Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Brick-And-Mortar Retail Adopts New Tactics In The Battle With Online Retail

Companies / Retail Sector May 17, 2017 - 06:03 PM GMT

By: John_Mauldin

Companies

BY PATRICK WATSON : Starbucks (SBUX) is doing something unique to improve sales. It is using mobile technology to increase repeat customers. Now, the online retail vs. brick-and-mortar conflict isn’t as clearly defined as it might seem.

Magical App Makes Coffee Headache Free

Starbucks has a very handy smartphone app that will guide you to the nearest store and hold your gift card balances. At the register, they just scan your phone and you’re done.


Better yet, the app now has mobile ordering. Before you even get there, you can order your drink—customized however you like—and it will be waiting on the counter for you. You just walk in and grab it. Magic.

This is where it gets interesting: The Starbucks loyalty program ties into the app too. It uses points to incentivize behavior, much like online merchants do.

It does this by sending personalized promotion offers.

This new approach to retail marketing isn’t the old shotgun advertising (pull the trigger and hope you hit something). It’s a sniper rifle aimed right at one’s weak spot.

Personalized Promotions Draw You In

Standard retail promotions—10% off, 2 for 1, etc.—have lost a lot of their bite.

They may or may not work. Some people would have bought the product anyway, even without a discount. Others didn’t buy, but would have if the discount were just a little more or offered on a different day.

What if the store could offer each customer precisely what it takes to make them buy, and not a penny more? That’s kind of what Starbucks is doing.

Every month or so, a message might pop up that says, “Buy these three products in the next week and get 100 Bonus Stars.” Normally, you would have to spend $50 to earn 100 stars. So this isn’t a negligible amount of money.

There’s a pattern to the three products too. Two are always items you bought recently. The third one will be something you’ve never bought before. They offer you a reward for trying it… and it usually works.

Another sales tactic is the “Star Dash.” It awards escalating Bonus Stars for making multiple visits in a defined period.

You can sense the goals here: Frequency of visit and average ticket size are key metrics for any retailer. The Starbucks app tracks those by customer. Then the loyalty program offers individualized incentives.

This is remarkably similar to the way online retailers customize prices and promotions based on customer data. But it’s happening in a physical store.

Hybrid Models Blur The Lines Between Online And Storefront

The retail sector battle isn’t black and white—stores vs. online. While that’s part of it, drawing the line is getting harder.

Chain stores are now exploring ways to integrate e-commerce with their store networks. At Nordstrom (JWN), for example, salespeople carry tablets that list every store’s inventory. If you want those shoes, but they don’t have your size in stock, no problem. A few taps, and a Nordstrom store across the country will ship them right to you.

How do we classify that transaction: store or online? Is Nordstrom a traditional retailer or e-commerce? It’s both—or maybe neither.

Walmart (WMT) offers store pickup for online orders. Last month, it launched a “Pickup Discount” program where you actually get lower prices for items bought that way.

There’s another element to this: supply chain efficiency.

If a chain store advertises a sale in traditional media, it has to make sure every location is stocked up on that item.

Contrast that with the Starbucks app giving every customer their own personal sale days. They can coordinate it with inventory planning and smooth out the peaks. Small savings add up over thousands of stores.

The bigger point here is that retailers are not surrendering to the Amazon (AMZN) juggernaut. They are fighting back with whatever advantages they have. And they do have some—as we see in the Nordstrom and Walmart hybrid models.

Investment Opportunities May Abound

For investment strategy, it means that some beaten-up retail stocks may have more value than we think.

Likewise, I suspect we’ll see new real estate opportunities as the economy finds the right balance of storefront, mall, and warehouse space. Companies that offer retailers efficient technology and logistical services may also have good prospects.

Finding those opportunities isn’t easy, of course. But success never is.

Subscribe to Connecting the Dots—and Get a Glimpse of the Future

We live in an era of rapid change… and only those who see and understand the shifting market, economic, and political trends can make wise investment decisions. Macroeconomic forecaster Patrick Watson spots the trends and spells what they mean every week in the free e-letter, Connecting the Dots. Subscribe now for his seasoned insight into the surprising forces driving global markets.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in