Most news outlets seem to cover the changing retail landscape with near-weekly stories on store closings and bankruptcy filings. Even outside of the fact that articles with high click-rates beget other similar articles, which in the case of retail generally include household names with a significant nostalgic punch—there certainly is a dramatic change in the industry. However, we should not take stock in those with signs proclaiming “the end is near” for retail any more than we do the madman in front of the park fountain.
One of our customers’ CEOs recently told his leadership that he’s tired of hearing about “The Retail Apocalypse.” He pointed out the fact that it’s become such a ridiculously exaggerated topic, it even has its own Wikipedia page. Given the industry we’re in, this naturally made it worth a look.
What’s interesting isn’t the fact that retail is changing, or that the general public and media have mischaracterized the evolution. What is interesting is when you look at the factors contributing to this change, understand their impact, and – most importantly — understand how to combat them in order to thrive in the face of this “New Retail” environment.
Factor #1: The E-Commerce Takeover
Straight from the Wiki page: “The main factor cited in the closing of retail stores in the retail apocalypse is the shift in consumer habits towards online commerce.”
It’s no secret that online shopping is increasing at a much faster rate than that of brick-and-mortar, but most experts agree the retail channels do not operate as a zero-sum game. The growth of e-commerce continues to reveal how much consumers have evolved—and how channel-agnostic they are when it comes to shopping.
“Customers need opportunities in both the digital and physical realms, both Forrester research teams said in their reports. That has led not just to omnichannel services and the revamping of mobile apps and websites on the part of legacy retailers, but it also seems to have made brick-and-mortar stores an inevitability for pure-play e-commerce retailers.”
As a result, all types of retailers are taking steps to ensure the whole shopping experience is seamlessly integrated into online and offline.
Factor #2: The Death of the Mall
“Another factor is an over-supply of malls, as the growth rate of malls between 1970 and 2015 was over twice the growth rate of the population.”
The industry is absolutely right-sizing it’s physical footprint. Not only were there too many malls, but that was compounded by the growing demand for online shopping, which amplified the perception due to more malls closing.
Factor #3: Restaurant Renaissance
“A third major reported factor is the ‘restaurant renaissance,’ a shift in consumer spending habits for their disposable cash from material purchases such as clothing towards dining out and travel.”
Visionary retailers are marrying these two together to create a more experiential experience for shoppers. For example, Urban Outfitters bought a pizza chain. Other retailers like Barnes & Noble and Tiffany & Co. opened up restaurants in their stores. Tommy Hilfiger is deploying technologies such as interactive screens and smart mirrors to make the store a destination experience itself.
Retailers big and small are leveraging these strategies to increase foot-traffic within physical locations and offer consumers a “chance to buy an experience rather than just an object or service.”
Factor #4: Bad Inventory Decisions
Lastly, the final factor in poor brick-and-mortar sales performance is “a lack of accurate inventory control [which] creates both underperforming and out-of-stock merchandise, causing a poor shopping experience for customers in order to optimize short-term balance sheets.”
This is a big one. Lack of inventory accuracy means retailers are making really big bets in all the wrong places. Overstocks and out-of-stocks alone account for approximately $123 billion to $129 billion loss in annual revenue!
Traditionally, retailers try to anticipate fluctuations in future demand, yet, most of the time, fail to do so accurately. The opportunity for improving inventory decisions across stores is invaluable—and completely feasible given the technology and data available.
Moving Forward: The Retail Renaissance
Taking advantage of cutting-edge technologies, like Celect, can help businesses thrive in today’s “Retail Renaissance.” Only then can we set the record straight (on Wikipedia and beyond) to reflect the industry revival we’re undergoing today.