CX Metrics for Shop Closing Decisions — Choosing the Winners and Losers
There’s currently a sea change happening in retail. Toys“R”Us recently announced bankruptcy, and as part of its restructuring plan, the retailer will be closing stores after the 2017 holiday season. J.C. Penney closed 138 stores, with most closing at the end of July and a few remaining open until the end of September 2017. Macy’s shut down 70 stores in 2016, with plans to shutter another 34. Sears has closed 180 stores under both the Sears and Kmart brands in 2017, and has plans to close another 150.
There’s no doubt that traditional brick-and-mortar retail is undergoing a major shift. The onslaught of e-commerce is part of the pressure driving this change, as is an oversaturation of retail outlets in the U.S. Here, we have roughly 24 square feet of retail space per capita, more than twice the space of Australia and five times that of the U.K.
The fact is that retailers are looking to realign their physical footprints with the needs of consumers. In today’s hypercompetitive and fluid retail environment, there’s no doubt that stores that look good on paper still fail. The trick is knowing how to identify that failure quickly before the store is a significant drag on a retailer’s bottom line.
When making store closing decisions, retailers typically focus on hard metrics like same-store growth or profitability. However, to evaluate the long-term success (or failure) of a store, a much broader and deeper range of factors need to be considered. The biggest shift that occurred during the e-commerce revolution is that it broke the paradigm of customers as a captive audience. Consumers once shopped in physical stores because they had to; now given the plethora of online options available, they only shop in a brick-and-mortar store if they want to. Hence the metrics surrounding the customer experience (CX) ascend rapidly to the top of the list when smart retailers are evaluating store performance.
So exactly which metrics define the customer experience? More than ever before, the path to purchase is extending. Attention should be paid not just to the transaction and interaction at the point of purchase, but also to the environment surrounding the consumer during the entire path to purchase. There are many additional aspects that can be measured which influence the experience both inside and outside of the store location which have a significant impact on the customer’s perception.
The customer journey includes everything from typical considerations such as point-of-purchase displays, inventory, friendliness and cleanliness to new considerations that should be added such as customers’ traffic patterns as they enter the store and after they've left the store. Consider this: When a customer is in the area of the store, might they want to grab a bite nearby? Do they also get their oil changed? Overall, are they having a positive experience before, during and after the interaction with your brand? These needs will drive their decisions about where to shop as well as what they will do before, during and after their trip.
How to Measure the Customer Experience
A very effective platform for quantifying and tracking the customer experience both up front and over time is the mystery shopper. Mystery shoppers are a neutral third party that can enter a store and engage in the experience from the customer’s perspective. The best part is that a mystery shopper can extend the collection of these experiences to include everything that happens both inside and outside of your store, helping you understand the whole of the experience rather than just that transaction.
Here's a sample of the experiential metrics that a mystery shopper might collect:
- What does the customer see/experience in the immediate vicinity of the store?
- What happens to the customer immediately upon entering the store?
- How positive/negative are the interactions with store associates?
- Is the store environment pleasant and does it align with consumer trends/preferences?
- Is the store capitalizing on upsell opportunities?
- Is the store well stocked with merchandise?
- Are merchandise delivery mechanisms effective?
- Are customer convenience items (e.g., restrooms, fitting rooms, etc.) readily available?
- Are promotions — now and in the future — visible and engaging?
- Are any potential liabilities (both safety/compliance issues and negative customer experiences) effectively mitigated?
- Are there any potential liabilities due to employee actions?
- Are employees increasing or hindering customer loyalty?
- What other experiences are in the consumer path before entering/leaving the store?
Can using mystery shoppers to answer these questions really make an impact? Given all of the downsizing in many sectors of retail, it’s helpful to realize that specific segments are actually expanding their storefront locations, with discount retailers, restaurants and grocers opening new stores. These retailers have honed their value equation by taking a hard look at their customers’ experiences and factoring them in as one of the most significant variables that determine the performance of a physical storefront.
Lisa van Kesteren is the CEO and founder of leading mystery shopping agency SeeLevel HX, with more than 600,000 mystery shoppers, covering QSR, retail and financial services nationally.
Related story: Are Retailers ‘Retail Revolution Ready’?