Why These 6 Retailers Are Expanding Into Service Businesses

Why These 6 Retailers Are Expanding Into Service Businesses

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If you’re a retailer with a successful omnichannel strategy and a robust e-commerce business, how do you continue to grow in 2023? The latest marketing play has retailers thinking beyond the store shelf and expanding into service businesses.

With retailers facing more pressure to increase revenue, getting into the service businesses segment has become an attractive option. Consider a retailer like Costco, which sells vacation packages and carpet cleaning services alongside toilet paper and ground beef. Or Home Depot, with its tool rentals and credit card offerings for contractors. In addition to serving their customers’ unmet needs, a growing number of retailers are using consumer services as a marketing proposition — sidestepping traditional sales and enhancing their capabilities to attract and retain more customers within targeted demographics. 

According to data presented in a McKinsey & Co. webinar, a survey of more than 6,000 consumers showed many are dissatisfied with their current service providers and would be willing to switch to a retailer’s service offerings. This is especially true when retailers undercut local service businesses on pricing, which many can afford to do given their national presence and scale.

Here’s how six national retailers are embracing the strategy and building their own service businesses to drive engagement and meet customers’ needs.

1. Costco

Costco was an early pioneer as a retailer that turned to the service businesses segment. The membership warehouse club offers an array of services under the “Services for Members” banner, including appliance installation, travel planning, vision services, water delivery, and carpet installation, as a way to attract and retain customers. The majority of Costco’s member services are fulfilled by third-party contractors. Costco vets and approves those outside contractors, then negotiates better rates for its warehouse members. Today, Costco uses its exclusive member services as a way to differentiate itself from competitors and justify the value of its annual membership fee.

2. Best Buy

Just about everyone has heard of Geek Squad, Best Buy’s technical support team. The group helps with spyware and virus removal, software installation, and general computer troubleshooting for Best Buy customers. Best Buy is also certified to repair Apple products. According to the company’s Annual Fiscal Report, almost 40% of customers seeking repairs of Apple products are new to Best Buy or haven’t made a purchase in the past year. That opens the door to a tremendous opportunity for Best Buy to convert those visitors or re-engage lapsed customers. The company is now using a similar strategy to attract high-value businesses as customers through Best Buy for Business, a service that provides nationwide, customized technology and A/V solutions for offices, schools, hotels, and builders. 

3. Target

Service businesses aren’t strictly consumer-focused. Target is one of a number of mass market retailers launching retail media networks as a way to leverage traffic on their websites and mobile properties. With massive online reach, combined with screens and displays in-store, Target has the ability to offer advertising services to CPG brands. Target’s retail media network, Roundel, is connected to its loyalty program. It provides vendors with access to data they wouldn’t receive otherwise, as well as personalized and targeted activations.

4. Home Depot

Home Depot is another early adopter of the service model. The retailer has been renting tools to customers since 1995, when it opened its first Tool Rental centers in four Nashville stores. For Home Depot, the service is designed to bolster retail sales. Customers are more likely to purchase products when they have access to the right tools to put those products to use. In more recent years, as Home Depot and other home improvement retailers have faced mounting pressure to grow profitably, the company has invested more into its service business. In addition to tool rental, the company also rents trucks to customers and contracts with third-party vendors for appliance installations and other home services.

5. Walmart

Walmart is constantly adapting its strategy to the latest industry trends. While the retailer is currently closing stores that offer only pickup and delivery services—signaling the end of a decade-long push to improve convenience for e-commerce customers—it’s growing its Walmart Services business. Walmart Services run the gamut from photo printing to auto care. Services are about building an ecosystem that makes the retailer a constant part of its customers’ lives. The retailer offers financial services including reloadable debit cards for customers who can’t access traditional banking systems, as well as assembly, home improvement, and installation services for shoppers who’ve purchased products at Walmart stores. Those services, in particular, are used as a way to encourage shoppers to purchase products they might have a hard time installing or setting up.

6. Crate & Barrel

Crate & Barrel has aggressively gone after the interior design business by offering complimentary design services at its retail stores. As part of the program, shoppers can browse virtual catalogs and assemble their favorite products, and Crate & Barrel’s designers will create layout options with additional design ideas. Shoppers also have the option to work one-on-one with an interior designer provided by the retailer. Offering the service for free undercuts traditional interior design firms and helps Crate & Barrel attract customers who might want interior design help, but aren’t willing to pay for a designer’s services. It also ensures that all sourced products come from Crate & Barrel or its sister stores, boosting sales in a high-margin industry.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.
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