Viewpoint: How can department stores survive in the digital era? – Sharmila C. Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Boston Business Journal

How can a department store survive in the age of digital shopping carts and free home delivery? It’s a question that some of even the most iconic retailers struggle to answer.

As a result, many are closing up shop. Last month, for instance, Macy’s identified seven stores for closure as part of its previously announced plan to shutter 100 locations nationwide. In November, Sears said it would close 63 stores on top of the 350 that it announced would shut earlier in the year. And last summer, J.C. Penney closed about 140 of its stores around the country.

Closing less-profitable locations makes a lot of sense, but that alone is not enough. What’s needed is a reinvention of the traditional bricks-and-mortar model. Stores must rekindle the magic of department store shopping by providing a holistic customer experience, one that’s efficient and satisfying from a purchasing point of view, but also engaging and exciting.

For starters, brick-and-mortar stores need to change how they view their online counterparts: digital stores should be seen as complementary forces rather than competitive ones. Shopping in the future will be a blend of the electronic and physical realms.

Take, for instance, the “buy online pick up in store” option, known as BOPUS. Customers like BOPUS because shipping to the store is typically faster and cheaper than shipping to their homes. Retailers are in favor because it reduces delivery charges and expenses associated with shipping to individual households, and cuts back on the hassle of customer returns.

Chains are getting creative about motivating customers to opt in. Kohl’s has dedicated parking spots for BOPUS shoppers. CVS, meanwhile, goes one step further with curbside pickup so shoppers needn’t leave their cars. These perks are a prime example of an offline/online collaboration that improves the overall customer experience by giving them special treatment.

This is just the beginning, though. Retailers must do a better job of using their online consumer behavior data to acquire a deeper understanding of their customers’ preferences. Studying web traffic patterns and regional trends will help stores ensure they stock the “right” kind of inventory—a curated selection of clothes, accessories, electronics, and home goods tailored to the communities they serve. The result: a department store filled with merchandise that its customers actually want to buy. This online/offline market research offers clear benefit to shoppers, too. Before venturing to the store, customers can feel confident that the swimsuit/parka/Instant Pot they desire is there—and comes in their size or with the specs they want.

 Chains will, of course, always sell department store staples; but in the Digital Era, the “right” kind of inventory also means stocking a few surprises. To continually delight and inspire customers, stores must carry an assortment of distinctive and rare goods. They could, for instance, sell specialty items from local designers and artisans. Whole Foods has had success selling locally grown produce and bakery products from community-based suppliers. At a time when consumers are inclined to “shop local” and are shying away from goods produced by factories or big business conglomerates, this could be a way to win new customers and generate buzz.

Read the full post at The Boston Business Journal

Sharmila C. Chatterjee is a Senior Lecturer in Marketing and is the Academic Head for the MBA Track in Enterprise Management (EM) launched at MIT Sloan in Fall 2012.

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