The Retail Apocalypse
The Current State of the Retail Industry:
Retail has been changing over the last five years, more so than over the last fifty years, due mostly to a change in the Retail Consumer, who is ever-more digitally-savvy, deal-oriented and seeking personalized service and experience alongside their purchase.
Amazon and other Online Giants have compounded this problem with low prices, speedy and cheap delivery, and advanced analytics which can deliver relevant marketing and personalized services. In the Brick-and-Mortar space, this is especially difficult due to the lack of consumer identity, further widening the gap between what E-Commerce can do, and what Retailers cannot.
Over the past few years, the New Year generally brings stories of Retail Revenues, increases in E-Commerce, and in the last few years, the announcement of Retailers going bankrupt, layoffs, closing stores or otherwise reducing their Brick-and-Mortar footprints.
This year, the New Year began with a bang and a long string of announcements by Retailers who filed Chapter 11, or who were closing a large number of Stores.
As of April 12th, the list included the closure of over 3200 stores across the U.S., and includes the 9 Retailers who have filed for Chapter 11 Bankruptcy, including two Retailers who have previously filed for bankruptcy and were bailed out.
Year-to-date Chapter 11 filings:
- Gander Mountain
- Gordmans Stores
- General Wireless Operations (formerly RadioShack)
- BCBG Max Azria
- Michigan Sporting Goods Distributors
- Eastern Outfitters
- Wet Seal
- Limited Stores
These figures do not reflect the number of jobs that will be lost, both in the Brick-and-Mortar locations, but also the Head Offices and Distribution Centers. In a report by the Bureau of Labor Statistics, March saw the loss of 27,800 Retail industry jobs on the heels of February’s 30,900 jobs lost. This will only continue to mount as Retailer after Retailer file for bankruptcy.
Not included on this list of Retailers who filed for Chapter 11 are the speculations that the Gymboree Corporation will also fall within the coming weeks and months.
Cause and Effect:
The 2016 holiday season was a mixed bag for Retailers, seeing a much increased return to the Stores by deal-hungry consumers. According to the NRF, Retail Sales for November and December increased 3.6% or by $658.3 Billion Dollars, including $122 Billion in Non-Store Sales (Online). However the majority of items sold during those two crucial months, were heavily discounted having to compete with Online Merchants, cutting into the Brick-and-Mortar Retailers’ critical sales margins.
Increased wages, heavily discounted items, more online competition and a new era of consumerism have led to this point; Retailers are now in reactionary mode, trying to recoup the costs of doing business. Retail itself has changed because the consumer’s habits have changed, and while many retailers scramble to cut costs and consolidate, other are falling by the wayside, and more will follow suit.
In addition to this, with the closure of traditional Mall Favorites and Mall Anchors, we will see Real Estate in trouble, as consumers generally do not want to shop where there is a lot of empty space. This causes a type of ripple-effect where stores lose sales and go bankrupt and close locations, which prompts consumers to no longer shop in a certain mall, which in turn leads to more lost sales and potential bankruptcies.
Many large Retailers are already scaling back on their physical locations in order to consolidate costs, or increasing their E-Commerce operations due to the growth in those channels. Others are trying stand-alone stores, or smaller formats to accommodate the urban centers, or trying to incorporate restaurants or other services to create an “experience”. These efforts may work, and they may not, only time will tell as the modern consumer is fickle and diverse.
While Generation X and Millennials tend to lean towards shopping online, Generation Z tend to prefer shopping in stores, and may yet be the salvation of Brick-and-Mortar, this may change over time, especially when they come to maturity, credit eligibility and limited time for shopping.
Truth is, Retail is Evolving, and as consumer preferences get stronger, the lines between the online and offline worlds of commerce are not just blurring, they are dissolving.
The Retailers who are able to survive the coming apocalypse will be those who will be able to reach their customers on a One-to-One basis; creating a personalized experience, and leveraging the necessary technologies to analyze, interpret and keep-safe the precious Consumer Data. Those who survive will understand that every touchpoint on a consumer’s journey is but one of many channels, and all need to be treated equally, with seamless information and transition.
There is a golden age of Retail yet to come, sadly, not every retailer will see the other side.
About Advantage2Retail (A2R):
For over a decade, Advantage2Retail has been assisting Retailers and Distributors across North America to Lower Costs, Reduce Inefficiencies, Improve the Customer Experience and to Increase Revenues. Our clients’ success is our primary focus, and together, we have been able to help them avoid the pitfalls of the Retail Apocalypse and not just survive, but thrive.
If your business is suffering the effects of the Retail Apocalypse, A2R stands ready to help your organization to optimize your systems and business processes, to help you plan ahead strategically and to support you every step of the way. To get started, please contact us directly at firstname.lastname@example.org or learn more about how A2R can help your organization here.