By Sharmila C. Chatterjee
December 15, 2017

It’s beginning to look a lot like Christmas everywhere you go. Take a look in the five-and-ten—and while you’re at it, look at all the other store windows advertising spectacular sales, holiday discounts, and clearance extravaganzas. The markdowns are as widespread as they are substantial. This year on Black Friday, for instance, the average advertised discount across 17 major retail categories was 45%, according to the price-tracking firm Market Track.

As ecommerce continues to eat away at traditional retail, brick-and-mortar stores seem to believe that the best way to compete is to slash their prices. This tactic might be understandable if, say, the country were in a deep recession. But GDP has been growing for eight consecutive years, the unemployment rate is at a 17-year low, wage growth is strengthening, and the stock market is in the middle of a nine-year bull run.

In this economy, it is not necessary for retailers to pander to bargain hunters—nor is it wise. Sure, some holiday shoppers may be lured to the shops in search of a great deal, but if that’s what they’re looking for, they can easily go online. Brick-and-mortar stores cannot match the price-comparing capabilities the Internet offers.

Instead of competing on price, stores should invest to entice customers. By focusing on their core competencies—one-on-one, human-to-human customer service, sensory-stimulating in-store experiences, and promise of instant gratification—traditional stores have an opportunity to excel where websites falter.

There’s good news and bad news for retailers this year. On a positive note, consumer confidence is strong and customers are feeling flush. According to data from the National Retail Federation, sales for November and December are expected to clock in at about $682 billion, which would make 2017 the strongest holiday season since 2014. But on the flip side, department stores as a shopping destination placed a distant third behind the Internet and mass merchants, according to Deloitte’s annual holiday retail survey.

There’s no mystery why online shopping is growing. It’s fast, easy, and convenient. But it’s also impersonal, tedious, dull, and solitary. Traditional shopping, on the other hand, has the power to be fun, exciting, and energizing. Stores need to capitalize on that.

A good place to start is by cultivating top-notch sales personnel whose primary job is to provide impeccable service. The human touch is key. These customer representatives ought to be knowledgeable and approachable; they need to be ready and willing to spend time with shoppers and listen to their concerns and budgetary constraints. They must be accessible and resourceful in how they help customers find a perfect gift for that hard-to-buy-for person on their list. They must be compassionate not cloying; personable not pushy. In short, they must know how to make customers feel good. A website can’t do that.

Next, retailers need to make their stores more inviting. They need to engage customers’ senses by creating visually appealing and sweet smelling holiday displays. They need to delight and surprise shoppers by handing out free samples and small gifts. They need to enchant customers by showing off their creative side. They need to make the shopping experience feel special.

Retailers must also make smarter investments in inventory to assure instant gratification. They need to first acquire a deep understanding of their customers’ wants and needs, and second ensure that their products and offerings reflect that. Their merchandise must be stylish and au courant. And they must have an ample stock. (There’s nothing more frustrating than venturing to a store to find that the cashmere sweater you covet doesn’t come in your size.) Stores ought to leave hard-to-find items, like obscure books or exotic prints, to the Internet, and instead focus on trendy items.

Finally, retailers must stop the constant markdowns. Continuous deep discounts not only lead to customer fatigue and the vanquishing of holiday magic but also slash the very resources retailers need to counter online retail. The more discounts brick-and-mortar retailers give, the fewer resources they have for long-term investment.

This year Black Friday teasers and discounts started as early as Halloween. Discounting does not help with long-term sales and in fact, might accomplish the opposite. By hosting perpetual sales, brick-and-mortar stores are training their customers to expect discounts. Without a major price cut, customers will simply delay or abandon their purchase, or worse, buy from a competitor—most likely one online.

It’s no secret that brick-and-mortar retail is suffering. This year’s bankruptcies and closures of The Limited, BCBG Max Azria, Gymboree, Toys “R” Us, and Payless Shoes are all evidence of that. But there is a solution. If retailers want to be around next Christmas, they need to start playing to their strengths.

Sharmila C. Chatterjee is a senior lecturer in marketing and the academic head for the enterprise management track at the MIT Sloan School of Management.

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