Nothing captures media attention like an ominous prophecy of economic doom.
In 2017, we first heard the words “retail apocalypse” when venerable brick-and-mortar retail chains like Sears, Toys R Us, Victoria’s Secret, and JC Penney began to file for bankruptcy or significantly curtail their physical presence. Images of everything-must-go sales and boarded storefronts plastered the business news. Two years later, the notion of a retail apocalypse— presumably still on its way—is well established in the public psyche. We continue to hear tales of a future United States littered with ghost-town malls and populated with consumers who rarely leave their homes to shop.
The only problem with this prediction is that it doesn’t appear to be bearing out. Some stores do close their doors, as they always have, but others soon take their place. As catastrophes go, the retail apocalypse seems to be falling a little short on doom. Small business owners with physical stores could be forgiven for thinking, “Is the retail apocalypse still coming? Or Armageddon ahead of myself?”
Here’s what is really happening on the store front.
Recently, Wall Street Journal editor Lee Hawkins weighed in on the changes we have been seeing in the retail landscape. Hawkins believes that while it is true that the rise of e-commerce is real, the retail ecosystem is both nuanced and adaptive enough to ensure the survival of brick-and-mortar. His diagnosis is less of a retail apocalypse and more of a retail metamorphosis, driven by rapidly evolving customer preferences.
“Ninety percent,” says Hawkins. “That’s the percentage of retail sales still done in stores.” He points to statistics from the U.S. Census Bureau, indicating that while online sales have captured an increasingly larger share of the overall U.S. retail market (expected to do almost $4 trillion in business in 2019), it has risen only from 3% to 10% of total annual sales over the last twelve years.
It is true that in some sectors, such as books, music, videos, apparel, and toys, online retailers have gobbled up considerable market shares and left physical stores selling these items in the lurch. Yet there are some things, like groceries, that consumers still prefer to buy in person. Also, while Amazon is still the big winner in e-commerce, capturing nearly 50% of that market, that still only represents 5% of the total retail market.
Hawkins’s conclusion? Brick-and-mortar businesses need not shake in their boots, but they will need to adapt to their customers’ digital behaviors and desire for convenience in order to thrive.
The internet and the immediacy of mobile devices create a wealth of choice when it comes to retail buying options. It is worth remembering, however, that while e-commerce is doing a great job at keeping pace with what customers want, brick-and-mortar businesses have risen to the challenge of evolving consumer preferences too.
Retailers like Target and Walmart have responded by adding click-and-collect and ship-to-store functionality to their online platforms. These give customers the ability to compare prices and make selections online while foregoing shipping costs and sometimes enabling same-day receipt of their goods. In addition, grocery pick-up services like ClickList have been a remarkable boon to parents and other busy people everywhere. Such services have given customers new choices that serve an appealing function: they reduce customers’ time spent performing mundane tasks.
Meanwhile, businesses which once existed only online are seeing value in establishing a physical retail presence as well. The phenomenon, dubbed “clicks-to-bricks,” includes companies like Warby Parker, Casper, and of course, Amazon spinoffs like Amazon Books and Amazon Go.
Clearly, while transformations are taking place in the retail landscape, successful companies understand that the future of retail won’t be a matter of digital behemoths crushing brick-and-mortar stores. The future appears to be much more blended than that.Buy It Now
Owners of brick-and-mortar stores should take the “retail apocalypse” not as a death knell, but as a wake-up call to adapt. It is a given that any small business today must maintain a strong online presence to survive. But Hawkins advises that the ongoing success of a company today has more to do with how it manages the customer experience both online and off. Investing in technology that makes the customer experience easier is a smart move. Be empowered by the technology that your customers prefer to use, not defeated by it.
While the apocalypse has turned out to be less catastrophic than expected, brick-and-mortar business owners who give their customers digital functionality are more likely to come out on top than those who don’t. And since future consumers are likely to do much of their in-person shopping in locations that suit their lifestyle habits, it wouldn’t hurt to lease a location between a gym and a Starbucks.
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