Retail as we know it is under pressure. Disruption is happening at every turn. Whether it is the rise of online shopping, the downturn in consumer spending or the squeeze on margins, things are not fantastic in the world of retail.
This is not just conjecture, when you start listening to the news and reading about the South African institutions that are facing the bitter end of the line. Recently in South Africa the legendary Stuttafords have been forced to close their doors after 159 years of trading. in 2016, Edcon sold their debtors book to Absa / Barclays and it looks as though the mighty retailer might be next with Edgars stores being systematically closed in a bid to save sales.
This is sadly not just a local problem; there are retailers all over the world struggling to keep their heads above water. In the US: J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. In the last few months, several clothing companies’ stocks hit new multi-year lows, including Urban Outfitters, and American Eagle, and Ralph Lauren announced that it is closing its flagship Polo store on Fifth Avenue, one of several brands to abandon that iconic thoroughfare.
Online Is Killing The Retail Store
The “go to” answer for anyone when trying to come up with reasons for the death of retail. The truth of the matter is that, yes, there are a lot more people buying stuff online, but it cannot be held as the only reason for brick and mortar stores closing down.
The emarketer.com research report published in August of 2016 found that worldwide retail e-commerce sales were going to grow at a steady rate over the next four years.
Coupled to that research was a prediction about the percentage that e-commerce retail would make up of the total retail number. At best in 2020, e-commerce retail would make up a comparatively miniscule 14.6% of total retail sales worldwide.
This data alone does not show that the e-commerce retailers are the driving force behind the brick and mortar retailers having to tighten their belts.
Millennials Are Killing The Retail Store
This could be closer to the truth. Let’s face it, millennials are different and they are forcing the world to be different along with them. The world of the large retailer was built by Baby Boomers and Generation Xers. It resonated with them and their ideologies. Big retailers represent prosperity; safety and stability – characteristics that Millennials are not exactly synonymous with.
Millennials are more about bespoke, personal and highly experiential stores. Ones that feed their need to be unique. The large retail store is too repeatable; which means that too many people can dress just like you. In the mind of a selfie snapping Millennial; that’s too much to bear.
The Balance of Power
A slick online experience is critically important, this includes mobile and tablet devices, so that large retailers can make sure their enormous marketing and technology budgets can keep them afloat. Critically though, retailers need to be careful about how they navigate the next few years to make sure that they continue to exist. So what can they do differently?
Retail Needs To Reimagine itself
A possible solution to the retail conundrum is to downscale. Not necessarily to downscale in the traditional sense of the world, but rather to use their biggest disruptor (digital) to their advantage and enable it to downscale.
Size Does Matter
The footprint that a retail mall makes is huge. And they are getting bigger and bigger with each passing development. Property developers are making money hand over fist for each and every extra square meter that they can fill. Of course they stand to lose a lot of money when their clients cannot stay in business.
The current business model of a retail store doesn’t support the downscale model; they need to carry too much stock and need space both behind the scenes and out front for clients.
But, do they really need all that space; all that stock?
What if there was a middle ground between online shopping and bricks and mortar? A hybrid model that gave the best of both worlds.
People love to look, feel and try on the products that they are buying. They need the emotional connection that aids the in decision making process. This is the retail experience. It is something that online shopping cannot replicate.
So what if we thought about retail stores as showrooms and not stock holding stores? Not only is this possible, but it makes absolute sense!
The retail store doesn’t need to carry the stock that it needs to sell; it only needs to carry the stock that the customer needs to make sure that it fits. That the look is right and so they get comfortable with the quality. That means one in each size; not a representative size curve.
As soon as this happens; the size of the store can virtually get cut in half. And the associative savings are everywhere: electricity, rent, salaries.
Retailers can now use online as the fulfillment engine in the equation. The customer scans with their mobile the garments they want to buy. These are added to their online shopping cart and when done, they checkout and the goods are dispatched from the retail warehouse.
This is what online excels at. Order fulfillment when and where the customer stipulates.
Make It An Experience
This now leaves the retailer to focus on the experience. To differentiate and to make it personal and memorable. This is what the Millennial is after, an experience that is unique.
Technology can come to the retailers rescue again:
- 3D printing – 3D print unique accessories made to fit each individual
- 360 degree digital capture – capture measurements and contours for accurate fittings and recommendations which gets stored in the customers online profile for better online shopping
- Virtual Reality – allow customers to virtually try on clothes so they can see how future styles could look for prelaunch ordering and customisation
- Facial recognition – staff can be empowered with a Google Glass like equivalent packed with user information about earlier buys and browsing habits. The facial recognition software will allow employees to call shoppers by name and make them feel welcome by pointing out “recommended items” based on earlier purchases.
The Future Of Retail
The future of retail is not to be only online or only offline. We are still creatures that need to interact with one another – no matter our generation. Retailers who manage to take advantage of the online-2-offline dynamic are the ones who will weather the storm the best.
There are technology advances that need to be harnessed quickly to take advantage of their inherent advantages. There are going to be more retail casualties; but those will be the ones who refuse to adapt their business models and value propositions to meet the changing needs of a fast moving and demanding clientelle.
This article was originally published on Jonathan Houston’s blog