Reinvigorating Retail: Capitalizing on Online and Off-Price ConceptsSeptember 18th, 2017 | Posted by in Retail
Could online and off-price concepts be the key to capturing market share in the retail industry? It is no secret that the industry is facing headwinds, primarily driven by shifting consumer preferences. However, many online-only retailers and off-price retail concepts have found unique success in the challenging retail environment. Yet, much like traditional retailers, these organizations must continue to introduce innovative strategies to keep pace. One example of such innovation is Gilt’s recent website relaunch, in which the online designer merchandise retailer placed more emphasis on personalization than its traditional flash sales, while also introducing a mix of full-price and discounted goods.
As traditional brick-and-mortar retailers search for new ideas to get ahead of the competition, they may not make full-fledged pivots to online-only or off-price strategies, such as developing an entirely new off-price brand. However, as they explore similar concepts—such as off-price sections in-store, online flash sales, or enhanced omnichannel offerings—there are important considerations they should keep in mind as they emulate elements of these concepts to refresh and refine their own strategies.
For example, Hudson’s Bay, which acquired Gilt in 2016, has focused on creating a more seamless shopping experience across channels with its website relaunch. Now, customers can pick up and return purchases at Saks Off 5th—which is also owned by Hudson’s Bay—and Gilt will offer Saks Off 5th merchandise by the end of this year. Hudson’s may also introduce more Gilt shops within Saks locations. While enhancing these omnichannel offerings and increasing convenience will likely drive revenue, retailers considering adopting similar offerings must develop a holistic view of such programs’ impact on overall sales across channels to determine whether they truly add incremental value.
Consider a retailer introducing in-store pickup for online orders, similar to Gilt order pickup at Saks Off 5th. How could the retailer pinpoint whether the program actually drives new business? Customers who typically shop online may make in-store purchases that they otherwise wouldn’t have when they come into the store to pick up their online purchases. However, on the flip side, customers may instead simply shift their typical in-store purchases to online channels, or worse, return more merchandise than they otherwise would have during their trips to the store for online purchase pick-up.
Similarly, imagine a retailer that wanted to launch an off-price section within its existing full-price stores, rather than introducing a separate off-price brand. Before investing in such an initiative, decision-makers would likely want to determine its overall sales impact. For example, the retailer could find that the new off-price section, while attracting some new, price-conscious customers, also causes some existing full-price shoppers to trade down to these new off-price items, ultimately cannibalizing overall profitability.
As traditional retailers look to reinvigorate their businesses, it will be important for them to learn from the successes of their online-only and off-price counterparts. However, rather than making sweeping changes to strategy, they should innovate carefully and invest only in the programs that have proven to add value for their business. In order to determine which elements of their peers’ strategies to emulate, retailers must develop the advanced analytic capabilities necessary to measure the impact of potential new programs before investing in widespread rollout. By using small-scale experiments to evaluate ideas such as off-price sections or online flash sales on a smaller scale before broader implementation, retailers can identify which ideas will be most profitable, and refine their investments accordingly.
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