Can good customer service make shopping fun again?

This article is part of our new editorial package, The Future of Shopping, in which we predict how the retail landscape will be shaped over the next decade. Click here to read more.

Piles of unfolded clothes — often discounted — combined with messy fitting rooms, long lines and a store employee nowhere in sight. If you’ve shopped in person at a mall or a big-box store recently, it’s a scene you’d recognise.

Customers who avoid stores complain of a nagging feeling that there’s more to be found online and an experience that’s time consuming and sometimes unpleasant thanks to insufficiently staffed shop floors. “Shopping used to be fun,” says a New York-based PR executive. “But now, unless you’re exclusively a luxury consumer, it’s tedious.”

After years of drifting off course thanks to a lack of investment, the compounding effects of multiple recessions and a pandemic, plus digital distractions, retailers are cleaning up the store experience and reinvesting in customer service — their survival depends on it.

“Retailers seem to be realising that it’s crunch time,” says Neil Saunders, managing director and retail analyst at Globaldata. A November 2023 report found that US retailers cut 72,182 jobs last year through October, a 258 per cent increase over 2022. Holiday hiring was down 46 per cent last season. “Cutting staff works initially, as it saves money and makes the bottom line look better. However, there is a very limited runway to make gains and the lack of investment eventually starts costing sales and causes financial issues. We are now at that point.”

The opportunity lies in going back to basics, adds retail consultant Robert Burke, with a heavy emphasis on services, personal shopping perks and well-trained and educated store employees. Why else would anyone bother shopping in stores?

“Customers today want a great digital experience, a great store experience and fair value,” says Macy’s chief stores officer Marc Mastronardi. He says the company — as part of new CEO Tony Spring’s turnaround plan, titled Bold New Chapter — spent the last year and a half interviewing 60,000 customers and store employees to figure out what the business needed to be. “It was a reminder that you can drift away from that great retail experience, as we’ve been trying to do everything at once while dealing with a disruptive environment.”

US department stores are at a turning point against a brutal backdrop for multi-brand retail. Many are over-retailed: Macy’s is closing 150 stores in the US after it reported another year of stagnant sales in February. More competition, especially from the off-price sector, is putting the pressure on, while investments in digital marketing and e-commerce operations have diverted attention away from stores. Sales at Nordstrom’s banner stores fell 3 per cent in the fourth quarter of 2023, and more of the company’s focus is going towards its off-price Rack business (where sales were up 14 per cent).

“The department stores have let the staffing and attention side of their business go down. It’s set up a vicious cycle,” says Pamela Danziger of Unity Marketing.

Retailers will need to move in the direction of fewer, better staffed and better merchandised stores to survive. Where technology does fit in: it’s behind the scenes, used to create customer profiles, predict their next purchases and offer product recommendations. And it’s made customer service all the more relevant. High-end department stores, like Bergdorf Goodman, Saks and Neiman Marcus are leaning into luxury experiences. For mid-tier retailers, the emphasis is on convenience and personalisation that rewards loyal customers. Both need people to get that job done.

Pivot to people

As e-commerce settled into our everyday lives, department stores — so rooted in the sprawled physical experience with services at their core — faced an existential crisis. They threw everything at the wall, from interactive tablets in the shoe department to augmented reality apps and virtual try-on screens at the makeup counter. Neiman Marcus and Nordstrom opened innovation labs and tech hubs to propel them into the future of shopping. The problem? No one really wants to shop this way when they’ve decided to take the time to go in person.

Customer service, which includes department-specific store staff and other perks like in-person tailoring, is what set department stores apart for decades. Technology was, and never could be, that moat that protects these stores from competition when big-box stores like Target and Walmart also have access to and the ability to invest in technology, Saunders says.

“Technology is still being used in department stores, but there is an increasing recognition that it’s not a substitute for good service and human interaction,” he says. “Moreover, technology does not solve all issues — such as a lack of staffing resulting in poorly merchandised stores. Most department stores know they need to invest in people to make a difference.”

Macy’s is in the midst of an expanded pilot programme that incorporates all of the lessons learnt from its survey of 50 stores, and Mastronardi says a key investment in the new format is more workers. “You have to have enough [associates] in the store. It’s not just more bodies, it’s the right people in the right place with the right skill.” Employees might be staffed to work on “visual enhancement” or store appearance, help customers in the fitting rooms, run cashiers and offer service in departments that require a higher touch, like beauty and jewellery.

The problem, for many, is that it’s expensive to properly invest in staff. “When I think about retail, it’s the people piece that’s missing. People cost money, they need to be managed and trained,” says Danziger. With fewer people on the floor, fewer products are moved, she adds, and so sets in a damning problem for department stores: piles of inventory that aren’t selling and need to be deeply discounted to budge.

“When you invest in employees and train them, that investment ends up being very powerful,” says Jessica Ramírez, retail analyst at Jane Hali & Associates. “If you know about the category and the brand you’re selling, you’ll have the customer coming back. A lot of department stores have lost that, and it’s a huge miss.”

RJ Cilley, COO of Saks, says that when the company split its Saks.com business off of its Saks Fifth Avenue business, and received a cash injection of $500 million from investment partner Insight, that money was used to invest in best-in-class customer service technology. “The investment made it possible for us to think about that customer experience, invest in it how we wanted to and understand who our customer was.” That includes lifetime value, shopping history and predictions of what they’ll do next. From there, Saks is figuring out how to shape the customer experience around a personalised view of the customer themself.

Personalisation: Finally the next frontier?

Even after the retail-tech bubble burst, retailers are still chasing personalisation. It’s like achieving nirvana for the retail industry: if you were to solve it, your problems would fall away.

Though it looks different to what might have been believed 10 years ago. “We’ve been talking about personalisation for many years and the evolution of personalisation — everyone having their own singular experience tailored to them — those models can only be so good. The one-to-one website idea is not practical,” Cilley says.

Instead, personalisation relies on the information customers are willing to give, he continues. “If the customer tells us who they are, we need to react by showing them the right things.”

Saks is testing generative AI to help understand customer data and make predictions based on past behaviours, which Cilley says is then given to the customer service associate to empower them. Bergdorf Goodman is also putting customer data into the hands of employees; chief retail officer Melissa Xides says the company has “hacked personalisation” via high-touch service. “You can only do that with the customer if you nurture that relationship in the highest regard,” says Xides.

Bergdorf Goodman associates use an app called Connect that stores and organises customer profiles and analytics. But more than the tools or technology that associates have, what Bergdorf’s customer service strategy comes down to is a “belief system”, according to Xides. “We have a manifesto that inspires every [employee] to go above and beyond for our client. Every one is empowered to make that magic happen,” she says. “The values that make up our body of work are shared traits developed by the associates.”

Back to basics

Luxury is operating on a different tier — and with different customer expectations — than other retailers. What about everyone else?

Mastronardi says that Macy’s faces the challenge of needing to account for every customer, the high-end shopper and the off-price consumer, both of whom may find themselves shopping at Macy’s. “A big part of the coaching and the development work with our [associates] is understanding, ‘What do you [the customer] need?’ It’s personalised.” That might mean a walk-through of the women’s dresses or a buy-online, pick-up-in-store order fulfilment. Better trained employees are equipped to handle any type of transaction, Mastronardi says.

Good customer service can’t exist in a silo, either. Having properly curated products, with enough sizes and colours, in stores is key — if customers are trained to look online for the full selection, they’re less likely to go back to stores. Over-stuffed sales floors also make for a bad experience.

Macy’s store cuts, along with its new, smaller store formats are indicative of the direction of wholesale overall. Will it work? “The idea of having less will keep department stores to some extent alive. I think that there may be a different wholesale relationship being built in the US,” says Ramírez.

Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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