Do we really need physical storefronts anymore? At a time when it’s so much easier to head online to place an order for everything from pizza to pens to shoes, shirts, and sofas, under what circumstances do we absolutely have to leave home and stand in line at a store to make a purchase?
Turns out, not as often as you might have guessed, as the recent bankruptcies and closures of The Limited, American Apparel, Wet Seal, Aeropostale and Pacific Sunwear can attest.
Now that technology has progressed enough to show us what we would look like in clothes based on body measurements we provide, a la Levi’s Made to Order jeans, and we can arrange entire rooms in our homes on-screen, what, exactly, do we need physical storefronts for? Amazon and its Prime delivery service has spoiled us with the convenience of placing an order online and receiving it at no additional shipping cost two days later. No longer just for books, you can set up an ongoing pantry subscription so that paper towels, diapers, and potato chips arrive on your doorstep just as you’re about to run out.
So are declining sales at some of the nation’s leading retailers a sign that physical storefronts have run their course?
We’re Witnessing An Evolution
No, says Ken Morris, principal, and Perry Kramer, vice president and practice lead at Boston Retail Partners.
“[Brick-and-mortar] isn’t dead, it’s evolving,” says Kramer.
During the 2016 holiday season, overall sales were up, but for many companies, sales shifted online – where margins are smaller – from the traditional brick-and-mortar environment, where margins are healthier, he explains. Retailers right now are trying to figure out how to adapt; the ones that have adapted are thriving.
“Stores are no longer stores, they are distribution points for products,” says Morris. And retailers like Restoration Hardware (RH) understand that. RH has showroom stores to provide inspiration and style guidance but “they’re not really selling anything there,” he says. “It’s like a giant 3D real-time catalog.”
The trick to surviving in the new convenience economy is competing on the service experience, says Kramer, citing Apple stores as an example of a retailer that has done a good job of providing customers with an experience. They can try new products, ask questions of knowledgeable sales associates and learn how best to use them. “Apple stores are full in any mall,” he points out.
Meijer is another savvy retailer that understands the importance of the experience for shoppers. Its annual back-to-school Meijer Mania nights for college students is an in-store party that gets local students excited about shopping there. In addition to providing bus transportation from campus to the store, Meijer entertains the students who participate. In years past, stores have had mechanical bulls, rock climbing walls, and oversized photo booths set up in addition to a live DJ. The memorable night is designed to forge a shopping relationship that endures until graduation and beyond.
Morris describes another success story in Mario Batali’s Eataly, the “theatre of shopping” in Boston’s Prudential Center. At Eataly, you can eat at one of three restaurants, shop for groceries, and learn how to cook all under one roof.
It’s going to be critical for retailers to offer their customers more than just a shopping opportunity, but an experience.
Revisiting The Supply Chain
At the heart of the current retail challenge is the disconnect between e-commerce and storefront operations. Companies are selling things at lower margins online, explains Kramer, which only serves to incentivize shoppers to go there, rather than visit a store. “Retailers need to revisit the supply chain and rework stores to ship and pack at lower cost,” he says. “There’s a lot of growing going on,” as stores try to figure out how to make the two platforms coexist profitably.
It’s still a work-in-progress, as Q4 results show.
While news that Macy’s will shutter at least 100 of its 728 stores in 2017 sent shock waves through the retail community, Morris and Kramer took the consolidation as a good sign – a sign that Macy’s has a plan to get its costs under control.
Explains Joanna Arhontis, author of The New Retail Revolution: Bricks and Mortar Stores are not Dead Just Different, “Brick-and-mortar stores have not embraced online. They have tried to take their stores and put them online and have left out the experience. They don't quite understand how to engage with the customer like we do in-store. We have to bring that to life online. The consumer needs the retailer to engage with them.”
“Understand that it is even harder to keep the consumer on your webpage if you don't grab their attention in the first 5-10 seconds,” she says. “You lose them and may never get them back. You as the retailer need to give them as much knowledge and information as if they were standing in your store.
Retailers that will continue to struggle are those selling a commodity, says Morris. “They have to figure out how to differentiate themselves.”
