Stores borrow from fast-food industry’s playbook
By MAE ANDERSON
The Associated Press | November 22,2012
People line up outside Toys R Us as Black Friday sales begin in Royal Palm Beach, Fla.
NEW YORK — This holiday season, Burger King won’t be the only place where you can have it your way.
It used to be enough for stores to promise discounts of up to 70 percent off to lure shoppers during the busy holiday shopping season. But the ease of ordering online and the sluggish economy has created more demanding U.S. consumers who aren’t impressed by discounts alone. They want their shopping just like their fast food: not only cheap, but convenient too.
That means they’re no longer afraid to walk away from the cashmere sweater with the perfect fit if the store is crowded. They’re also unwilling to buy those suede pumps that are just the right shade of blue if they have to pay to get them shipped. And they cringe at the prospect of carrying around a bunch of paper coupons; they’d rather be able to pull them up electronically on their smartphones.
Retailers from discounter Wal-Mart to department-store chain Macy’s are doing everything they can to make it easier for this new crop of finicky shoppers to spend their money during the busy holiday shopping season. Several are opening on Thanksgiving Day. Some are offering free layaways and shipping. Many are matching in-store prices with cheaper online deals. And others are allowing shoppers to buy online and pick up their merchandise in stores.
It’s the latest effort by stores to court shoppers like Patty Edwards. Four years ago, Edwards, who lives in Bellevue, Wash., bought all of her holiday purchases at online retailer Amazon.com because she thought it was the easiest way to shop. But this year, she plans to shop elsewhere because there are stores are offering more shipping options.
“Now I’m not necessarily tied to Amazon,” said Edwards, a retail analyst and principal at investment firm Trutina Financial. “I can go to Nordstrom, Saks or Target and have stuff available to pick up. It’s a pretty simple process. That wasn’t the case four or five years ago.”
The have-it-your-way approach is partly a response by merchants to their fear that shoppers will spend less freely this season over worries about high unemployment and a package of tax increases and spending cuts known as the “fiscal cliff” that will take effect in January unless Congress passes a budget deal by then. It also comes as the growth of smartphones and tablet computers have made it easier for shoppers to browse and buy with the touch of their fingertips. No need to battle long lines at The Gap when you can just Google what you want.
That puts pressure on brick-and-mortar retailers, which count on the holiday shopping season for up to 40 percent of their annual revenue, to find ways to get shoppers into their physical stores. That’s becoming an increasingly difficult feat: The National Retail Federation, an industry trade group, estimates that overall sales in November and December will rise 4.1 percent this year to $586.1 billion, or about flat with last year’s growth. Meanwhile, online sales are expected to rise 15 percent to $68.4 billion, according to Forrester Research.
“Retailers have to do a little more to grow sales this year,” said Frank Badillo, a senior economist at consultancy Kantar Retail.
This isn’t the first time stores have had to up the ante. Big sales and door busters like deeply discounted TVs used to be the hallmark of the winter holiday shopping rush. But stores noticed over the last several years that Americans were cutting back on spending during the economic downturn, so they ramped up their discounting even more.
Shoppers became addicted to the ever bigger sales. And they began fleeing to online retailers, which can offer much cheaper prices than brick-and-mortar stores because they don’t have the overhead costs of operating physical locations. Shoppers also began to appreciate something else about online retailers: They offer them the convenience of being able to shop within the comfort of their homes or office cubicles.
To better compete, brick-and-mortar stores figured that they’d have to replicate their online rivals’ formula. Shopping in stores needs to be cheap and easy, they figured. So stores began trying new ways to make shopping more convenient last year, such as free shipping and expanded hours. But this holiday season, they’ve expanded the scope and scale of those incentives to include:
Stores typically open in the wee hours of the morning on the day after Thanksgiving Day known as “Black Friday.” It’s typically the biggest shopping day of the year. But the Black Friday openings have crept earlier and earlier over the past few years, with retailers such as Macy’s Inc. opening stores at midnight. This season, some stores have expanded their hours even more: department-store chain Sears, toy-store chain Toys R Us, Wal-Mart Stores Inc. and others are opening on Thanksgiving to grab those who want to shop after their turkey dinner.
“We saw a shift in how customers are shopping last year,” says Ron Boire, Sears chief merchandising officer. “Members told us some of them want to stay up late. Others like the idea of getting out early.”
Shipping & returns
About 44 percent of retailers are offering free shipping this year, a jump from 12.5 percent last year, said Vicki Cantrell, executive director of Shop.org, the National Retail Federation’s digital retail division. And package delivery company UPS, which commissioned a customer service study with research firm comScore, said retailers also are working to make returns easier, by including return labels in packages or providing a link online that customers can use to print labels out. Additionally, some stores, including consumer-electronics retailer Best Buy Co., Toys R Us and Wal-Mart, are offering customers the option of ordering online and then picking up their merchandise in stores.
Danny de Gracia, 32, a political scientist in Honolulu, Hawaii, likes to use stores’ “buy online, pick up in store” option to avoid the hassle and crowds in stores. He said it allows him to just run in and grab his purchases. Gracia, who said he plans to spend no more than $1,000 this holiday season, last used the service to buy a Sony digital camera for his father at Best Buy.
“It’s easier because when you’re in the physical store sometimes you have to stop, ask questions and get assistance,” he said. “With stores that offer online shopping you can simply search the site, read up and compare options and then purchase, pick up and leave ... It’s an outstanding service that I utilize whenever possible. I wish that it would be available for groceries.”
Programs that allow customers to pay over a period of weeks have long been used for some holiday shoppers. But typically, shoppers have to pay a fee for these so-called layaways. This year, Wal-Mart lowered the fee it charges customers on its holiday layaway program from $15 to $5. And Sears and discount chain Kmart, both divisions of Sears Holdings Corp., ditched the fee they charge completely. The two stores previously had charged $5 for an 8-week layaway and $10 for 12 weeks.
While small mom-and-pop stores long have offered to match the cheaper prices that customers find online, this year big merchants such as Target and Best Buy have said that they also will do that. The move is an attempt to combat the growth of so-called “showrooming,” when customers look at merchandise in stores but buy it cheaper online.
Forrester Research analyst Sucharita Mulpuru said that the online price-matching programs are an attempt by brick-and-mortar stores to keep customers. “The increasing price transparency we’re seeing online is something brick-and-mortar stores have to deal with and deal with it directly,” she said.
Shopping apps for smartphones and tablets have been around for a few years, but this year retailers are beefing them up. For instance, Macy’s is launching a Black Friday portion of its mobile app, which highlights Black Friday specials and other deals not advertised elsewhere. It also will have maps and information about where in each store Black Friday deals can be found.
The shopping apps are an attempt by brick-and-mortar retailers to hook shoppers like Stefanie Scott, 35, in Greenfield, Wis. Scott, who plans to spend $1,000 to $2,000 on gifts this year, starts her holiday shopping ritual by first checking out deals on Facebook.
Then, she brings her smartphone along on shopping trips and uses mobile apps to get discounts once she’s in the store. She’s also a fan of the “buy online, pick up in store” offers, and recently used one at Best Buy to buy a videogame for her brother-in-law.
“I’m tied to my cellphone,” she says. “Coupons and lists get lost in my purse. It’s so much easier when I’m shopping to whip out my cellphone and have them scan it. The more I can do on my iPhone I’m all for it.”