Retail has one foot in the grave and the other on a banana peel.
Don’t believe us? 2008 was the worst year for retail on record. That year, during the Great Recession, 6,163 retail stores locked their doors, never again to reopen.
In 2017, there have been 5,300 closings so far as of the writing of this blog.
Sure, it would be easy to say that online shopping is killing retail (and it is, more on that later), but the truth is that there are a lot of factors weighing in against brick-and-mortar shops, and there have been for decades.
The bad news is that nearly 16 millions of jobs are at stake if retail goes bottom-up. The good news is that forward-thinking brands are shining a light at the end of the tunnel.
What’s the prognosis?
The death of retail is a story of overindulgence. In the mid-20th century, as suburbs spilled from city limits and automobile culture brought shoppers far from the traditional commercial centers of urban streets, stores scrambled to capture those fleeing dollars. Following their wayward consumers into the sprawl, amongst the mass-produced, neatly arranged homes they erected monuments to the god Retail, big as city blocks and filled with all the comforts and luxuries one could imagine.
You might know them as shopping malls.
In their eagerness, developers filled every square inch of this country that’s not a national park with boutiques and food courts, to the point that they currently occupy 25 square feet per capita. For reference, that’s ten times the figure for all of Europe. 25% of these nearly 1,100 malls are anticipated to close by 2022, as dozens already have, leaving desolate husks of architecture scattered across the suburbs.
Meanwhile, developments downtown provide an equally bleak outlook for retail. The shopping districts of New York look vastly different than a scant five years ago: JC Penney, Ralph Lauren, Kenneth Cole, H&M, Juicy Couture, Toys R Us, FAO Schwarz and Aéropostale have all abandoned flagship stores around Fifth Avenue, Times Square and Manhattan. What was once a symbol of status and wealth has become a relic of a bygone era for retail.
Whether it’s in a mall or a standalone store, “if you build it, they will come” only works for retail if you have a contingency plan for when they stop coming.
And this is the point where they’ve stopped coming[chart id=”18405″]
New kids on the block
Let that sink in.
64% of Americans can order everything from laundry detergent to cars (yes, the kind you drive) and have it delivered to their doorstep within 2 days, or even within the same day in some cases — all without changing out of their pajamas.
It’s true that retail still accounts for the lion’s share of shopping with a whopping 90% of all purchases taking place inside a traditional brick-and-mortar store, but mobile transactions are gaining traction, and quick. To put things in perspective, Amazon’s third annual Prime Day sale continues to be a smash hit: 2017’s sales grew 60% over 2016’s figure, which in turn were a 43% increase over 2015’s. It surpassed their own sales for mega-shopping holiday Black Friday.
This signals a new era for shopping, one where consumers are comfortable sacrificing instant gratification for flexibility and convenience. What was once a major hassle, sending financial information over slow, potentially unsecured internet connections after dozens of clicks, can be done securely and in an instant, even from the phone in your pocket.
For the record, shopping on mobile devices is a true success story: back in 2010, it accounted for just 2% of all online shopping. In the last 7 years that number has swelled to 20% thanks to massively improved mobile wallets, one-click ordering and improved connection speeds.
Online shopping isn’t necessarily creating new ways to shop, but it’s streamlining the hassles that used to plague consumers. If you’re looking to drop a fat stack on a new refrigerator, that used to mean several trips to the store to scope out the available models, while a well-meaning but insistent salesperson breathes down your neck to ensure they make commission.
Alternatively, over the course of a week you can check out consumer reviews on fridges right on your iPad in between dinner and your nightly Netflix binge. Your model of choice can be delivered to your doorstep with free shipping.
That convenience also opens up the amount of products a consumer can shop from. Chances are, if you’re a Carolina Panthers fan living in Idaho, you’re not going to run into any Cam Newton jerseys for sale at your local sports shop in Boise. But there are hundreds of options from dozens of online retailers. Brick-and-mortar stores seem woefully clunky in comparison, and Andrew Goldberg, vice chairman at CBRE Group, doles out some survival advice: “Retailers are going to have to evolve and do a better job of making it worth the customer’s effort to come to the store.”
What the future holds
While retail is trying to patch up the bleeding, industries like travel and entertainment are in peak health. Retail goods are becoming less of a hot commodity, and experiences are en vogue.
See for yourself: scroll through your Instagram feed until you hit a photo of someone sipping an organic, cruelty-free kale smoothie at some trendy farm-to-table restaurant. Took you all of three posts before that one cropped up, huh? Now try to find a selfie someone took inside a retail store. Slim pickings there, right?
If the waning past of retail failure is a mobile website, the future of retail is an app.
Assuming you’re one of the nearly 2 billion Facebook users on planet Earth, chances are you don’t visit Facebook.com on your mobile browser. Instead, you downloaded one of the slew of apps available from the social giant depending on your needs: Facebook, Messenger, Events, the list goes on.
Facebook.com is perfectly serviceable on mobile, but it’s bound by the limitations and bloat of whatever browser the user has installed. Ad blockers, distractions from other open tabs, and the ever-present URL bar provide distractions from the experience you may be hoping to deliver to your consumer.
Sounds like a department store to us. Even after wading through the swamp of candle shops and copyright-infringing airbrushed t-shirt kiosks in the mall, the labyrinth of stovetops and perfume inside the department store itself have already made us weary before we’ve even found what we’re looking for. We just want a pair of jeans, man! Ain’t nobody got time for that!
On the flipside, within a dedicated app, you are king. Your app is a custom, distraction-free zone where your customer goes to focus on you and only you. It’s the “You Experience,” and some retailers have shown success by shifting to that model. Apple Stores are are a constantly buzzing mecca for acolytes of the church of iOS/Mac. Likewise, Samsung’s 837 store in NYC hails itself as a “experiential digital playground” and “cultural destination.”
Sure, you can still buy laptops and smart devices at those shops like always, but these tech leaders are helping pave the way for a new kind of retail. Smaller, tailored venues are drawing crowds, and asset manager Cohen & Steers, Inc. describes this shift as “part of a permanent evolution in how and where Americans spend their money.” The inevitable death of flagship stores proves that inundation in your product is overwhelming. It’s focus consumers desire, so it’s time to trim the fat and kill off retail bloat.