another new social media site, I must admit I was leery. But after reading and playing with Pinterest, I discovered it is the perfect match for my store, and perhaps yours, too!

For me, Facebook is word-driven communication I use mostly to inform followers about events happening at my store, announce when new products arrive, and share the occasional inspirational quote. It also encourages communication between myself and my followers. However, I’ve seen interest in Facebook declining over the past six months.

Pinterest, on the other hand, is lifestyle focused and much more visually oriented. It allows me to be creative, expressing my passion about products, offering customers new ideas for how they can put them to use, and giving people more reasons to buy from me. Pinterest can serve to drive traffic to my website, let people identify me as an expert on certain subjects, and build community. When you find out how your products and services fit into the lifestyles of your customers through pinning, you will find what they want to buy, what the trends may be, and how to better serve your customers.

I liken the individual pinning process to creating vision boards or collages. A Pinterest account is a blank slate where you can decide what you want others to know about your store. Pinterest could be a full-time job if I let it. However, because of the viral nature of this powerful format, I can’t not pin! Here are just a few of the possible boards to create for your store:

Board Ideas for Your Store

  • Product Boards: Candle Burning, Relax and Renew, Great Gifts for Father’s Day, Accessorize Yourself
  • Theme Boards: Summer Fun, New Arrivals, Must-Read Books, What I’m Reading, Mindless Meditation, Bling Bling
  • Resources: By the Numbers (Numerology), Candle Magic, Planets Align, Good for You Foods, All Natural, Going Green
  • About Your Store: Meet the Team, Customers Are Saying, Offers and Coupons, Visual Store History, Store Tour, New Displays
  • Building Community: My Favorite Independent Stores, Where I Like to Eat in Town, Community Partners, Ways to Help, Made in the USA
  • Just for Fun: Quotes, Places I Want to See, If I Had a Million Dollars, My Heroes

—Jean Haller, Journeys of Life, Pittsburgh, Pa.


Has Digital Killed the CD Star? Not Exactly.

As someone who has survived both the cassette and the 8-track formats, I can testify the CD has plenty of life left in it, partly because it offers some advantages over downloads. CDs sound better, for one thing. While casual listeners may not detect the difference, it becomes more important on better playback equipment.

Digital downloads seldom include the album liner notes, which may contain several pages of information, from lyric translations to artist reflections to meditation aids and more. This greatly enhances the listener’s enjoyment of the recording, not to mention the cover art, which adds visual appeal to the music.

Any computer file, including downloaded music, is vulnerable to computer crashes and other failures. While some labels and online retailers offer replacement sound files, owning the tangible CD feels more secure to many people.

Lastly, when it comes to giving a gift to a friend or family member, a physical object makes for a better present and shows more thought went into the purchase than a download gift card.

If you sell CDs in your store, or would like to, consider the following strategies to boost your music sales:

  • Display a “Now Playing” stand at the front register showing whatever is playing in the store.
  • Institute a “Frequent CD Buyer” club card, offering a free or discounted CD with a certain number of purchases.
  • Offer a CD discount on your customer’s birthday.
  • Place CDs around the store with tie-in merchandise, not just in an isolated music rack (e.g., put appropriate CDs in your meditation, Native American, or spa products sections).
  • Provide tie-in discounts (e.g., buy two spa products, get 10% off a spa-related CD)
  • Invite music artists in your area for in-store signings or concerts to promote their new releases.
  • Invest in a set of quality in-store speakers.
  • Finally, remember: ABPM (always be playing music)!

—Bill Binkelman, music reviewer, Retailing Insight


Janine DePaulo, former managing editor of Retailing Insight. Special thanks to editor-at-large Jean Haller and music reviewer Bill Binkelman for their contributions to this article.