Current dogma tells companies that if they want to sell to young people, they need to turn to the internet. Then why are retailers like Amazon and Target investing in brick-and-mortar stores?
Last year, Amazon opened its Amazon at Penn location underneath 1920 Commons. Target has just opened two new stores in Center City, and has another location slated to begin operations near the Philadelphia Museum of Art in 2017. Especially for Amazon — an online giant that “disrupted” the retail industry — the new locations don’t seem to make sense at a time when traditional retailers are struggling to counter the challenges posed by the internet.
“If companies are smart about the way that they manage the brick and mortar side in conjunction with the online side, great things can happen,” Wharton professor Peter Fader said. “Having a broader physical presence as well as just additional appeal — being able to do things with consumers that they can’t do online alone — it’s generally a really good thing to do.”
Target’s new stores in Center City are what it calls “flexible format” locations. Small and compact, they are designed and stocked for an urban environment; the company also has “flexible format” stores in New York City, San Francisco, Chicago and Boston.
Target spokesman Kristy Welker also emphasized the value of closeness for city residents.
“Guests in urban areas tend to travel great distances to get to a Target,” she said. “We are bringing the store to them and meeting them where they are.”
Target and Amazon are representative of another trend in marketing: understanding and targeting valuable customers.
“It’s all about figuring out who our best customers are and building relationships with them,” Fader said. “It has traditional retailers quaking in their boots — not only because it’s big bad Amazon — but because Amazon understands their customers much better than most grocery stores do.”
Target’s brand is what Syracuse University professor Amanda Nicholson calls, “cheap chic,” appealing to young city residents rushed for time and money, but who still want quality.
“They’re here on their way home; they can pick up some dinner and they can pick up that lamp that is well-designed and well-priced, and take the elevator up to their apartments,” she said.
Larger companies are also beginning to realize what smaller, “mom-and-pop” stores have always known — the value of building relationships with customers.
“If you’re a mom and pop store...you know who your customers are,” Fader said. You know who the good ones are. You know whose call you’re going to take at two o’clock in the morning and who can wait until Monday.”
“You’re already doing this kind of stuff on a small-numbers basis,” he said. “The question is, how can you scale it up from tens of customers to millions of customers?”
That’s the question that Amazon and Target — along with hundreds of other companies today — are trying to figure out.