Sunday, August 5, 2012

Uniqlo in New York - Online vs. Storefront Fashion Retail

Last week, I joined Google+ after being frustrated with Facebook forcing me (and all its users) into using its Timeline. While exploring Google+ I found this recent the New Yorker article discussing one of my favorite retailers, Uniqlo, through one of my friend's share.

I have been a fan of Uniqlo since going to their stores in Shanghai in 2002. Uniqlo’s parent company, Japan’s Fast Retailing, also owns other of my favorite brands in fashion retail, including Theory and Comptoir Des Cotonniers. In the decade since becoming a loyal customer of Fast Retailing’s brands, I’ve found the products to be fashion forward, price competitive and high quality - and equally as importantly, I’ve had good experiences as a customer at their stores in various parts of the world.

The New Yorker article led me to think about how retailers should balance the needs of providing staffing and in-person customer service versus expanding their online business. Uniqlo in the U.S. only sells out of its stores - they do no Internet and no phone order business. I think they have made a conscious decision to focus on building their store business, hiring more people to offer fast, accurate and convenient customer service on site. However, in today’s market, offering store business only is not complete customer service. Customers want and expect both!

I don’t need to tell you how much the Internet has changed the way we live, interact and shop. During the five years I spent working at a major luxury retailer, I witnessed a substantial decline in the number of customers visiting the store over the years. Many of those customers have stayed loyal to the company but have moved more of their shopping to the company’s website. Will my old employer and their competitors look at closing stores when the next downturn forces them to look at reducing costs to stay profitable? I bet you they will. At least, we are already seeing a trend of slowing down the opening of new stores.

Will the Internet completely take over store business? No, I don't think so. As the New Yorker article explains, there is still an important role for a positive in-store experience and for customer service in the fashion industry. Especially for luxury retailers, the high margin is mainly built from customer service. Honestly, based on my personal experience, for basic items like T-shirts, casual pants etc., I don’t see a big quality difference from the products one finds in JCPenney or Kohl’s compared to full-line retailers. What customers are paying for is the service. We expect salespeople to tell us honestly and competently what colors look good on us, and if the fit is right etc. If they don’t meet this basic expectation, there is almost no reason to go to the store, other than to have to have some visual stimulation. (This is part of what hurt electronics retailers like Best Buy - people looking at the product in the store, and then ordering online from Amazon where they can get a lower price, if they aren’t getting great service anyway.)

For retailers with a storefront business, I believe there are four key elements that will bring success even against online retailers:

  1. Intelligent store design - making the store highly visually appealing, items easy to find and the store easy to navigate
  2. Having the right selection of products in stock and available
  3. Providing excellent in-store service
  4. Hiring well (and enough)

By successfully executing on these four elements, customers will come back to you either online or offline. None of this is easy, but neither is putting together and operating an online supply chain. The continued migration of customers to the Internet is unstoppable, but stores will continue to provide a vital human link in the minds of customers as part of their overall relationship with the brand.