Walking throughout your local shopping district, whether it is in New York, Chicago, Los Angeles, or anywhere in between, the ghosts of empty storefronts are haunting the retail industry. The darkened, empty, open spaces are a stark reminder of a business that just was not selling enough to stay.
There is no denying that we are amid a time of change in the retail sector. For years now, the industry has been talking of a retail-apocalypse, which officially started in 2010. The beginning was marked with stores closing in droves. In the 9 years since, we have seen the pendulum swing drastically to the ecommerce, direct-to-consumer side, with brands questioning whether they need brick-and-mortar at all. Brick-and-mortar retailers have trimmed their least successful doors, and some have shuttered completely.
High rents coupled with unpredictable changes in consumer tastes and behavior has ultimately led to closures for many. Have we seen the worst of it, or is the worst yet to come? Is what is happening even that bad? 2017 was a record-breaking year for the retail industry in the U.S. and 2018 saw growth month after month. The face of the market, though, is evolving.
What we do know is that retailers, developers, and mall groups are spinning their wheels and experimenting with many new strategies to figure out what the new secret sauce in retail is going to be. Needless to say, there is an apparent change happening in this sector. The companies that are embracing this change will come out stronger in the end.
Just Google “retail chapter 11” and you will see what appears to be a dark, ominous cloud over the industry. It seems as though no one is really safe from bankruptcy. Are most retailers really just one bad lease term away from going under?
Even more retailers are reducing their store count by closing large numbers of doors across the country. This year alone will mark store closings for the likes of Victoria’s Secret(53 stores), JCPenney(at least 24 stores), Family Dollar(390 stores), Gymboree(800 stores), Payless Shoe Source(all stores), Gap(290 stores), Macy’s(8 stores) and countless others. Even Barney’s New York, a champion for independent designers, has entered Bankruptcy and immediately released a plan to close a significant number of doors.
So how do you escape the fate of brand after brand that is struggling to find their footing? Well, if we knew the exact answer we would be running for the 2020 election, but we’ve got some insight.
To start, let’s talk competition. E-commerce giants like Amazon are definitely giving traditional retailers a run for their money. As an emerging brand, to think that Amazon is notyour competition is to set yourself up for failure. They are everyone’s competition. You may not have the capital that they do, or the expansive reach to consumers, but you still need to pay attention to their strategies and what is making them win the consumer dollar in such high volume.
Studies have shown however that, while these e-comm giants are really putting a squeeze on other mainstream retailers, it is small companies with either less than 100 employees or less than $10 million in revenue that are experiencing rapid growth and thriving business. Also of importance, is to be able to see and communicate your advantages over retailers like these. While they are admittedly easy and convenient to shop, most people would not term the experience necessarily a pleasurable one. What is your brand story? What is so great about your product? Your story and any curation you provide of your line is really what can set you apart from a company like Amazon.
Being small means being nimble. A small brand has the advantage of being able to react quickly to changing markets, new retail trends, and direct feedback from their consumers. Transitional times in the market also provide opportunities for major growth for businesses that are ready to take advantage of white space
Here, we’ll point to five trends that are set to reshape retail in the coming year.
- Shopping is getting emotional
Consumer spending is being lead with emotions over wallets. Millennials are driving the push for corporate responsibility, social consciousness and sustainability. This has already impacted how retail brands both present and position themselves. This has created an environment of culture coders, brands creating a customer experience beyond retail. The next generations are putting their dollars where their morals are. They want to feel a part of something bigger than themselves when they make a purchase. They want to know that they are contributing to something positive, other than the positive figures in some unknown guy’s bank account.
- Digitally native brands are showing up IRL
Mall groups are courting digitally native brands to freshen up their stale persona. New York’s Hudson Yards’ second level “Floor of Discovery” is specifically for new-to-New York and digitally native brands just entering physical retail. Some physical retail spaces may be appropriate to act as a brand showroom where consumers can try your product, then order to ship directly to their home rather than stocking inventory in store for people to purchase and walk out with their item.
- Pop-ups are getting big sponsorship
Pop-up shops are not new. They are still gaining in popularity and some cities are even prioritizing pop-ups in order to keep empty storefronts from depressing entire neighborhoods. Major retailers are also looking to get into benefits of pop-ups and new brand discovery. The Market at Macy’s provides independent brands with a physical retail environment at a reasonable cost to the brand. This could be a great way to test a new market and to attract new customers. Physical retail space operating costs need to be looked at as a marketing opportunity as well as a retail channel. Don’t forget that lines are your friends. Give your customers a reason to wait in line for what you have to offer. I recently saw an hour-plus line form and grow through torrential down pouring rain, thunder and lightning for a Milk Bar ice cream pop up. The line itself was it’s own form of marketing. If 100 people are looking at your website at the same time, no one really know. If 100 people are waiting in line to get into your store, it entices people to stop and jump in line right behind them to be a part of the action. At the very least, people will ask questions about what is going on and follow up by looking up what brand is causing such hype.
- Bargaining power is falling in the hands of the brand
Physical retail used to be the only way to connect with your consumer. Those days are gone. There are so many opportunities for brands to speak directly to and develop relationships with their consumers. A digitally native brand with clout and a dedicated following has the upper hand in negotiations with physical retail developers when negotiating lease terms. These days, a recognized DTC brand that lands a physical retail location can attract consumers to a location that may otherwise not have been on their radar. Separately, when choosing a physical retail location, whether it’s stand-alone, a mixed brand pop up, or mall being aware of the surrounding brands is important. Who are you sitting next to? What types of consumer will they attract and will they be inline with yours?
- Malls are shifting focus from department store anchors
Malls used to be anchored by one or two major department stores that would serve the purpose of attracting a large amount of customers. Major department stores have been struggling and are not creating the pull the used to. Now, forward-thinking mall groups are looking more at the total experience offered to the consumer. Better restaurants, buzzy digitally native brands, community art installations, and experiential features are now becoming the major draw. Shoppers want to know that if they are taking the time to make the trip to a mall that they are really going to be getting an experience and not just an opportunity to shop.