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The myth of the retail apocalypse 

Dan Blacharski | Nov 15, 2017 1,664 views 1 Comment

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Massive retail store closings and bankruptcies are causing concern, hype, and a little bit of over-reaction throughout the industry. While any growth-oriented enterprise will be rightfully concerned about the shrinkage, jumping to conclusions about a “retail apocalypse” is dangerous, and it’s even more dangerous to point fingers and lay blame where it is not deserved. What’s going on currently in retail is not an apocalypse, it’s a correction. It’s not the Internet’s fault. It’s not Amazon’s fault. Dotcommers are not taking over the world.

To be sure, the retail industry is facing a dramatic transformation. What we think of as a brick-and-mortar store is rapidly changing, and consumers have an entirely new set of expectations. News reports accurately detail thousands of store closings and bankruptcies, but the broader metrics paint a somewhat different picture, with the National Retail Federation reporting that there is a net gain in 2017, with a 4.2 percent year-on-year increase in retail sales, and a net increase of 4,000 store openings projected for 2017. For every closing, there are 2.7 openings. What’s different today is that the stores that are flourishing are the ones which are willing to shed the old skin of traditional retail and embrace a newer model.

Launching in late 2016, footwear fashion brand WORLDboots co-founder and COO Ben Zerbe wasn’t worried about gaining a retail footprint amidst the current apocalyptic scare. “In a very short period of time, we have been able to combine traditional marketing tactics and retail placement, with a vibrant digital channel. We’ve been very successful in making our mark with a great product, in an industry which is exceptionally difficult to enter and dominated by huge fashion brands with much more established names than us.”



According to Zerbe, WORLDboots’ winning strategy required combining the traditional fashion industry move of gaining shelf space in retail stores and boutiques, with building a digital presence and a vibrant online channel. “We’ve found that consumers have a new set of expectations in the fashion industry,” said Zerbe. “Before they go to a physical store, they look online for information. Having that digital footprint is essential for any type of consumer goods, and especially in our segment.”

Part of the issue that creates the appearance, if not the reality, if a retail apocalypse is the fact that the character and size of retail stores is changing. Newly opened stores are smaller formats, which are more highly targeted to specific demographics. Ric Noreen, Managing Partner at Waypoint Strategic Solutions, suggests “What is behind this is the rise of the presence of food in small box retailing. Dollar General, Family Dollar, and Dollar Tree are adding thousands of stores every year. They can have a store opened in about 100 days.” Those smaller stores are opening in greater numbers, while the larger and more visible ones are closing, creating an illusion of retail distress that is really not as troubling as it may seem at first glance.

What drives store closings

While the rise of smaller format stores is encouraging, the image of a large retailer creating a visually disruptive gap in a shopping area creates that impression of looming retail disaster, and according to Noreen, there are two things driving those closings: Retailer consolidation, and smaller independents getting squeezed out of the marketplace. “In a retail consolidation, the retailers will look at success data and the number of shoppers,” he said. “If you just acquired a chain, only half of those stores might be incremental to your shopper base and the rest will be redundant. You have stores battling over the same shopper, so one of them gets closed.”

What retailers are doing right

“If you’re about everything, you’re about nothing,” said Noreen. “The stores that are opening are creating differentiation, assortment, and a new marketing, pricing and promotion perspective. They’re either competing on the basis of extreme value, like Aldi, or in a category like Trader Joe’s, or Fresh Market. They reflect it in their assortment, and they reflect it in their pricing.”

Success too, has always been, and still is, in the marketing – and those retailers with the greatest levels of success combine older, more traditional marketing tactics with newer digital, data-driven tactics. “The simplest example is the age-old tactic of placing billboards or outdoor advertising in a dense shopping district,” said Mark Fick, President of commercial signage company Allstate Sign. “Prominent signage remains essential to retail success in this hyper-competitive environment.” The entire path to purchase may start digitally, with tactics like geo-targeted messaging and data-driven analytics, but what happens once a shopper goes into a dense shopping area with multiple stores?

Noreen asks, “If the path to purchase indicates that a mom is choosing a general shopping area, what kind of signals are you sending when she gets to that center? What kind of influences should there be when she has three mass merchandisers, two discounters, and three grocery stores to choose from? How can you interrupt her path to purchase to get her to choose your store out of those seven options? It’s the simple things like that.”

Today, successful retail marketing – and staying in business while other retailers are closing their doors – revolves around two main factors: Retaining your current customer and increasing share of wallet, and acquiring new customers. “You have to do both,” said Noreen. “You have to understand the path to purchase to be able to influence it and acquire customers. And once you have them in the store, you have to hook them with loyalty programs to keep them and grow the share of wallet.”

Retail survival today is dependent on multiple factors, including understanding the shopper base and their path to purchase, adjusting the store format to suit the neighborhood and the demographic – often with smaller footprint stores – and understanding the right mix of marketing strategies. Is there an apocalypse in retail? Not really. There is, however, a shift in strategy, and those who do not understand that shift will succumb to competitors who do.

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One Response to The myth of the retail apocalypse

  1. Dave November 21, 2017 at 12:28 pm (5 comments) #

    I like to share quick story.

    I live in Canada and needed to purchase 2 pieces of luggage.

    I went to Hudson Bay Co (HBC) location about 20 min from home.

    The luggage section had no sales staff, a small portion of the selection as their online store.

    When the sales person arrived, he seemed more interested in not providing any help so he could get to his break.

    I have experienced same issue with Best Buy.

    Retailers have too many salespeople with no training, you cannot count in web reviews as factual, their motivations or quality comparisons that dices the data in a way you can make good comparisons. Experience is key to product recommendations!!

    I ended up ordered from Samsonite and Amazon.

    Samsonite call center was helpful to explain the different models, Amazon had same price as HBC, I see no reason to reward a retailer than does not invest in their people and brand.

    If retailers do not want to be “showroomed” and/or want to beat Amazon or their vendors, they need to add value like knowledgeable staff on the floor.

    I really hope retailers will read this, I spend $1,500 Monday on luggage that a local retailer could have captured!!!

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