ARE THERE ANY SILVER LININGS IN ALL OF THIS RETAIL MISERY?
It has certainly been a tough year for brick-and-mortar retailers with the amount of store closures in 2017, outpacing the closure that took place after the 2008 financial crisis. Many attribute this to the “Amazon affect”, and the fact that we are all becoming consumers who cannot resist the convenience of an item arriving to our home in two days or less. Although this explanation certainly has merit, the truth is that the lion share of retail sales still occur in brick-and-mortar retail stores, and there are plenty of success stories in brick-and-mortar retail that offer the consumer a value proposition, a human engagement and experience, that can never be replicated online.
We are also a nation that has been overbuilt with retail compared to other countries and there is a needed recalibration for retailers who have stores that are not profitable. There is a need to clean house and allow for a reset of the retail landscape. Getting the store count to the right number, building the e-commerce channel, and implementing strong integration between brick-and-mortar and online will allow the U.S. retail market to stage a comeback, stronger and more efficient than ever. It is an industry that was badly in need of a shakeup, and with a competitor like Amazon you have no choice but to get better fast, or perish.
We are already seeing retailers such as Walmart, Best Buy and Target who are working diligently to transform themselves with the growing threat of Amazon biting at their heels. They have a huge amount of catch up to play online where their revenues are a drop in the ocean compared to Amazon, but their brick-and-mortar platform when tightly integrated to the online experience, can be a massive asset once they get both humming. Not every retailer is going to survive this fight, especially those selling general merchandise, but the ones that dedicate efforts toward greater efficiency, deeper engagement across channels and offer an experience that transcends the purely online competition, there is a strong opportunity for them to thrive.
Another silver lining for brick-and-mortar retailers is that the millennial consumer likes to buy experiences, not just products, they want to engage. In-store experience and customer service matter and that is a huge differentiator. While millennials do shop online and use social media constantly, 85 percent of them use mobile devices for shopping, but not buying. These consumers want to research online but still come into stores to purchase. To back up this point, April’s retail sales saw 91.4 percent come from in-store purchases, while 8.6 percent came from online. Now the pace of e-commerce growth has been double digit while brick-and-mortar has been anemic but that is also due to all the store closures and retooling that is being done. We are in a transformative period where I believe the true omni-channel retailer, one that engages their clients beautifully across the physical world and the virtual world will win this game.
So yes, there has been a lot of doom and gloom in the retail sector, but brick-and-mortar stores are not going anywhere anytime soon. Smart retailers can use this painful transition to reinvent themselves in order to cement their position in the retail landscape.
So, as the legendary band “The Kinks” once sang, “Give the people what they want.”
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