Due to the recent COVID-19 situation, many businesses have closed recently as of late due to poor revenue. Landlords of commercial properties are heavily affected as they have the pressure of lowering their rentals. The challenge comes in whereby your rentals do not meet your mortgage payments and you might be forced to let go of the property.
Even with the increasing support from the government and landlords through rental waivers, this might not be enough to sustain retail businesses.
This is due to many measures that are set in place by the government which reduces these businesses' overall cash flow. With reduced footfall to their retail businesses, less customers are patronizing their stores. The COVID-19 situation is a harsh environment where your weakest links are exposed, leaving the strongest to survive and weaker businesses to fail.
One of the issues that I realized based on my experience as a real estate professional is that most of these retail businesses are operating from a “look, view, and buy model”. In this article, I will discuss some of the current setbacks that these businesses have and my opinions on how we can modify this traditional approach to the retail businesses.
It is important to clarify what I mean by the “look, view and buy model”. In a traditional sense, this is how most retail businesses work. Most of the time, a consumer will walk into a store and upon seeing something that they like, will trigger an immediate recognition that this product might be able to solve a particular issue that they might have. The consumer will make a decision on the spot to purchase the product or not.
Based on the consumer buying process, this traditional model fulfills only 3 stages. Problem recognition, purchase decision and purchase.
Let's take a look at why some business operations which had trouble in the past and ended up winding down. These businesses end up closing down due to some issues that they did not fix in time when it was easily reversible. From an outsider’s point of view, most of these shops are heavily relying on the “look view buy model”, but they might also be facing some other internal problems. Let me elaborate on the possible problems these businesses might have encountered during their operations.
Issue of Time
In an ideal scenario, most businesses will definitely want to enjoy a stream of customers entering their shops, with a perfect conversion rate of 100%, the average transaction rate per visit and 24/7 operation hours. However, in reality, only a fraction of the numbers from these factors will be met. Most landlords do not allow their tenants to run their businesses 24/7. Most 9-5 workers will only frequent malls usually during lunch hours, after work hours or weekends. This puts time pressure on businesses to see how they can best compete for their future consumers' attention during that short window!
Place yourself in the customer's shoes, if a particular good is offered in an online space and it costs just $5 in shipping fees, will you make that purchase online instead of specifically traveling down to a brick and mortar store to purchase it?
Lack of Choices
Most retail shops are unable to completely service a consumer's needs totally due to poor inventory variation and quantity. As an exception, most bookstores do not experience this factor as they will most likely have the particular book that you are looking for. Some of these stores which are able to override this point are discount shops, where there is a huge variety of inventory to always keep the potential consumer interested. However, their businesses might encounter underlying issues due to other of these factors which are mentioned in this article.
Poor Information Search
Most of the time before making any purchase, you will do a quick information search online to get a review of the product that you are intending to buy. From then, you will make your decision whether to purchase or not. The staff of retail businesses will need to be highly trained in order to provide for consumers the information that they require about the product before making an “informed decision”.
This is a reason why most B2B businesses employ sales professionals, Time is a crucial element for most businesses and we will require people to be placed in front of said consumers to provide them with information that they require but unable to source on their own due to time constraints on other more pressing issues.
No longer should you expect to sell your inventory if you simply use it as a warehouse to display them, consumers can simply do that in the comfort of their own homes! Of course, employing a trained sales professional will require a high initial investment, but I do believe that it aids in the growth of a business in the long run.
Post-Purchase Dissonance
Due to poor development throughout the consumer buying process, most consumers who obtained their purchase through the “look, view and buy” model, will have post-purchase dissonance. Simply put, the consumer will have regret in their purchase, and will have a negative connotation in regards to the place of purchase. This will overall harm the brand image of the business, reducing the average lifetime value of the customer.
The average lifetime value of a customer is a metric in which how much a consumer will spend with their businesses.
Post-purchase dissonance further increases in correlation to the overall price of the product. This is the reason why big tech companies place a lot of emphasis on customer service, where sales professionals are more than willing to explain the specifications of the product before you make a purchase.
No Other Forms of Obtaining Revenue
These retail businesses are highly dependent on the footfall of their overall premises. Taking the COVID-19 situation, for example, a lot of foot traffic within the malls' area affected. This causes their businesses to be affected greatly.
What Can I Do as A Business Owner?
If you are still operating your business with the “look, view and buy model”, one question which you can ask in regards to your operations is,
“How do I present my product in front of my potential buyers?”
One such way is to start building up your online presence, or brand image. This can be done in a few ways such as starting a blog. Gone are the days where starting a brick and mortar store is enough. With an online presence, what you can do further is to present yourself as a product expert. Think about what are some potential issues that your consumer will experience, and start writing FAQs, blogs or even video yourself solving that particular issue that they are experiencing.
By doing this, you are tackling two big areas within the consumer buying process, which is “Problem Recognition” and “Information Search”.
This will move you forward to the next step of the consumer buying process, which is “Evaluation of alternatives”. By branding yourself as a product expert, you will consistently be in communication with your potential buyers too. Which is highly effective in developing your next prototype!
Having an online presence will also solve the issue of “limited inventory”. With an online webpage, the potential buyer will perceive that you do have said product, just that it might not be on display at the moment.
To further elaborate on this point, act as a sourcing agent in regards to the product that you are not carrying in your inventory. Once you have located that product, sell it to your customers!
What Can I Do as a Landlord?
The lifespan of a business will impact your rentals either positively or negatively. Make their business, your business. Hence, it is important to look for tenants which have a solid online presence and a good way of generating leads to customers online. If the main business operations of the tenant revolve around F&B, ensure that they are sufficiently connected to food delivery portals and applications.
In addition, these F&B operations should be highly differentiating with a unique draw.
The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.