Retail Apocalypse: How to survive 2018
Last year was the first year since 2009 that we saw the total number of retail stores in the United States shrink. By the end of 2017, retailers announced more than 8,000 store closures. The list of companies which closed the most stores is topped by RadioShack and Payless, two of the many retailers that filed for bankruptcy last year and decided to close off all store locations.
The real downward driver for retail stores in 2017 were softline retailers, which closed more than 3,400 stores. This led to a decreased occupancy rates in retail centers, especially those that traditionally focus on apparel, such as regional malls. Still, the year wasn’t completely bad for retail. Research from FGRT shows that physical store sales were up by 2.5% last year. Sectors such as grocery and dollar stores are growing. And the occupancy rates in open-air and destination shopping centers didn’t fall as much as in regional malls.
The Retail Apocalypse in 2018
The trend of retailers diminishing the number of brick-and-mortar stores that started in 2015 is dubbed the “retail apocalypse.” While 2017 saw the most drastic movements in the retail industry so far, it’s not likely that the process will stop in 2018. In fact, it’s expected that this year will be the year retail apocalypse culminates. A month in, and we’re seeing the signs that it might be so.
Sears have announced the closure of 45 Kmarts and 18 Sears stores by the end of January. Four of the 45 Kmarts expected to close are in Virginia. J. Crew plans to close 39 stores by the end of January. Macy’s, Walgreens, Gap, and Teavana are among the retailers that have already announced store closures in 2018. The closures unavoidably bring job loss for the people employed in retail. Department stores, which employed close to 1.8 million of Americans in 2001, now employ fewer than 1.3 million. The downward trend is not going to change. And when there’s a need to point the finger at a likely culprit for the state of retail and the ongoing apocalypse, it’s e-commerce that gets the blame.
Is E-Commerce Ruining Retail?
There are many reasons why the influence of e-commerce can be detrimental to brick-and-mortar retail. E-commerce is a product of the digital age, and as such has an easier time adopting new technologies that help increase sales. Online stores have a much easier time getting to know their customers, with the ability to gather data from every interaction. They can also choose the perfect time to recommend the right product to customers. An online store can, with the help of a Magento search extension, harness the power of artificial intelligence to predict what its customers will like. Online stores are always open, and it’s much easier to search through their stock than brick-and-mortar stores’.
None of this would matter, however, if we didn’t live in a world that’s increasingly favoring digital-first retail experiences. Even the customers who purchase products in physical stores start looking for products online. Recommendations, price comparisons, and reviews — these are the things shoppers like to take into account before making a purchase decision. Data from Deloitte show that, in 2016, 56% of shoppers used digital devices in relation to an in-store purchase. The digital world is influencing brick-and-mortar retail. But the influence is much more fundamental than stealing away customers.
How Can Retailers Survive 2018?
Thriving in a digital-first retail world isn’t easy. For many retailers, simply surviving it is a daunting task. In the past couple of years, retailers have been sizing down their presence to a more manageable level. That is a good step towards cutting costs, but it might not suffice. The retailers who thrive as we’re nearing the end of the decade are the retailers who understand that the difference between e-commerce and commerce is blurring. Customers are still more likely to shop in a physical store, even though they will use digital technologies to reach a purchase decision.
The trick is in developing an omnichannel experience that will give the customers the best of both worlds. Having a separate online store and a separate physical presence will not be enough. The closer retailers get to being able to offer a seamless retail experience that involves all the relevant channels, the closer they will get to success.
It’s quite possible that retail apocalypse is a myth. At least the part that e-commerce is killing physical retail might be. It’s much more likely that we’re seeing the evolution of retail. The retailers who are quickest and best to adapt to the new reality are those that will thrive. Sales and marketing professionals always knew that the best way to attract new customers is to go where they are. In this day and age, that means being both offline and online, in a unified and harmonious way.