THE BEST OF BOTH WORLDS: Brick-n-Mortar Stores and Digital Technology Working Together

Rob Lloyd, CFO, GameStop
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Big data, Beacons, Geo-Fencing, Digital wallets, Mobile point-of-sale, Smartphone applications, Cloud-based systems, Augmented reality --the list of transformational technologies bombarding retailers and their customers is seemingly endless and growing longer every day. Not surprisingly, retailers are left trying to predict the best ways to invest their IT resources to stay ahead of the digital ecosystem curve and avoid being left behind.

Some retailers consider recent technology advancements a double-edged sword, capable of delivering countless benefits, while potentially threatening the very existence of their successful brick-and-mortar store operations. However, smart retailers recognize the tremendous upside represented by these new technologies. They are finding ways to leverage these technological advancements to operate their physical retail stores more efficiently, and help build closer relationships with their customers to ultimately help drive additional revenue.

At GameStop – once considered the very definition of a traditional brick-and-mortar operation with more than 6,600 video game and technology retail store locations worldwide – we are thriving by utilizing our brick-and-mortar retail stores with new innovative digital technologies congruently to morph relevancy of our physical stores and online channels to ensure we deliver unique experiences that meet customers’ needs.

Knowing Customers

Never before has retailers had access to the amount and types of data now available about their customers through customer loyalty programs and online channel analytics. According to IDC, the information in the digital universe today would fill a stack of iPad tablets reaching 2/3rd of the way to the moon (157,674 miles), and the volumes of data is expected to more than double every two years.

All this information can provide retailers with valuable clues about the tastes, intent, discovery journeys and purchase decisions of their customers. When combined with the data most mature businesses already have about their customers – not to mention the collective wisdom and passion of knowledgeable, frontline employees, who are some of retailers’ most valuable information sources – the possibilities are virtually limitless. For example, GameStop is able to gain valuable insights from our more than 40 million PowerUp Rewards loyalty members that can quickly be leveraged in identifying new ways of interacting with customers, radically streamlining promotional offerings, reducing unnecessary costs, and pursuing unique opportunities that deliver incremental revenue and growth.

Engaging Customers on All Fronts

Each customer is unique and today, more than at any other time in history, consumer behavior is becoming increasingly fragmented, complicated and difficult to predict. Consequently, it is important for retailers to embrace multiple channels to serve customers when, where and how they want to interact.

For years, brick-and-mortar companies have addressed this need by providing online storefronts to make it easier for customers to engage with them. More recently, the reverse scenario is also playing out. E-commerce sites are now augmenting their operations with physical shops. This trend is not surprising. Despite the long-speculated demise of brick-and-mortar operations, the majority of retail sales still take place offline.

The key is providing seamless online-to-in-store experiences. Successfully pulling this off can be a challenge. That is why more retailers are experimenting with and adopting new technologies throughout their enterprises. One example is retailer investments for in-store customer Wi-Fi capabilities. A recent study by Loyalty360 found that 82 percent of medium and large retailers have deployed in-store Wi- Fi. Another study by research consultant IHL Group determined that almost half of retailers surveyed saw increased customer loyalty and an associated 3.4 percent increase in sales due to the availability of in-store Wi-Fi. These results are likely driven by the types of services that can be offered to customers via in-store connectivity. More companies are providing in-store access to “web-in-store”or “pick-up at store” capabilities, that allow customers to purchase products online while in the store and determine when they can pick up their purchase at the store, thus enhancing the overall convenience available to customers. The results for GameStop are outstanding as shown by a more than 60 percent increase in cross-channel sales in 2014, which includes pick-up at store and web-in-store.

Retailers are also finding ways to improve real-time interaction with customers across the entire multichannel ecosystem. Investing in systems to capture and use personalized customer data in real-time – for frontline store employee interactions and via customer-facing e-commerce algorithms – enables businesses to better serve customers at the point of sale, whether in the store or online. For example, the GameStop Technology Institute (GTI) focuses on leveraging innovative technologies – such as beacon technology and geo-fencing –to better address the needs of today's empowered consumer. With GTI we are testing these technologies in several of our Austin, Texas stores to ensure customers who opt-in always have access to relevant product offers, video game ratings and reviews, when and where it matters to them most. So far, the program is being well-received by both customers and store associates.

Getting Together

During the past several years, much has been written about the concept of “showrooming” in retail, the notion that physical stores were becoming places to display products that consumers would later purchase online. However a PWC report earlier this year backed up a phenomenon well-known at GameStop. Online storefronts have also become showrooms where consumers research products and compare prices for later, in-store purchases. Consumers are looking for retail experiences rather than simple purchase transactions.

One way companies are taking advantage of this fact is by offering “buy online, pick up in store” programs. Many retailers, like GameStop have successfully launched these programs as a way to encourage online customers to visit brick-and-mortar environments. The service continues to prove successful as GameStop enjoyed a 146 percent growth with the program since last year alone, and saw a more than 300 percent increase in pick-up at store requests coming from mobile devices. Not only is this helping to deepen customer relationships with stores, but it is enabling retail associates to connect personally with customers. Retailers staffed by helpful and knowledgeable associates can deliver the retail experience customers crave by offering them access to ‘real’ people who share the same love and passion for the products the customer is looking to purchase, providing a unique and relevant shopping experience.

The significance of this direct in-store interaction cannot be overstated. Beyond bolstering customer relationships, skilled retailers recognize this as an opportunity to sell customers additional items when they visit the store to pick up their products, such as accessories to complement their online purchases. It is no surprise that “buy online, pick up in store” programs are gaining popularity as retailers realize significantly higher average transaction values based on the residual sales.

One thing remains clear: In the hyper-competitive and ever-changing world of retail, it’s all about the customer experience. Organizations that invest in customer-centric systems and technologies to make shopping easier, faster, more enjoyable and safer for customers will be best positioned to succeed in the future.

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