Tuesday, February 25, 2014

When This “New Era” Of Retailing Arrives

The next era in retail is coming and it may well involve fewer and smaller stores. The days of the “big box” stores look to have a diminishing luster to them. Sears has closed nearly 300 stores since 2010 and that includes their flagship store in Chicago this coming April. J. C. Penney's, Macy's and Target are all reducing stores and personnel and this is just the beginning. 
 
There is an indication that there is a shift in the retail environment and it's one that will continue. According to the International Council of Shopping Centers, 44 percent of annual store closings announced since 2010 have occurred in the first quarter. Will this year's closings indicate or confirm the emergence of a new trend?
The Internet and online shopping is the usually identified as the reason for fewer and fewer visits to the local mall. This past holiday season saw a 12% increase online and around 15% decrease in mall foot traffic, so is the mall concept dying? 
 
"Any time you stop building a product, that's usually the best indication that the customer doesn't want it anymore," said Rick Caruso. You do know that there has not been a new indoor mall built in America since 2006. 
 
That's not to say there aren't a number of ways to grow new retail business. Retailers just need a new approach. An approach that looks to the lifestyle of its customers. More than three quarters of retail transactions are still made at brick-and- mortar locations, but how was your last in-store experience? Did it involve anything more than you and a transaction device, which may or may not have been attended to by a cogent individual? Retail is far more than just a pure transaction

Experts say that shopping needs to be “an experience”. That experience is what builds a connection between consumers and a retailer's brand. Many of us aging “boomers” can still recall the shopping experiences of old most fondly. Retailers need to lose the boring physical store experiences .

Technology

Some large retailers are exploring the technology to track shoppers within the store itself. There are apps which will send tailored offers to smart phones as shoppers reach a certain section of the store; recommending items based on past purchases; or allowing shoppers to program an automated shopping list. Is there a line between helpful and creepy, and when does one cross it? 
 
What are the key factors that determine how much information a shopper is willing to share? 52 percent of shoppers are willing to share information with retailers if they get a discount on their next purchase and shoppers are more willing to share information with high-end stores. Just remember that Nieman Marcus has had their digital network hacked lately. When will shopper rethink their privacy concerns?

Perhaps the best approach to growing retail is to simply get back to the basics, give the better service and attention to detail. In short, put the customer first. I, myself, have quit patronizing stores which put the self-checkout as a prima facie of customer service.

Relocation

Wal-Mart, one of those big-box discount retailers, is in need of a bricks-and-mortar makeover – or so some analysts have suggested. The world's largest retailer gave a disappointing full-year forecast, based upon its recent lackluster sales and the expected sharp cuts in food stamp benefits or higher payroll taxes that will hit the disposable income of its core customers. Cold weather and a reduction in food stamp benefits can't the only reasons.

Analysts have also called for Wal-Mart to move its stores closer to major population centers, shrink the square footage of its superstores and shutter about 100 under-performing U.S. locations. "It appears increasingly uneconomic for the customer to drive 20 to 30 miles, or even 20 to 30 minutes, round trip to a supercenter to save a marginal amount on consumable goods.

Apparently Wal-Mart has listened. They have recently said that they are doubling the number of smaller new stores originally planned to open this year. The smaller stores will allow the retailer to reach new customers, particularly in urban areas. This may also appeal to shoppers who want to pick up groceries and other staples mid-week, as they need not go out to the super-centers. Comparable sales at the smaller stores rose 5 percent last quarter, compared to an overall 0.4 percent drop in the United States. Wal-Mart now plans to open between 270 and 300 small stores this fiscal year and is spending an extra $600 million to do so.

One in five Wal-Mart shoppers relies on food stamps and by some accounts, that may also apply to their employees. Last year's cuts to benefits under the Supplemental Nutrition Assistance Program have been particularly painful for Wal-Mart, both in their bottom line and in the public relations field. How ironic it is that Wal-Mart helped create the low-wage economy. The big box development model -- built on cheap land on the edge of the community with taxpayers subsidizing your hard costs of transportation and infrastructure.

As Edward McMahon  put it so clearly, “The two things that have kept Wal-Mart out of cities were its inflexibility on design issues and opposition from labor unions and civic activists who oppose the company because of its low wages and negative impact on existing local businesses. Now that it appears that Wal-Mart is willing (when pushed by local government) to adapt its stores to the urban environment, it is likely only a matter of time before the retail giant moves into cities all over the country and cities that want good design are going to have to demand it.

On December 4, 2013 Wal-Mart opened its first two stores in Washington, DC and the new stores illustrate the lengths to which brick and mortar retailers will go to get into rapidly growing urban markets. Having the world’s largest retailer interested in locating in the city where we’ve lost almost every other department store over the last four decades — that is a good thing.

Target, Whole Foods, Safeway, Giant, and other chains are also breaking the old rules. Smaller buildings, stores in multi-story buildings or in mixed use developments. The Euclid Kroger, for all of their hype, is not breaking new ground.

In some ways, the idea of national chains opening big new urban stores is a return to the way things once were. In 1960, we called it department store. Today we call it a Walmart.
Edward McMahon

2 comments:

Unknown said...

I'm probably not representative, but I'm not clear why anyone would want to physically go to a store to pick out most items. I can certainly understand for items that need a 'hands on' approach but virtual reality / augmented reality can at least take care of the visual portion of some of those things as well, and 3D printing can take care of some items at home.

Add to that that some changes really only happen in new generations of people; if you grew up shopping in a real store (which most shoppers today did), you might be more resistant to changing over to online shopping than younger people would be. I would love to see information on demographics -- what ages are shopping retail now? Are 12 year olds shopping retail as much as a decade ago?

I think brick-and-mortar retail will continue shrinking for some time. That will probably manifest as fewer, smaller stores.

Unknown said...

I'm probably not representative, but I'm not clear why anyone would want to physically go to a store to pick out most items. I can certainly understand for items that need a 'hands on' approach but virtual reality / augmented reality can at least take care of the visual portion of some of those things as well, and 3D printing can take care of some items at home.

Add to that that some changes really only happen in new generations of people; if you grew up shopping in a real store (which most shoppers today did), you might be more resistant to changing over to online shopping than younger people would be. I would love to see information on demographics -- what ages are shopping retail now? Are 12 year olds shopping retail as much as a decade ago?

I think brick-and-mortar retail will continue shrinking for some time. That will probably manifest as fewer, smaller stores.