Elections and Retail: Turning Out the Vote

Politics and elections that determine political outcomes have significant repercussions on the retail industry at multiple levels. The most obvious and more predictable is the legislative agenda espoused by the winning party on costs of doing business including tax rates, wages and labor rights and retail operations, in general.  However, most retailers avoid making political statements, for fear of alienating any segment of their customer base.  

 

However, many retailers are communicating their civic-minded views to customers in a non-partisan way by addressing an important issue – low voter turnout in elections.  Stores like Levi’s and North Face are giving their workers time to vote,” reports that several retailers have signed a  “Make Time to Vote” campaign letter to support their employees right to vote during the 2018 midterms. 

Why Levi’s Gives Its Employees Time to Vote

Make Time to Vote

 

There is no federal law in the US mandating that businesses give their employees time off to vote and

 

Unlike office employees with flexible work schedules, service-based employees in retail have to deal with scheduling conflicts or miss pay, the primary reason why people don’t make it out to the polls on Election Day.  B

 

 

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Gamification of Retail Loyalty Programs

Retailers have used loyalty or membership rewards programs as a customer retention tool. Research by Accenture Labs shows that “42 percent of customers are enrolled in retail loyalty programs, and these customers generate 12 percent to 18 percent more in incremental revenue compared to non-members.” Predictable rewards programs – “buy $x, to earn y points/rewards” are so common that they are no longer a differentiating factor in retailer choice, consumers expect them.

 

Researchers at the University of Chicago Booth School of Business conducted four experiments in lab and field settings and found that uncertain rewards are more effective in motivating consumers to make repeat purchases than certain rewards, even when the uncertain reward makes customers worse-off than certain rewards.  In their study, “The Fun and Function of Uncertainty: Uncertain Incentives Reinforce Repetition Decisions,” Drs. Shen, Hsee, and Talloen explain that the psychological boost consumers experience when the unpleasantness of uncertainty is resolved motivates consumers to repeat their actions.

 

Many subscription-based online retailers use uncertain rewards to gain and retain customers. Birchbox, Blue Apron, BarkBox, and Stitch Fix send their subscribers a mystery box each week or month with a different combination of products. Customers look forward to opening the boxes and enjoy discovering products. The uncertainty keeps customers continue their subscription.

 

 

Tom Ryan, discussing this research in the RetailWire article, “There May Be Benefits to Adding Uncertainty to Rewards Programs,” and several BrainTrust experts comment that “discovery, chance, mystery, surprise, and delight are all essentially emotion-based concepts, and that’s why they appeal to shoppers/consumers in the loyalty space” (Anne Howe) and that the “uncertainty gamble” only works if the consumer likes the surprise products and services. Consumers provide their product preferences that subscription-based online retailers use to create their surprise assortments for the mystery boxes.

 

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Clicks to Bricks Strategy – Reaches Tipping Point in 2018

As of a few years ago, pure-play online retail was anointed as the most efficient mode of doing business. Lower costs, greater flexibility, ability to capture information through the customer journey trumped the costs and liabilities associated with physical stores – major store-based retailers like Macy’s, JCPenney announce store closing on most quarterly earnings calls and prioritize e-commerce.

 

As online retail has become crowded and hyper-competitive, more pure-play online retailers are setting up physical stores to complement their online operations. Established online retailers, like Warby Parker, Zappos, and Bonobos have long used their physical stores as an important customer touchpoint to reduce consumer purchase uncertainty, help customers identify their preferences and select products online, and process customer returns.

 

2018 has been a blockbuster year for clicks-to-bricks strategy. Amazon, the biggest online retailer owns Whole Foods and sells its products through its 460 stores. According to Warren Shoulberg reporting in Forbes, Wayfair, the online home furnishings retailer is shelving its “no store” mantra to open its first physical store and distribution center in Cincinnati, OH in 2019, and two pop-up shops in NJ and MA for the 2018 holiday season

 

Reid Greenberg, e-commerce lead researcher at Kantar retail in a report by Ilyse Liffreing on DigiDay observes, “Roughly 85-90 percent of retail takes place in brick-and-mortar locations.” Mall-type department stores are challenged “because they aren’t connecting with shoppers in the way they want to be connected with. Consumers already know what to expect when walking into one of these stores.” 

 

E-commerce brands are redefining the in-store experience by interconnecting digital touchpoints and mobile apps with their physical experience. Instead of traditional mall-based focusing on stocking products, display and checking out, the focus on providing the customer with a branded experience, visualize and experience products (as Boll and Branch does for their premium bedding) or helping the customer interact with technology to help in product discovery and use. 

boll-photo

Boll and Branch store at Short Hills mall, New Jersey. Photo courtesy: Digiday

 

Online commerce is approaching maturity in its life cycle. Incremental growth in e-commerce revenues will be driven by older, risk-averse customers cautiously making purchases from online retailers. Having a positive shopping experience at a store of an online retailer will go a long way in reducing the uncertainty associated with the process. Having a retail location provides other benefits – conversion rates are higher in stores and Google SERPs (Search Engine Results Page) ranks merchants with physical locations higher than online-only merchants, another win for retailers selling online. 

 

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Amazon’s $15 Minimum Hourly Wage – Reactionary or a Smart Business Move?

On October 2, Amazon unilaterally announced that all its US-based employees – 250,000 full-time and part-time, 100,000 seasonal and temporary agency staff will earn a minimum wage of $15 an hour effective November. This will also apply to workers at its many subsidiaries, including Whole foods, Audible.com and Zappos.com. As reported by David Meyer in his Fortune article, in 2017 Amazon’s median pay was approximately $14 an hour, while Walmart’s minimum wage is $11 an hour and Target’s aim of $15 an hour by 2020.

 

Further, as the second-largest private employer in the US, Amazon is “encouraging” large companies to follow suit and is lobbying the federal government to increase the federally-mandated minimum wage of $7.25 an hour set nine years ago.  

 

 

Many, including David Meyer at Fortune, have observed this may be in response to political pressure Amazon CEO,  Jeff Bezos was facing as the world’s richest man while dealing with “The Stop Bad Employers by Zeroing Out Subsidies – Stop BEZOS —Act” introduced by Senator Bernie Sanders. The proposed legislation would require companies that don’t pay a living wage reimburse the tax authorities for federal benefits paid out to their low-wage workers. Several other retailers including Walmart and McDonald’s have faced similar calls but have yet to respond.

 

Others, including Neil Saunders in his Chain Store Age commentary, suggests Amazon’s unilateral move was an economic and strategic imperative as Amazon’s growth engine is reliant on a robust workforce in a tight labor market, especially during the holiday season. Amazon will better able to tolerate the impact on its profitability, through cost-savings.  

 

This view is supported by Prof. Zeynep Ton at MIT and author of “The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.” In his Fortune Leadership Forum article, he argues that even in low-cost retail, the logical trade-off between low prices and good pay is false. Studies of four retail chains Costco, Trader Joe’s, QuikTrip, and Spain’s Mercadona, offer better pay and benefits to their employees compared to their competitors. They are able to keep prices low and deliver excellent financial returns to their investors through higher labor productivity, great customer service, innovative practices, and healthy growth. They consider workforce, including front-line employees to be a strategic asset in a complex environment, as an imperative for long-term competitive advantage.

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Upward Mobility: Digital Retail Careers

The growth of online and mobile shopping requires a talent pool of employees who can ensure an easy and productive online experience.  Bryan Pearson in his Forbes article notes that as retail evolves “the most promising jobs will involve insights, not inventories.”  Digital retail jobs come under various titles but fall into three broad categories: customer experience leaders, data analysts, and software developers.  

 

Mary Thompson in her CNBC segment “Talk about Upwardly Mobile Jobs; Digital Retail,” quotes Niraj Shah, CEO of Wayfair. Online and omnichannel retailers “need more data scientists, merchandisers, marketers, designers,” and that “in every role, we are looking for folks to have a little bit of an analytical bent, and a little bit of a way to use data to further progress what they do.”

 

retail_companies.talent needs

The graphic is courtesy: The Digital Journey, by Kim Mckesson, Jerry Noonan, Anthony T. Laudico, Klaus Halsig.

 

In digital retailing, data and technology together are integral in all areas of the business, because, according to Shah “they help the merchant understand what is happening out there, what customers are looking at, what they want and what they prefer.” In contrast, merchandising or the promotion and presentation of goods is key in traditional retail and technology can be a separate function on its own.

 

In addition to typical character traits desirable to employers – hardworking bright, team-oriented or collaborative, potential employees must have “the ability to use analytical insights or quantitative data.” Sucharita Mulpuru, a retail analyst at Forrester Research, notes that “growth rates for the jobs that are open in this industry are extremely high. It’s somewhere between 20 and 50 percent.” Most retailers have little choice but to pay higher wages if they want to stay competitive.

 

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Retail Job on Resume Pay Dividends in Other Sectors

On September 28, we reported on 2018 Universum Survey of Top Global Employers for Business Students. The retail industry is the largest non-government employer in the U.S. supporting 42 million jobs and is often the first employment opportunity for many Americans. As college students start their new school year in a booming economy with a tight labor market, knowing that a retail career on their resume is valued by hiring managers across industry sectors can be helpful to those considering in internships or full-time positions  in retail as well as reassuring that it will help and not limit their ability to transition to other sectors in the future.

A National Retail Federation commissioned study “Retail’s Value on a Resume: How Jobs in Retail Prepare America’s Workforce for Success,” by market research firm GfK shows that 80% of hiring managers across industries value the foundational job skills that a retail job experience instills in its employees. They also believe that those skills are transferable to jobs and careers in other sectors. For students considering careers or jobs in retail, the NRF Foundation provides an interactive toolkit “Retail as a Career” to identify various opportunities in retail.

As technology permeates across retail functional areas and organizations themselves, many retailers are launching technology and digital innovation initiatives to stay competitive like Target’s Tech Incubator, Walmart Labs, and Canadian Tire’s Digital Innovation centers in the Americas and around the world. Sam Berndt at NRF reports that computer-science graduates are in demand in retail and offer a good balance compared to the Silicon Valley rush. Compensation is competitive, they can be located in small and large communities with low cost of living, have interesting projects like developing innovative technological applications in AI and autonomous vehicles.

Adapted from: Berndt, Sam (2018), “4 reasons computer science grads should be looking for jobs in retail,” in Retail as a Career, NRF Foundation.

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Retail Sales is on the Upswing, Then Why are the Malls Dying?

Monthly statistics from the US Census show that U.S. retail sales are consistently growing at a modest rate, yet shopping mall vacancies and closures are the highest in the last seven years (WSJ 2018). Experts blame the downturn in shopping malls on e-commerce, but online sales account for only 10% of US retail sales – the remaining 90% occur in brick-and-mortar stores. Yet, another conjecture blames ‘shopper boredom,’  but that runs counter to the popularity of open-air, lifestyle centers. 

In a guest column on RetailOperationsInsights.com, Profs. Rosenbaum, Ramirez, and El-Manstrly propose and test another hypothesis – shopper concern for personal security in enclosed malls. Videos of people in dangerous situations, trapped in enclosed spaces – malls, airports, movie theaters, are frequently on news broadcasts, trending on internet websites and social media – have a chilling effect. leading to shopper’s avoidance of enclosed shopping malls.

They tested their hypothesis empirically, with groups of 150 shoppers watching three short videos of a typical mall journey, one without any shoppers present, second with few shoppers and third with many shoppers. Neural activity of 450 shoppers was measured using the EMOTIV Epoc+ 14 Channel Mobile EEG device on six cognitive metrics – engagement, excitement, focus, interest, relaxation, and stress.

Their results show that shopped viewing a shopping experience with many people present lead to increased stress, lower excitement, decreased focus which induces place avoidance. What can mall owners and their retail clients do to address this issue? Can use of color, open spaces, glass ceilings/domes in enclosed malls attenuate the fear consumers experience? What role do security symbols (prominent signs of alternate/multiple exits, bag checks at entrances) and third-party certification play in lowering anxiety associated with a mall visit?

This post is an adaptation of RetailOperationsInsights.com Guest Column, “The Politically Incorrect Reason to Explain the Death of Enclosed Malls: It’s The People,” October 1, 2018.

Posted in Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 4: Store Location Planning, Part 5: Managing a Retail Business, Privacy and Identity Theft Issues, Uncategorized | Tagged , , , | Leave a comment