With all the bankruptcies, store closings, reported “dips” in shopping foot traffic and the rise of e-commerce, financial analysts and news media alike are all ready to ring in retail’s untimely death. It’s hard not to feel depressed at the amount of companies filing for Chapter 11, especially beloved ones like American Apparel and Gander Mountain. But is it really all as dire as everyone says it is?
Store closings and goings-out-of-business last year felt sudden and dramatic, with Macy’s closing 100 stores, American Apparel’s bankruptcy, and Drugstore and Beauty.com being shut down by parent company Walgreens. 2017 is off to another rough start with multiple Chapter 11 filings (Gander Mountain, hhgregg, Wet Seal and Gordmans among them) and mass store closings, like The Limited’s total shut down of all their stores and website. Payless is rumored to be filing sometime in the next week or so, with an anticipated 500 store closings across the US. Business Insider attributes this to the rise of e-commerce and lower shopping mall foot traffic, noting that shopping mall visits declined by 50% between 2010 and 2013 (as per a Cushman & Wakefiled analysis).
Some of our most beloved brands appear to be falling by the wayside due to Amazon‘s massive presence in the retail industry, accounting for 43% of all online retail sales in the US as of last year. People are avoiding malls, shopping online more often and they’re not shopping as much, either. According to the Federal Reserve Bank of New York, 33% of Americans said they couldn’t come up with $2,000 in the next 30 days if they needed to. Only 26% of people said they would apply for a minimum of one type of credit over the next 12 months. Not only do stores not have the money to continue operating fleets of physical locations, many Americans don’t have the money to shop in them. Those of us who do have the money spend more of it online, with digital sales rising from 15% to 19% in a Local Consumer Commerce Index release from JPMorgan Chase.
So does all this mean that retail is dying and we should fear the “retail apocalypse” (as Business Insider puts it)? Eh, probably not. Online is where it’s at these days, and big-name retail brands are finally starting to recognize it. On Nike‘s third-quarter earnings call, CEO Mark Parker said shoppers “[have] decided digital isn’t just part of the shopping experience; digital is the foundation of it.” Bebe is shuttering all of their nearly 170 stores to focus on a solely online presence. Kenneth Cole is following suit, closing most of its physical locations to focus on its “online, international and wholesale businesses,” according to RetailWire.
While traditional retail models are struggling to find a place in this increasingly digital world, online brands like Warby Parker are embracing a limited physical location model, setting up showrooms for customers to view and try on products. They’re also connecting with their audiences on social media, using Instagram and Pinterest as digital sales floors where they can speak directly to millions of shoppers at once, most of whom are tech-savvy millennials driving modern retail trends. It’s no surprise online brands resonate better with millennials than traditional brick-and-mortar department stores, like JCPenney, and millennials (who will overtake baby boomers as the largest generation) are projected to increase their spending by 24% in the next two decades, meaning big box retailers will need to adapt to keep up with market changes.
Are things scary in retail right now? Yes. But as technology changes, along with methods of communication and advertising, companies will need to change with them if they want to stay relevant. It’s a painful lesson many shopping mall mainstays are learning, with consequences we’ll all have to shoulder, like retail workers’ loss of employment as stores close and more automation is introduced to the retail experience. Retail is rapidly shifting into an even more interactive, personalized experience, and we’ll hopefully see more retailers embracing that over the course of 2017. They’ll have to, or they’ll be left behind.
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