The future of retail is not to compete with online sellers; in fact, it’s to do the exact opposite.
Retail is not dying. It’s not even in trouble, not really. It is, however, evolving – significantly. That’s where retailers may wind up in trouble. Those that insist on maintaining the status quo will wind up stagnating and likely failing. But those that ride the crest of the evolving retail wave will survive and thrive in the new paradigm.
Yes, stores and malls are closing, but that is not necessarily a bad thing.
The U.S. is saturated with malls, and many of them are in areas that were once prosperous but, for whatever reason, are no longer seeing the shopper traffic. It could be the age of the area or the mall itself. Tired, outdated malls with décor that’s stuck in the 1990s are not going to attract a crowd.
On the other hand, there are malls throughout the United States that are flourishing – and they are doing so by providing retail and entertainment options that encourage people to visit, such as enticing restaurants and trendy events.
Let’s look at a store commonly found in those malls as an example: Macy’s. Throughout 2016 and 2017, Macy’s closed more than 80 stores. That’s a bad sign, right? But is it? Like malls, Macy’s had too many locations. It was a model that worked for a while but is no longer economically viable. So, Macy’s shuttered its under-performing locations. Now, its sales are stabilizing. Yes, the company still has plans to close stores, but only 18 throughout 2018. So, Macy’s is doing…ok. The real question is if Macy’s can become successful again. It’s going to need to innovate, but the store closures were not the company’s death knell.
Like an over-inflated stock market, there’s going to be a correction. What we’re seeing now is a retail correction.
The big question: How can your store avoid being corrected?
Smart Stores are Slowing Down
Buying products online is easy. Like, really easy. I mean super-duper easy – and convenient.
A retail store cannot hope to compete with that, which is why they shouldn’t try.
In order to compete with online efficiency, retail needs to become the opposite: a destination for people to slow down, linger, and enjoy.
For example, at the flagship Samsung store in New York City, all the products you can buy are on the second floor shunted against the walls. The main intent is to entertain visitors with music and interactive experiences (that showcase the capabilities of Samsung, naturally).
This is not an attempt to make buying as simple as possible (i.e., competing with the online experience). It is, in fact, entirely the opposite. It’s encouraging the consumer to take a break, slow down, and enjoy as much time as possible in the store.
Apple is rebranding its largest stores into “town squares” complete with tree-lined avenues. The goal is for these locations to become “gathering places” where folks assemble to attend classes on coding, music, and photography.
It’s this reason that stores are adding coffee shops, juice bars, or taverns. Urban Outfitters went so far as to acquire a pizza chain and may add the ability to grab a slice in its newest locations.
Technology Enhances Customer Experience
Stores like Sephora and Neiman Marcus are already equipped with mirrors that let you take 360-degree videos as you try new makeup, glasses and other wares, so you can compare different options side-by-side. The mirrors even provide feedback.
The dressing room is getting an upgrade, too. At Rebecca Minkoff, mirrors with an interactive touchscreen enable shoppers to have products sent to their dressing rooms. These same mirrors can also change the color of clothing, so you can see how different colors look on you.
Soon, however, the dressing room itself will go away, replaced by a mirror that’s actually a reflective LCD so you can virtually try on clothes and jewelry. Three-dimensional cameras will map these items to the contours of your body. You will even be able to see how an outfit will look from the back.
Thanks to these digital mirrors, trying on clothes will be so 2017.
Or what about shoes that are custom printed to specifically fit your feet? That’s the goal of Volumental. Currently, the company’s tech is being used to create a virtual model of someone’s feet to suggest shoes based on width, arch height, and other measurements. However, the future goal is to use the models to create custom shoes on a 3D printer.
What We are Buying is Changing
In 2006, U.S. consumers were spending $423 million at food services and drinking places (“food services and drinking places” is the actual NAICS term, BTW – code 722).
In 2016, that number has jumped to $660 million — an increase of 41 percent in just 10 years.
Part of the reason for this is shifting consumer habits. Again, it’s prioritizing experiences. The idea of spending those hard-earned dollars on a nice meal and pricy bottle of wine instead of on a new cardigan.
Another way habits are changing is with consumer electronics. Let’s head back to 2006 again. In that year, while cell phones were ubiquitous, they were limited to a select group of consumers: adults (also, unless called Blackberry, they flipped open and closed). Today, pretty much everyone in a household has a cell phone, meaning the average phone bill per house has more than doubled. Factor in the cost of those electronics and you can see how money that once flowed to apparel and housewares outlets has been redirected to suit other needs.
Perhaps the greatest indication of retail’s continued relevance is this relatively recent trend: previously online-only stores are opening brick-and-mortar locations.
Warby Parker, Bonobos, Google, and even the great retail-killer itself, Amazon, have all opened stores over the past year.
It is also telling to examine some of those stores. For example, while Warby Parker has opened several stores across the country, not one of them is located inside a traditional mall.
And while the Amazon stores have mostly been limited to pop-ups and its new cashier-less convenience store, Amazon Go, (a one-off, for now) it is looking to purchase more physical stores – and may do so by simply buying (and modifying) an existing outlet (like Target or Sears), much as it did through its purchase of Whole Foods.
Online retailers that create physical stores see a 3.5 percent rise in online sales. On the other hand, physical retailers see a 9 percent increase in total sales after they create an online store.
The obvious solution for current physical-only retailers that are struggling is omnichannel. Seamlessly blend your physical experience with your online one to provide your consumer with as many options as possible.
While online retailers are looking to their brick-and-mortar contemporaries in establishing a physical presence, there is much that physical retailers can learn from their online counterparts. Just look at the improvement in customer service since Amazon showed the world how it should be done. As these two channels work together, best practices are going to continue to be further refined.
Give Consumers a Reason to Visit
Online sales are on the rise. Ten years ago, only 2.5 percent of retail sales took place online. Today that number has skyrocketed to…8.5 percent.
8.5 percent! While that is not an insignificant number, it also means that 91.5 percent of all retail sales take place in a store. A physical store can offer what’s missing in an online transaction: an experience. The ability to touch, taste, smell, and feel the product.
But your store has to provide that experience. It has to give consumers a reason to stop by and enjoy what you are offering. To see how your store can transform to meet the evolving retail landscape, call The Trade Group at 800-343-2005.