How Retail Can Thrive in Kotler’s 4th Industrial Revolution

Blog Post
November 03, 2017

Philip Kotler recently published an article on called “Will the 4th Industrial Revolution Kill Store-Based Retailing?” In it, he asserts that the internet, mobile devices and the Internet of Things (IoT) have brought us to the point of another industrial revolution—one that is killing brick and mortar retail. He points to closures of stores like J.C. Penney, Macy’s and Toys R Us.

However, Kotler explains that there are several efforts retail brands can make to improve the likelihood of their success, such as:

  • Making stores more interesting to visit
  • Offering customized service
  • Functioning as a “showroom” where customers can see and try out merchandise in person
  • Functioning as a “depot” where customers can pick up merchandise they ordered online

Essentially, retail brands need to consider their customers and what brands can do to make customers’ lives easier or more enjoyable. This is exactly what I and my Harte Hanks colleagues have been saying for the past year or more.

Most recently, I wrote about the fact that Toys R Us failed not because of its competition with ecommerce, but rather because the brand failed to provide the kind of experience its customers would have valued in a brick and mortar toy store. Had they better understood the customer, they could have provided a more interesting—or more importantly, useful—experience for them. This could have taken the form of functioning as a showroom and/or a depot, as well as offering more personalized service.

I’ve also discussed how Nordstrom is functioning as an interesting (and useful) experience center and showroom with its new Nordstrom Local test. And Bobbi Brown, partnered with Lord and Taylor, is making the retail experience more interesting and customer-service oriented with her justBOBBI boutiques. Amazon even knows the value of a good brick and mortar experience, which is evidenced by their purchase of Whole Foods.

Focus on the 85%

Kotler admits that only about 10% of retail sales in the U.S. currently happen online. This has been predicted to increase to 15-17% by 2020. Either way, in-store transactions still account for the vast majority of retail sales. Brick and mortar stores are closing not because of digital competition—they're closing because:

1. They overdeveloped their brick and mortar footprint;

2. They're not offering any value in terms of experience (like I mentioned with Toys R Us).

So, retail brands with a brick and mortar presence can focus on the 15% by offering ecommerce (one of Kotler's additional suggestions), but the lion's share of brands' efforts should focus on retaining the 85% that still want to buy in-store. They can do this by providing real value through their store locations. 

Succeed with a More Human Approach

The key to providing in-store value (and really, the key to succeeding with any of these efforts Kotler discusses) is to first find the audience segments where your brand has the best opportunities. This will allow you to focus your limited marketing resources where they’ll have the most impact. Secondly, you need to thoroughly understand the individual people in those segments and the jobs they’re looking to complete throughout their buyer’s journey. Understanding your customers and what they’re trying to achieve allows you to converse with them contextually and provide the experiences they crave. 

This is what Harte Hanks is calling more human marketing—and you can achieve it through the 5 Pillars of Best-in-Class marketing.

It isn’t easy work. But it’s necessary work for any company that wants to earn and maintain a competitive edge in this saturated brand world.

As Kotler says:

“Even though online sales will continue to grow as a percentage of total retail sales, there will always be some stores prized by their customers who will continue to patronize them.” —Philip Kotler

If you want to be one of these prized stores, figure out how to implement Kotler’s suggestions…or find a partner that can guide you along the way.

Learn more about Harte Hanks' approach to human marketing here.