Traditional Retailers are Losing to Digital—But They Don’t Have to

Business Resources - 4 Min Read

Small and medium-sized retailers are losing business to e-commerce sites, including Amazon—but according to Bob Phibbs, those are often self-inflicted wounds. As an internationally acclaimed retail consultant, Phibbs has spent more than 30 years transforming struggling stores into huge successes. He’s the founder of The Retail Doctor and a celebrated author, mentor, and speaker.

We sat down with Phibbs to talk about what retailers can do to adapt to the digital landscape, offering something that Amazon can’t compete against.

Q. You’ve opined a great deal about the fact that many small and mid-sized businesses are shutting down, seemingly unable to cope with the changes brought about by digital commerce.

Most independents have gotten lazy. They forget what it was like when they first started out, when they’d do anything for a customer. They forget what it was like to greet them, to be excited they were there. They had it pretty easy for a number of years, but now they expect another 100 people to walk in the door and that’s just not happening. There are fewer people walking in, so the number one thing business owners need to remember is they have to fight for every single shopper who comes through the door.

Number two is that you can’t do that just by sitting behind the counter and waiting for customers to walk up and ask you questions. You need sales training to know how to engage customers.

Number three is to pay more than you might want to pay. Employees these days are not loyal to much, but the best ones will demand more money, and you can’t give great service with minimum wage employees who aren’t ambitious and who aren’t loyal to the business.

Number four is you can’t market with coupons. That’s a dead end. You just keep attracting the same low-price customers, but you really need the higher-price customers who will buy things without discount. That’s how you maintain your margins to stay in business.

Lastly, I think an awful lot of independents spend as much time complaining about Amazon as they do sweeping their floors. Ultimately, the customer is not the enemy. Surely, you can’t shut down Amazon. You can create the best possible customer experience, with the knowledge that half of your merchandise is available online from other vendors. If you can do that, then life gets a bit easier.

Q. Do you have any numbers on how many people are shopping on Amazon versus walking into a store?

It’s about 20 percent, and that’s probably where it’s going to stay for a while. Techies love to tell us it’s going to increase to 95 percent, but the reality is that e-commerce has been at that 20 percent mark for a long time now.

Of course, people will check online for cheaper prices, but actually buying something is different. Brick and mortar provides something Amazon can’t, and so long as they stay focused on that, they can compete.

It’s something different for every company—there’s no one-size-fits-all. Your business’s value proposition may not be the same as the next business’s value proposition—but whatever it is, it’s not likely to be price.

All you can control is what the customer experiences inside your four walls. That’s the big idea.

Q. So each business has something specific they can offer that will help them compete with digital retail, and their mission is to find that and exploit it?

A. Yes. Don’t try to be more like Amazon or lower your prices down to nothing. You can’t win that battle. There will always be someone who’s cheaper.

Q. When smaller businesses don’t have the margins to pay more for a highly trained sales person, how can they stay in the game?

A. People who are going to perform better are always going to cost more money—but regardless, every company needs a retail training program. Your people need to know how to sell more than a product. They need to sell a feeling, and that’s work. But it’s something online can’t hope to do.

Q. So companies need to find a way to get employees trained, at any cost?

If they could do the job without training, they would—but most retailers are struggling right now. You have to find a way to get your employees training that changes the way your employees behave.
Remember, the number one complaint customers have is that nobody greeted them in the store—but that’s something every retailer can do. If customers aren’t going to be greeted and assisted with their shopping needs in your store, they might as well shop online and get the cheaper price.

What should the major takeaway from this interview be?

Every business model has its strengths and weaknesses. Ecommerce models like Amazon offer a cheaper price and the convenience of shopping from home. But brick and mortar businesses have the opportunity to offer a shopping experience that an ecommerce store can never hope to compete with.

In a retail environment you have the ability to engage your customer using all of their five senses. As well as having upbeat, friendly staff that assists them in their purchasing experience. You can add to the ambiance of your store by playing background music, adjusting the lighting, and helping customers in their selection process with knowledgeable staff.

Price matters. But ultimately, most people are looking for value, which is a combination of the many factors that have been discussed here. You may not be able to compete on price, but you can offer a great shopping experience that your customers will come back for time and again!

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Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.