The Death of Retail?

Kevin Gervais

In the business world, we often speak of disruption. Traditional businesses being shaken to their cores by factors like technology, being forced to rethink their businesses, approaches, or products. Perhaps this is nowhere truer than in the retail industry – more precisely brick and mortar retail.

While business prognosticators have been saying “retail is dead” for years, with no true apocalypse to fulfill their claims, they might be on the brink of vindication. After earnings dropped by 19 percent, Radio Shack, which has one of the largest footprints of any American retailer with more than 5,200 stores in the U.S., announced it will close up to 1,100 stores. Staples will close 225 of its 1,846 stores in North America by the end of 2015 after similar turmoil; Best Buy plans to close 100 of its 1,100 locations; and many analysts project that Sears, once a paragon of retailing success and the nation’s largest retailer, will close one quarter of its American stores in the next few years. And it appears to be only the tip of the iceberg: consumer perceptions of traditional retail are declining as well. According to Millward Brown Optimor’s BrandZ Top 100 Most Valuable Global Brands, only five of the top 100 most valuable brands in the world are from the traditional retail sector, and the majority of them are falling in the rankings.

What is happening to take down these common household names and titans of the business world?

The obvious answer is online shopping. After all, the lean operating models of online retailers make the large comfortable retail stores look wasteful, impractical, and even indulgent. According to a recent article in Forbes, there are 46 square feet of retail space for every American. Indeed, shoppers are looking to the convenience (shopping at 2 a.m. from your sofa in your pajamas), selection (42,465 results found!), and price advantage (comparing prices with one click) are moving online. Online shopping broke all records last holiday season, overwhelming even UPS and DHL.

The transaction itself is secondary – and can easily, maybe preferably, be done online.

However, the true answer may lie in something deeper – perhaps a shift in expectations on the part of the shopper. True shoppers (coincidentally the ones that spend the most money) know that shopping is not really about the transaction. It is actually about the experience, the process. They are the ones that revel in the discovery, the creation, the imagination that the act of shopping sparks. The transaction itself is secondary – and can easily, maybe preferably, be done online. Hence what retailers are calling the phenomenon of “showrooming:” what consumers do when they visit stores, try things on, look around, and pick their top choice items, but go online to make the purchase. Retailers who understand this, the ones who understand the power of the shopping experience, are actually thriving by leveraging their understanding of what consumers want.

Letting go of the notion that a store is a mechanism to deliver goods from buyer to seller allows great brands to use the physical space to create a journey into the brand’s universe. We’ve heard plenty about the Apple stores, but they were revolutionary in recognizing the shifting role of brick and mortar stores. The stores were a space for customers (many PC customers at that!) to interact with the brand. Dedicating an entire wall of a high street emporium to a free service in the Genius Bar was seemingly inefficient and overly costly, but revolutionized the way that the Apple brand engaged with its customer. Regardless of whether you bought an Apple product there, somewhere else, or not at all, you were welcome.

Indeed, some brands are following closely in those footsteps. Online men’s clothing retailer Bonobos has built an enormously loyal following, and has 10 “Guideshops” nationwide, in which customers are welcome to try things on, choose different colors and patterns, and immerse themselves in all things Bonobos, with the help of a stylist (they call them Guides), and a drink from the fully stocked bar, but without the ability to take anything home. Brand enthusiasts can order online from the store, do so in their own home, or not at all, but the shops are not for buying. Concept stores and pop up stores are furthering supporting this evolution. Shopping is not just about the transaction. It is about knowing and experiencing, a social activity built around meeting people, and physically discovering, touching and appreciating products.

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