Retail Stores Are Dying? Fake News
In a press conference yesterday at the Shop.org conference in Los Angeles, a panel of speakers spent an hour telling assembled media not to believe the stories they're reading and hearing about the death of retail. In fact, the opposite is true: while there have been some high-profile retailers that have closed stores this year — and a few that have gone out of business — the industry is growing, including store openings, jobs and, perhaps most importantly, sales.
Mark Matthews, vice president, research development and industry analysis, National Retail Federation (NRF); Katherine Cullen, director, retail and consumer insights, NRF; and Greg Buzek, president, IHL Group, a global research and advisory firm for the retail industry, shared the stage and offered stats to bolster their argument that retail is far from dying, as well as their thoughts on the current state of the industry.
Don't Believe the Hype
Culllen shared some findings from the NRF's latest project, Consumer View, a quarterly report designed to gauge consumer behavior and shopping trends, while Buzek offered data from his firm's recent report, Debunking the Retail Apocalypse, which reviewed over 1,800 retail chains with more than 50 U.S. stores. The common theme between the two reports: the notion that retail is dying is a false narrative being perpetuated by the mainstream media. Here's really the truth, uncovered in the two reports:
- there was an uptick of 1,326 stores in the core retail segment this year (IHL);
- the three fastest-growing core retail segments (excluding table-service and fast-food restaurants) are off-price retailers and dollar stores (+1,905 stores), convenience stores (+1,700 stores), and grocery stores (+674 stores) (IHL);
- 16 retailers account for 48.5 percent of the total number of stores closing, with specialty apparel brands under the most pressure (IHL);
- retail sales are up $123 billion in the first eight months of the year, a figure that's roughly equal to the gross domestic product of the Netherlands (IHL);
- Only about of fifth of U.S. consumers are primarily online shoppers (NRF);
- 78 percent of consumers said they're shopping at brick-and-mortar stores just as much or more than they did a year ago (NRF); and
- 49 percent of millennials said they're shopping more in stores this year compared to 2016 (NRF).
With that said, all of the panelists agreed that retail stores are fundamentally changing, driven by advancements in technology and shifting consumer behaviors. However, that doesn't mean they're going away. Rather, their purposes are evolving from one of a place to shop and browse to an intent-driven transaction channel.
More than 80 percent of customers research products online before they go in-store, noted Cullen. Shoppers are further along in the purchase cycle when they enter a store; they're coming in with the intent to purchase. For example, three-quarters of respondents to the NRF's survey said they're going to stores to buy something specific vs. browse.
A Plan for Legacy Retailers
With brick-and-mortar retailers seemingly under siege, at least from the media, what can they do to prevent the “retail is dying” narrative from becoming a self-fulfilling prophecy? The panelists offered some thoughts on why traditional retailers’ businesses are challenged, and what they can do to ensure future success.
Retailers overextended themselves with cheap money from private equity firms and low-interest loans, and now they're being forced to pay off that growing debt, noted Buzek. He cited additional reasons for the struggles of some retailers, particularly department stores and apparel brands, including the breakout of cosmetics into its own category, too many malls were built — and the malls haven't been good partners to retailers — and the country is seeing a shrinking middle class.
“Most of the companies that are closing stores are doing so because of self-inflicted wounds,” Buzek said. “They're doing so to get rid of debt.”
As for what brick-and-mortar retailers can do next, here are some tips from the panelists:
- Focus spend on innovation and evolving your business with technology, rather than paying off debt, Matthews advised. Following up on that point, Cullen said that new technology has to be evaluated against the customer experience. The technologies that are making the biggest difference for consumers right now are addressing the friction in in-store purchasing, she noted, citing click and collect as a prime example.
- Invest in better training for in-store associates. People don't want to be sold; they want to have their question answered, said Buzek.
- Attack out-of-stocks. The inventory is always going to be there online, Buzek said. Twenty-five percent of shopping trips are wasted because inventory isn't in the building, accounting for $14.3 trillion lost annually to out-of-stocks.
- Decouple this year's IT spend from last year's revenue. Amazon.com has changed the game here, consistently spending at a level beyond its revenue, noted Buzek. Retailers need a single view of customer, order, inventory, and they have to pay for technology that can provide it.
- Learn from the leaders, specifically from an IT perspective. Everybody thinks they have to beat Amazon; that isn't the case. You just have to be better than the weakest competitor in your space, said Buzek.
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