What enables retailers to engage their customers? Apparently, it entails selling a single, owned brand in dedicated stores, also known as vertical retailing. In contrast, department and big box stores that sell a range of brands often struggle to engage consumers in the experience as easily or effectively as the vertical retailers do almost inherently.
Vertical stores have long been praised for the price advantages they offer: The retailer does not have to mark up the wholesale prices it pays the manufacturer. But the enormous advantage of being a vertical retailer is not limited to prices. Rather, these retailer’s intimate and in-depth knowledge of their products enables them to create in-store and digital experiences that their customers truly appreciate, then link with them in varied and creative ways.
Some of the best in terms of offering great store experiences include Apple Stores and Williams Sonoma, as well as Warby Parker, Starbucks, and Victoria’s Secret. Even Trader Joe’s, with its fun experiential offerings, benefits at least partially from its extensive line of store brand merchandise. Furthermore, even when vertical retailers struggle somewhat in their market performance, for any variety of reasons, they still can leverage their experiential advantages, as exemplified by J. Crew.
In contrast, department stores struggle to create the same sense of experience, though Nordstrom might be an exception that proves the rule. Especially as several department store favorites, such as Jones New York and Liz Claiborne, disappear from shelves, these non-vertical retailers are stuck seeking ways to connect with customers in innovative ways. For example, Lululemon can host a yoga event that will appeal to virtually all of its clientele. Macy’s would struggle to find anything as broadly or similarly appealing to the diverse shoppers with whom it wants to create a link.
An emerging force in this competition to provide the best experience comes from e-commerce retailers that increasingly are opening physical locations to interact with consumers. For these retailers, the stores themselves provide channels for sharing content and telling stories about the brand, which in turn should enhance customer loyalty.
Discussion Questions:
- Why do vertical retailers have an advantage over stores that carry many brands when it comes to developing and maintaining loyal customers?
Source: Tom Ryan, Retail Wire, March 16, 2016