A few days ago, The Atlantic ran an article entitled “What in the World Is Causing the Retail Meltdown of 2017” in which journalist Derek Thompson laid out the reasons why so many brick-and-mortar stores are suddenly closing up shop.
He argued that, ultimately, it’s a confluence of a few overarching factors:
- The growing comfort of shopping online, particularly through the use of mobile devices
- The sheer preponderance of malls and the inevitable reality that not all of them are sustainable
- A growing cultural desire to reject materialism
On the Celect blog, we’ve discussed the first two points at length, so there’s no need to delve much further into them in this particular post. Worth exploring in greater detail, though, is Thompson’s third factor, as he lays out some rather interesting observations about today’s retail consumer.
They never really recovered from the recession
By “never recovered from the recession,” we don’t mean in the monetary sense; most studies point to American’s wallet doing more than fine. Rather, we’re specifically referring to the damage done to the consumer psyche. Thompson believes the 2008 economic downturn forced consumers to shutter wants for needs, and the mindset still lingers.
He writes, “Stagnating wages and rising health-care costs squeezed consumer spending on fun stuff, like clothes. Second, the recession permanently hurt logo-driven brands, like Hollister and Abercrombie, that thrived during the 1990s and 2000s, when coolness in high-school hallways was defined by the size of the logo emblazoned on a polo shirt. Third, as consumers became bargain-hunters, discounters, fast-fashion outlets, and club stores took market share from department stores, like Macy’s and Sears.”
Essentially, consumers learned to bargain hunt out of necessity and now, despite an economic recovery, have yet to break the habit. They’ve proven that even with having the money to splurge at the mall, they’re against what they perceive as wasteful spending.
They are spending their money elsewhere
Still, despite the lack of confidence in the economy, consumers are nevertheless spending money. Just on other, less materialistic things.
Thompson again, “But something big has changed. Spending on clothes is down—its share of total consumer spending has declined by 20 percent this century. What’s up? Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. The rise of restaurants is even more dramatic. Since 2005, sales at ‘food services and drinking places’ have grown twice as fast as all other retail spending. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.”
There’s really two ways to interpret this trend. The cynical view is that consumers are no longer infatuated with the traditional markers of material wealth: clothing has become more utilitarian; fancy watches are unnecessary when everyone has a clock on their cell phone; etc.
The other is, well…
Social media is really, really important to them
At first glance, the way consumers spend today seems paradoxical: They’re concerned with not wasting money, yet their spending more on seemingly fleeting things (a night out to dinner, a weekend getaway) than expensive retail goods, which, presumably, have far more utility. That conclusion, however, ignores the huge impact of social media.
Just as logo-driven brands were cool in the 90s and 2000s, sharing experiences on social media is what matters to today’s consumers. Why wear an expensive shirt and risk only a two dozen or so people seeing you in it, when you can tag yourself at a posh restaurant and bee seen by hundreds or thousands? It’s still an incredibly superficial exercise—people don’t change—it’s just presented in a different form.
So, what does it mean to me?
Today’s consumers, particularly Millennials and Generation Z, are far more concerned with the potential shareability of making a purchase. As a result, retailers must strive to make their brick-and-mortar locations an experience conducive to sharing on social media.
It’s why Adidas is promoting 3D printing, and Nike has opened a basketball court at its Manhattan location. Build the experience, and the purchases will come.