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.

Social Networking, Meet 3-D Shopping

Something passed my desk today that caught my attention: a press release about a virtual shopping mall called VirtualEShopping.com.

While I’m usually skeptical about these newfangled tools, I did check this one out … and it was pretty cool.

Something passed my desk today that caught my attention: a press release about a virtual shopping mall called VirtualEShopping.com.

While I’m usually skeptical about these newfangled tools, I did check this one out … and it was pretty cool.

Here’s how it works: After going to the site and downloading the free mall software that’s required, you enter a virtual 3-D shopping mall that looks very realistic. Once in the mall, you can create avatars or personas to represent yourself, interact with other shoppers and view storefronts.

Here’s what really got my attention: Some big retailers are partnering with the site. A quick look at the website’s advertiser directory shows hundreds of retailers — from familiar ones like Apple, Best Buy and Foot Locker to less well-known online retailers such as PrankPlace, Preschoolians and ShopIrish — advertising their wares on the site.

The website offers retailers a number of ways to woo customers to shop, including the following:
∗ offer coupons;
∗ salesbots (or pop-up ads) and virtual salespeople in front of their stores promoting merchandise and specials; and
∗ storefront signage, mall carts, billboards and information kiosks promoting the same.

Special events like seminars, concerts, guest appearances and contests are held on the main stage in the mall atrium.

VirtualEShopping.com also offers social networking features. An “I Want It/I Got It” section allows shoppers to share images and links of their favorite items with friends. Other features include a special dates section that makes it easier for friends to remember gift-giving occasions; a shopping tips chat function; and a section to share favorite stores. The site also grabs a snapshot of a shopper’s mall persona to represent each user in the social networking section. Registered users can invite friends to meet them in the mall at a prearranged day and time.

VirtualEShopping.com appeals to many demographics: Gen Xers who like to socialize in malls; moms with young children who can’t shop during store hours but who like to shop with friends; and even tech-types who prefer a more robust interface.

Hey, maybe I’m partial to these virtual worlds since we’ve had some very successful virtual trade shows here at eM+C. (In fact, to register for the on-demand version of our most recent, All About eMail, click here. It’ll be up and running until Feb. 16.) But really, VirtualEShopping.com is cool. Check it out.