Jan 4, 2016 - The five retailers featured in this list are pushing the innovation ... in fact the electronics retailer w
The Five Retailers That Matter By The Editors of RIS — January 04, 2016
The five retailers featured in this list are pushing the innovation envelope in both technology and strategy and are providing their customers with differentiated service and aligning their mission to meet shopper demand. This is the second time RIS News has produced this list. Two years ago we named Amazon, Apple, Macy’s, Target and Walmart as the five retailers that matter. For this year’s incarnation we disqualified the previous members of the article and built our new list by looking at the technology, business strategy, investments and economic success of those pushing retail forward. While the retailers on the list can certainly be debated, the five that made the final cut are certainly leaders in their particular segment. Congratulations to Best Buy, GameStop, Kroger, Nordstrom and Walgreens for being named the five retailers that matter.
Best Buy: Surviving, and Thriving Just a few short years ago it would have been unthinkable to place Best Buy on any list outlining the retailers that matter — in fact the electronics retailer would have been better suited for a list of retailers about to go extinct. As long-time rivals like Circuit City shuttered their doors, Best Buy has been able to not only survive in the highly-competitive consumer electronics segment but has emerged as the leader in the category. Since CEO Hubert Joly took over the reigns in the second half of 2012, Best Buy has done a complete 180, going from retailer on the rocks to innovative leader. When Joly joined Best Buy three years ago he quickly instituted a revitalization strategy. His Renew Blue initiative was designed to get the retailer back on the right track by addressing declining comps and shrinking profit margins. To achieve this lofty goal he called for a renewed focus on online growth, personalized customer experience, better optimization of the in-store environment and improved relationships with vendors. By all measures Joly’s plan has been a success. In the first year he stabilized the retailer’s declining numbers, prompting a doubling of the retailer’s share price and a return of investor confidence. While Best Buy is not immune to the struggles of other electronics retailers, it
continues to post impressive numbers especially in digital sales. In Q2 2016 total sales increased .8%, while online comparable sales increased by an exciting 17%. Despite a consumer electronic market that has gone soft Best Buy has continued to prosper. The electronics retailer is supplementing decreased sales in some electronics categories with an increased emphasis on appliances and service contracts. Thanks to the increased push in these growth areas, the retailer has been able to beat its own sales expectations and outpace the electronics market as a whole. Joly credits Best Buy’s multi-channel approach and its ability to engage customers in their homes, thanks to the company’s lucrative installation and service business, as a key driver of their market-leading success. “Today, we interact with customers in three distinct and complementary channels: online, in-store and in-home,” he said. “We believe our ability to do this particularly in-home is a strategic competitive advantage that will further differentiate Best Buy from the competition and allow us to deliver a uniquely personalized experience to our customers where, when and how they want to be served.” While the electronics segment has been commoditized in recent years thanks to pricing wars waged out across the digital landscape, the success of Best Buy illustrates that by focusing on customer service and an engaging path to purchase retailers with a solid brick-and-mortar focus can not only compete, but thrive.
GAMESTOP: Evolving Success As a purveyor of a vast array of hardware and software GameStop certainly has its finger on the pulse of technology. But the number one retailer of video games in the world doesn’t just sell tech, it uses it to define the GameStop experience. The retailer has a highly engaged customer base that demands a digitally infused shopping experience and GameStop delivers. The retailer is one of the few that has successfully introduced beacon technology into its stores, and did so with a unique strategy. While shopping in-store, customers that have the appropriate software installed on their mobile device can simply touch their phone or tablet to a GameStop beacon on the shelf and receive additional information on the corresponding product. The novel approach allows customers to control the experience. Rather than inundating shoppers with promotional messages when they enter and browse the store, GameStop’s beacon program puts the shopper in charge. The consumer decides if and when to receive additional product information, and the experience exudes a level of cool that connects with the brand’s primarily young target audience.
GameStop has always possessed a connected customer base, but thanks to its PowerUp rewards program it is now able to gain valuable insight into shopper behavior and is using that information throughout the organization. The marketing and promotions department is able to tailor its communication with shoppers based on past purchases, trade-ins and browsing history. In addition, careful analysis of the shopping habits of its 40 million-member strong PowerUp user base, GameStop’s real estate team is able to gleam invaluable insight into the best locations to place new stores. While video game sales are the core of GameStop’s business, the company is currently diversifying its offerings to meet changing market demand. As gamers continue to migrate to app-based gaming on their mobile devices, the retailer is experiencing slowing sales numbers and is entering new markets as it purposely deemphasizes its video game business. The retailer’s growing Technology Brands business includes Simply Mac, which sells a full line of Apple products; Spring Mobile, which sells AT&T services and wireless products; and Cricket Wireless, a new AT&T brand offering pre-paid wireless services, devices and related accessories. In addition to its Technology Brands business, GameStop acquired ThinkGeek, a purveyor and creator of collectibles and geek-gear in spring 2015. The two brands opened their first concept retail store focused entirely on collectibles in the U.S. in September and have been aggressively expanding the retail footprint. While markets and consumer expectations unavoidably change over time, forward-thinking retailers like GameStop are able to keep pace with consumer sentiments and continue to provide a differentiated shopper experience that meets ever-changing customer demand.
Kroger: Analytics-Powered Decisions The grocery segment is undergoing a radical transformation. As shoppers continue to demand healthy and organic products at an increasing rate — consumer demand has grown by doubledigits every year since the 1990s, according to the Organic Trade Association — grocers both new and old are catering to this powerful demographic and realigning their product arrays to capture the new-age grocery shopper. While Kroger is a far cry from a niche grocer specializing in an all-organic assortment, the largest supermarket chain in the U.S. is dedicated to providing organic and healthy alternatives for shoppers. In fact, Kroger is doing more than just jumping on the organic bandwagon — it is out front leading the charge.
Kroger’s Simple Truth brand is its most successful corporate franchise to date, with sales skyrocketing to over $1 billion in annual revenue less than two years since its launch. “We continue to see outstanding, double-digit identical sales growth in our natural foods department,” Kroger EVP and CFO J. Michael Schlotman said. “Simple Truth continues to grow at an astonishing rate, setting a record high for total sales in the third quarter, while continuing to establish all-time weekly sales records.” While developing a store brand to meet shopper demand is not a new concept for grocers, Kroger is pioneering a new approach to pinpointing emerging trends that should keep the supermarket powerhouse in a market-leading position for years to come. In spring 2015, Kroger acquired the technology assets of Dunnhumby, establishing its own inhouse analytics team, 84.51o, to gain insights into shopper trends and is using that data to guide its merchandising strategy. The size of Kroger’s in-house analytics department is staggering — with over 500 employees working for the wholly owned 84.51o, Kroger is clearly all-in on the idea that data-fueled insights are the key to retailing success in the customer-centric era. In addition to leveraging its analytic capabilities to power its merchandising decisions, Kroger also uses its insight into individual shopper behavior to tailor its promotions and communication with consumers. Members of Kroger’s highly-successful loyalty program get digital coupons delivered direct to their smart devices and receive personalized promotions on the retailer’s website based on prior shopping behavior. Kroger’s approach is clearly working. In Q3 2015 the retailer posted a 5.4% increase in sales, which marked the 48th consecutive quarter of positive comps for the supermarket chain. In addition, Kroger’s profitability is sharply on the rise, with operating earnings increasing to 3.1% of sales up from 2.6% last year. These positive financial results are having a major impact on Kroger’s overall value, with share prices more than doubling over the past year, reaching all-time heights.
Nordstrom: Refusing to Stand Pat With over a century in retail, it could be understandable if Nordstrom was slow to recognize emerging trends and adopt new technology, but the department store chain has shown that it is anything but slow. As much of the competition has been either unable or unwilling to accept the new retail reality, Nordstrom has thrived — placing a greater emphasis on its digital initiatives as in-store sales sag. Nordstrom is willing to evolve to match new market conditions and is enjoying increasing revenue while much of the industry is experiencing tepid sales numbers. For example, shoppers
have fully-embraced the off-price model, flocking to retailers like TJ Maxx for bargains on everything from apparel to home goods. Rather than stick to its luxury roots and ignore the increasingly powerful cost-conscious shopper, Nordstrom has embraced the trend forming its Nordstrom Rack brand, offering its name-brand merchandise at discount prices. Nordstrom’s off-price business including its online and physical Rack stores increased sales 12% and saw a 2.4% comp increase in Q3 2015. As the retailer continues to gain market share in the off-price segment it is increasing its investment, opening 16 new Rack stores in the quarter to bring its total physical footprint to 194 locations. In addition to its off-price business, Nordstrom continues to invest in new business ventures to diversify its offerings. Over the past five years the retailer has invested in and eventually acquired the flash sales site HauteLook and The Trunk Club, a luxury online retailer that operates on a subscription model. The brand’s latest venture is its investment in Australian startup Shoes of Prey. The footwear company offers full customization, allowing shoppers to design their own shoes online. In addition, Nordstrom has set up physical design studios in six of its locations and a digital experience on Nordstrom.com. Nordstrom has been aggressively investing in digital technology for over a decade with a focus on mobility, e-commerce sales and social media just to name a few. The retailer is not only increasing its profile in the crowded omnichannel marketplace but enjoying tangible success. Last year Nordstrom’s online sales increased 25.5%, and online transactions accounted for 18% of the brand’s total sales. Nordstrom is not only investing in customer-facing technology but also upgrading its associate’s technology to better service the shopper. “In addition to our ongoing mobile enhancements we launched a unique text-to-buy feature for our salespeople, enabling customers to buy a product via text,” co-president Blake Nordstrom said.” As customers continue to want a more integrated shopping experience, we view mobile as a long-term priority to provide a richer experience for our customers.”
Walgreens: Forging Modern Loyalty In December 2014, Walgreens Boots Alliance (WBA) was created through the combination of Walgreens and Alliance Boots, bringing together Duane Reade, Boots and Alliance Healthcare, and Walgreens, as well as creating a global pharmacy-led enterprise. And the company hasn’t stopped there. Just recently WBA announced it plans to acquire drugstore chain Rite Aid
Corporation for a total enterprise value of approximately $17.2 billion. The company’s 8,173 brick-and-mortar drugstores in every U.S. state serve as the foundation for its omnichannel architecture combining retail, pharmacy and healthcare services. Its digital business includes Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com. Walgreens also manages more than 400 Healthcare Clinics and provider practice locations around the country. The retailer boasts a popular loyalty program, with 85 million active Balance Rewards members and over 500,000 active connected devices. In November 2015, the company integrated the loyalty program with Apply Pay, so consumers can use their account without separately scanning a Balance Rewards card or barcode. The company is also advancing its personalization initiatives, with targeted offers through its new Everyday Points program, in which shoppers can get 10 points per $1 on almost everything. WBA reports approximately 27 million customers have signed into the program. “More importantly, as we analyze how they’re redeeming the points, we’re seeing encouraging behavior, behavior where people are actually selecting more and more on brand products and bigger baskets and products they may not otherwise have bought,” Alex Gourlay, EVP, WBA; president, Walgreens said. Walgreens also offers a mobile application, providing a mobile version of its Walgreens Balance Rewards for healthy choices (BRhc) program, which awards loyalty points for healthy behaviors and activities. BRhc was first launched in September 2012 to reward Walgreens customers for making healthy choices and for taking part in tracking activities, such as walking, running and cycling. In April 2014, the program expanded to offer members points for connecting biometric devices and tracking both blood glucose and blood pressure. In December 2014, Walgreens and MDLIVE, a provider of telehealth services, gave Walgreens website users 24/7 access to U.S. board-certified doctors through the mobile app. The platform enables users to consult virtually with MDLIVE physicians for a range of acute conditions. In November, Walgreens announced an expansion of the Walgreens mobile app, offering MDLive’s telehealth services to users in 20 additional states, now totaling 25. The company also just launched the Walgreens Connect app, which allows Walgreens Balance Rewards members who own a Well at Walgreens connected premium brand blood glucose meter or blood pressure wrist monitor to earn points for taking daily measurements. Walgreens digital and physical presence is coming together “at the corner of happy and healthy,” as the retailer says.
