28 February 2019
Image Credit: Jonathan Calugi, The Dreamery by Casper
A number of traditional bricks-and-mortar stores disappeared from the retail scene in 2018, but what’s next for physical store environments? In this series we look at the current and emerging retail environment and explore the models brands are adopting to make stores a success.
Described by the media as the ‘Retail Apocalypse’, it seems 2019 will see continued closure of many bricks and mortar stores across the US, UK and Europe. Brands that previously enjoyed success have experienced a significant fall in sales as they struggle to remain competitive in the current retail environment, where alternative channels within ecommerce have attracted new audiences.
Statistics and headlines paint a bleak picture of physical retail, positioning closures as an almost unavoidable manifestation. According to reports by Business Insider, the US experienced 3,800 store closures in 2018, with a further 1,500 so far in 2019. Similarly, UK retail saw net store closures of 7,500 in 2018, a 36% increase on 2017 (Deloitte). In Europe, German retail sales plummeted by 4.3% on the month in December 2018, the fastest rate in 11 years according to data released by the Federal Statistics Office.
So why is this happening?
Look for reasons why companies say they are failing and many will point to factors such as online competition, a poor economic climate, low consumer confidence or unfavourable business rates. While these factors can have a significant impact on performance, the retailers who have suffered worst express stark similarities.
Take for example Sears and Toys”R”Us, the stores of these long-established brands didn’t significantly look, feel or operate any differently to how they did 10 plus years ago. Relying on old strategies and outdated formats, stores failed to deliver value to the retail experience.
Before their closure in 2018, the Toys”R”Us stores failed to elicit any form of joy or excitement for children and adults alike. With no places to play, no toy demonstrations or a café for parents to go, the stores resembled the format of a warehouse wholesaler, rather than the magical toy store of something like a Mr Magorium’s Wonder Emporium. Retail analyst Nick Bubb described the stores as “too big and unwelcoming,” adding “They have tried a few smaller, mall stores, without much success, perhaps because the store format was too boring”.
With the rise of online shopping platforms, browsing thousands of products is no longer something consumers do at shelf, but from the comfort of their own homes. As the convenience of online retail improved, Toys”R”Us failed to create an environment that delivered anything beyond a purely transactional experience. Brands who identified this shift early have had significant time to adapt.
US department store Sears, which filed for bankruptcy in late 2018, experienced similar effects. Declining from more than 3,500 to 695 US stores between 2010 and 2017, the brand’s response to falling sales was to implement heavy cost cutting over investment and strategic positioning. As a result, Sears in-store customer service suffered considerably, with remaining stores in outdated malls becoming rundown and poorly managed.
How can you stay ahead in the future of retail?
This isn’t the end of bricks and mortar retail, but the beginning of a new type of store, whereby:
As the convenience of online retail grows, physical retailers who can deliver an experience that moves beyond a purely transactional format will prove most successful
Accurately anticipating the needs and behaviours of consumers is critical for retail success. Tracking the weak signals that indicate change in consumer behaviour is hugely important for brands who are looking to get listed with tomorrow’s retail success stories. Make sure to follow the series as we take a closer look at the current and emerging success stories in physical retail in posts to come and by signing up to our Trend Updates.
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