Cannibalizing Sales? Or, Growing Your Customer Base?

"Are retailers eating themselves alive?" 

That was the provocative headline we recently saw. Then this followed: “Retailers' rising e-commerce sales are taking a big bite out of their brick-and-mortar revenues – a wide-ranging problem.” Other pundits we've seen call it “an untenable dynamic for these retailers.”

“Huh?”, we scoffed, as we read this about major retailers.

The definition of retailing is “selling to the ultimate consumer.” Why does it really matter whether they buy from you in-store or online?

Moreover, our rant continued, retailing also is having the right product at the right price at the right place at the right time for the right customer.

If that "right customer" wants to buy online instead of in-store, kudos to the retailers who figure that out!

But then we paused. Maybe there IS something to be considered here. Something about  the focus on that “right customer.” 

Easy – and free – fact-finding project

So, here’s a simple, free project to try. Choose a short period of time, like one month, to try it out. Just gather your sales data for that past month.

A. Make a simple tally sheet of two columns. One column is for In-Store sales, the other is for Online sales. 

Then, for each sale, enter these bits of info into the appropriate column on your tally sheet: 

• Total dollar amount of the sale
• What they bought (by major merchandise category)

B. Next, add it up. Get a total dollar amount for each column. And, maybe a total dollar amount for each merchandise category in each column. 

C. Look for the patterns. And the surprises (yes, there WILL be surprises!) 

D. Then, consider what that might mean. (This is a great time to involve your key staff people as well.)

For instance, it may confirm the purposefulness of your shoppers. Do they seem to have a clear idea of what to buy from you online, and what they prefer to buy in-store?

Or, maybe it will illustrate how you have two very different kinds of shoppers. One group likes to shop in-store; another likes to shop online. 

Would that make any difference in your operation? Should it? For instance,

• Do they demand/deserve different merchandise mixes? 
• What will it take to grow sales from each group? 
• Should one group have priority over the other?
• Will you need other vendors?
• Different marketing programs?
• Or…?  Or…?

Or, maybe it's telling you about your merchandise mix. Some might be better suited to online shopping. And how might the merchandise your customers seem to prefer to buy in-store be presented more effectively?

Fun, isn't it? We think this exercise will stimulate the merchant thinking for you and your people.

Is "cannibalizing" a concern?

So, should you be concerned about “cannibalizing” your business by offering products online? We doubt it, but you should find out for yourself!

1. Quickly gather the data. (It's free, remember?) 
2. Serve it up as some great food for thought. 
3. And then feast on it!

"And Many Happy Returns"

We just learned of a study that quantified the effects of “free and easy” return policies.

• But first, some (reassuring) background: Apparently 48% of shoppers say that their top reason for choosing a retailer is a flexible returns policy. But, as is true in many instances, perception is everything! That is, according to a 2016 Holiday Shopping Trends survey from the National Retail Federation, “On average, two-thirds of consumers say that they didn’t return any of their gifts.”

So, how important is it to have - and brag about - a “free and easy” return policy? 

• A Washington & Lee University study compared two similar online retailers; one offered free shipping on returns, and the other required the customer to pay shipping costs to return items. 
• What happened? Over a two-year period, average spending per customer was four times greater ($2,500 versus $620) for the retailer offering “free and easy” returns!

Wow! That's impressive, isn't it?

Lessons for ALL Retailers

The lessons from this apply to brick-and-mortar retailers as well. What about your store's return policy? Does it seem “free and easy”, or is it restrictive? 

• If you require that items must be returned within a very short window of time, or can only be returned for “store credit”, you may be protecting yourself from being “ripped off”.
• But you also may be assuring yourself of missing out on future sales.
• Bigger yet, customers that trust you as a retailer are very likely to shop with you more frequently, and tell others.

Are there costs? Of course. Some customers will abuse it. Some merchandise will not be able to be returned to your shelves. For that, consider Ebay or Amazon for liquidating it yourself, or use some of the so-called “return services” to recoup costs. 

But consider the cost/benefit comparison. What does a “free and easy” return policy really do? 

It builds confidence and trust with your customer. It keeps them coming back, and spending more! ($2,500 vs $620, remember?) 

Hmm. Maybe it’s time to quit focusing on returned merchandise. Concentrate instead on those “returning customers”! 

And do whatever it takes to have many happy customer returns!

"Food for Thought" from McDonald's and 7-Eleven

Recent strategic changes by two global firms – McDonald's and 7-Eleven – provide good reminders for us all. Each business is making news by its focus on what they are known for. 

For 7-Eleven, that would be convenience and low prices. Granted, it is still a habit for many to stop at the corner store on the way to and from work, school and play. But for 7-Eleven to remain relevant, it needed an updated definition of “convenience” for its best customers: Millennials. 

Their research revealed that today, people are eating five and six times a day; over 40% of adults are eating alone and on-the-go. So 7-Eleven expanded its private label brands into portable, snack-sized “healthy and fresh foods”, geared especially to their Millennial shoppers.

• Their Go!Smart brand offers an array of fresh foods especially appealing to women shoppers (small portions of turkey chili and cornbread, kale and quinoa salads, hummus, all labeled with nutritional info).
• Their branded items also include gourmet nut and fruit snacks.

So far, it has been a winner! Sales of their private brands have grown smartly (30% in both 2015 and 2016). Since over 50% of their customers are Millennials – who now are old enough to buy beer and wine – the future looks bright as well. 

7-Eleven: Updated, but back to its basic convenience premise.


Similarly, McDonald's is returning its focus to delivering what it’s known for. In their case, of course, it is burgers and fries.  At low prices, from clean stores, and fast. (Oh yes, Egg McMuffins - how about all day long?)

Through their research, they discovered that fewer people were coming into their stores each year. Definitely not a recipe for success! 

Their new goal: “A better McDonald’s, not a different McDonald’s.” 

• They are simplifying the menu, to reduce the complexity of ordering and preparing (saving costs and time.) 
• They still offer choices to the customer. But not of different items (wraps? salads?), but more choices about the burgers. 
• Their focus is on what customers expect and want when they go to McDonald's. “You want fries with that?” 

Ahh yes. Back to your roots. The value of going back to the basics of what you are primarily known for. 

So, once upon a time...What were your stores known for?

• What about your stores do customers really know and love? 
• Does that still matter to today’s customers? 
• If yes, how do you make it even better for that customer?
• And then, Get cracking!