What the Hell Is Happening to Retail?

Retail is having a moment right now. Since the calendar flipped to 2017, we’ve seen more bankruptcies than all of last year. What’s going on?

Retail is having a moment right now.

Since the calendar flipped to 2017, we’ve seen more bankruptcies than all of last year, including some consumer electronics chains like RadioShack (again), hhgregg and Sears. Just recently, hhgregg announced it was going a step further, closing all of its remaining stores and liquidating all products.

The doom-and-gloom news has, of course, extended well beyond the CE industry. Some major stores — JCPenney, Macy’s, Payless, Lululemon, Urban Outfitters and more — have all announced either store closures or seen their stocks tumble to new lows. Ralph Lauren even announced that it was closing its flagship Polo store on Fifth Avenue in New York.

Mind you, all of this is happening at a time when the economy is very much out of the recession phase, consumer spending and confidence are up and the economic outlook has been nothing short of rosy.

So What Gives?

So what the hell is going on? Is this the end of retail? Is the apocalypse upon us?

The answer to any of those questions, as you’d expect, isn’t so straightforward.

Yes, this is a very dark time for retail. A lot of things are up in the air. Brick-and-mortar stores are facing some incredibly difficult times. But that doesn’t mean the entire industry is about to go kaput.

The Atlantic recently published a deep dive into the current state of the retail industry, and its explanation couldn’t have been more accurate — it’s probably the closest thing to a complete answer we’ll be able to find. The analysis points to three main causes for the “Retail Meltdown of 2017”:

  • The rise of online shopping,
  • the existence of faaaaar too many malls,
  • and a major shift in how consumers are spending money.

All of those make perfect sense. No industry understands the impact of online shopping better than the consumer electronics space, which has seen billions of dollars in business go to Amazon. Since 2010, the e-commerce giant’s sales in North America have quadrupled from around $16 billion to more than $80 billion last year. And in 2016, Amazon’s growth alone accounted for more than half of all online sales growth.

There’s also the mobile wallet affect. Since 2010, The Atlantic pointed out, mobile shopping has grown from less than 2 percent of digital spending to 20 percent last year.

As for the declining footprint of malls, there are roughly 1,100 in existence today. That’s down from the peak of about 1,500 (all of which were built between 1956 and 2005). So nearly a third have closed in the last decade. Further, while all of those malls have closed, not a single new one has been built.

Whereas malls used to serve as the cornerstone of local communities, the era of expansion resulted in an oversaturation of malls. When you take into account the number of malls and outdoor shopping centers throughout the U.S. — which brings the total up to more than 7,500 — and break it down by “gross leasable area,” as one research firm did, the U.S. far outpaces the rest of the world.

shopping center study

Lastly, The Atlantic hit on consumer spending trends. Here, it notes that Americans have shifted from a materialistic mindset to one where we’d rather spend money on going out with friends for food and drinks. A fair point.

A Shifting Retail Paradigm

The message in all of this is really geared toward the larger national retail chains. The downturn in physical retail square footage goes to show that, in the era of omnichannel retail, there’s no need to expand your brick-and-mortar footprint in order to boost sales. Rather than needing more locations, companies need a stronger e-commerce strategy. Easier typed out by a blogger than implemented by a retailer.

But what about the smaller stores?

If anything, all of the mall closures are positive for the specialty guys out there. With less competition in those local markets, consumers who still prefer to shop in-person are more likely to turn to you.

But that doesn’t mean you can continue to operate as you always have. Just like we wrote about in our analysis of Staples’ new strategy to drive foot traffic, local shops need to continue to drive home in consumers’ minds why their stores matter. You have to find that personal touch, something that separates you from the national chain, and can entice consumers to come walk through your showroom. It doesn’t have to be a co-working space. Maybe it’s free delivery if they live within so many miles, or same-day installation for orders over a certain price threshold. Heck, maybe it’s even just outstanding personal service from your salesfloor team.

Retail isn’t going anywhere. There’s always going to be a need for a physical place where people can come in and experience a product. The only difference today is that consumers need a little more enticing to get out from behind their computers. The onus is on the retailer to prove its worth in its communities. If you can do that, the “Retail Meltdown of 2017” will mean absolutely nothing to you.

Can Brands Really Make Us Happy?

Can brands really make us happy? If you ask any brand marketer, the answer is clearly “yes.” And even more so if you ask marketing staff from Coca-Cola, McDonald’s, Dove and now LuLuLemon, all of which have spent substantial marketing resources on associating their brands with “happy.”

Can brands really make us happy? If you ask any brand marketer, the answer is clearly “yes.” And even more so if you ask marketing staff from Coca-Cola, McDonald’s, Dove and now LuLuLemon, all of which have spent substantial marketing resources on associating their brands with “happy.”

But do consumers consciously purchase products with the sole purpose of achieving happiness? And if so, it is a conscious drive or among the 90 percent of our thoughts that drive our behavior from our unconscious mind?

According to Steve Quartz, professor at California Institute of Technology, we do, but mostly unwittingly, as emotional purchases are often unconscious. Quartz, a one-time believer that consumerism or the drive to buy stuff did not generate happiness, changed his tune after creating a consumer neuroscience project to further explore the psychological impact of buying. As stated in his article, which appeared on PBS.org, here’s what he learned:

We found that asking people to merely look at products they considered “cool” sparked a pattern of activation in a part of the brain known as the medial prefrontal cortex.

Quartz continues to explain that the brain activity resulting from seeing something deemed to be cool, and contemplating owning that coolness, is similar to how the brain responds when we receive a compliment, or feel that someone else values the brands or they have gone up in social status or peer approval. These are the same feelings we get when we anticipate love or rewards, or feel connectedness as we actually experience hormonal rushes of dopamine and oxytocin.

If the above is true, then it makes sense that adding visual and social coolness to your product packaging will increase attention and sales to even failing products as the cool score can actually trump other decision influencers. A case in point is that this very approach made big dollars for Proctor and Gamble when it redesigned the packages for Clairol Herbal Essences, a failing brand it bought in 2001 and decided to reinvent, per its packaging appeal in 2006.

P&G added a total happy appeal to its product, replacing the clunky dull pink rectangle bottle with vibrant-colored, shaped bottles that actually nestled together, making the purchase of the shampoo and conditioner pair more attractive – visually and emotionally. In addition to creating a more energetic shape, they added fun, happy language and changed the names of each product to reflect that new, inviting energy. P&G also uses fun language that reflects the persona of its target consumers and added riddles to the bottles. If you wanted the answer to the riddle on the shampoo bottle, you needed the conditioner, too. Post-repackaging, with a more vibrant, fun, shaped bottle and adding elements of happiness through language and interaction, sales soared. Products like Color Me Happy and Hello Hydration rose to the Top 10 products for shampoo sales in 2014, according to research from Statista.

In recent years, McDonald’s jumped on the happiness bandwagon with its 2014 Super Bowl advertisement, “Pay With Lovin.”Instead of focusing on its products or building appeal for new products, the entire 60-second TV spot showed cashiers surprising customers by telling them to pay for their purchase with gestures of love toward another instead of money. The impact of happy customers doing happy dances and calling home to say “I love you, Mom” produced some happy results for McDonald’s, as well as happy customers. In just two weeks of running the ad, the McDonald’s brand perception rating went from 30 percent positive or neutral to 85 percent positive or neutral, per a March 2015 article on adweek.com.

Aligning with happiness seems to be working well for Coca-Cola, too. It has a website dedicated to happiness quotes, music and tips. Its corporate social responsibility program is built all around giving people free gifts out of Coke vending machines at shopping malls, the Happiness Truck in underprivileged communities worldwide, and so much more. I’m pretty sure the marketing team and shareholders alike are happy with the brand’s 96 million likes on Facebook and sales of more than 1.7 billion servings of its product daily.

How you can add happiness to your brand’s marketing:

1. Learn What Moves Your Customers: Every personality has style, color, energy, art and more preferences. What are those associated with your target consumer? I was working with an agency that creates ads for auto dealers. We did a psychology-based marketing audit of its customers for a specific car and learned the creative was spot-off in its ads. The psychology profile for potential buyers was bright colors, high-energy visuals, and action/adventure-oriented themes. Its ad featuring a white car, sitting still in a parking lot, was doing nothing. We changed it up and changed response.

2. Know Your Data: Skip the transactional data and focus on behavioral data that is aligned with emotions. As mentioned earlier, we learned from neuromarketers that 90 percent of our thoughts and subsequent actions are driven by emotions, not conscious thought processes upon which our past transactions are based. Invest in programs that help you understand patterns, attitudes, emotional needs based upon behavior science, generational and cultural influences.

3. Share the Love: Remember, customers are people with strong emotional needs that go far beyond the products they purchase. And they are more than a name on a data field with a dollar value assigned to it. Create customer journeys that provide joy, relief and comfort along the way with your brand, and put in place return policies and customer service protocols that make them “Happy” when working with you vs. frustrated or anxious.

Most importantly, have fun creating opportunities for your customers and speaking with them on their terms, and from their own persona. When you have fun and create happiness on the job, it is simply contagious. And that’s a good thing to spread.