The great retail apocalypse. The death of retail.
All of these are phrases you’ve probably come across at one point or another in the past few years. I know I still do. However, if you’re in the retail industry then you certainly already know this is not the case. Retail isn’t going away and consumers aren’t spending any less.
People still like shopping in physical stores, even millennials!
Has there been an abundance of store closures in the past few years? Yes, obviously.
However, a recent research report by IHL Group reviewed 1,804 retail chains operating in the U.S. with 50 or more stores, and the data suggests that...wait for it...more stores are opening than closing in 2017.
Yes, that's right. You heard me.
According to IHL Group:
“Over 4,850 more stores are opening than closing among big chains, and when smaller retailers are included the net gain is well over 10,000 new stores. As well, through the first seven months of the year, retail sales are up $122 billion, an amount roughly equivalent to the total annual retail sales of The Netherlands.”
Stores are closing, however, retailers are also transitioning into smaller spaces. A recent Forbes article highlights the following:
“The reason why you see so many vacancies even though more stores are opening than closing is that the footprint and locations of the stores being closed aren't suitable for the stores being opened. The old stores' formats can't be transformed and their locations don't work for the new stores that are opening.”
Retailers are transitioning away from traditional store formats (hence, the store closures) and are moving towards minimizing their overall physical footprint with smaller, more intimate stores. This is fueled by a number of factors—including e-commerce, a decline in mall foot traffic, and efforts to improve the customer experience—but, more importantly, it’s a result of retailers trying to keep up with consumers and their evolving purchase behaviors.
Retailers are making do with less, and the stakes are high. Data-driven merchandising decisions are critical when it comes to making sure the right inventory is stocked across locations to meet localized consumer demand.
Interestingly enough, digital retailers are recognizing that brick-and-mortar retail isn’t going away, and several newcomers are entering into the physical retail space.
Chain Store Age also highlights some key findings from the report, quoting the president of IHL Group, Greg Buzek:
“Without question, retail is undergoing some fundamental changes. The days of ‘build it and they will come’ are over,” added Buzek. “However, retailers that are focusing on the customer experience, investing in better training of associates and integrating IT systems across channels will continue to succeed.”
While store closures dominated the headlines during the first half of the year, store openings are now casting a shadow over the so-called retail apocalypse. The main takeaway is this: the retail game is changing.
Clearly, its been a transitional year for retailers. Given today's competitive environment, the way retailers do business is being reinvented.