Retail is in a whirlwind of change. Online sales are increasing at a greater rate than retail sales overall. The downfall of large chains has captured many headlines in the last couple of years
All this shifting had prompted breathless headlines about a “retail apocalypse,” though many of the numbers indicate this conclusion to be overblown. While the number of store closures broke records in 2017 and 2018, more than five times as many retailers plan to have more stores open in 2019 than 2018 than plan to have fewer open.
According to Andrew Myers, WorkJam’s vice president of Asia Pacific and global digital strategy, and former Chief Operating Officer at Target Australia, there are four important challenges confronting the brick-and-mortar retail sector.
- Property. This one is not new for brick-and-mortar (hence the name). But it is as challenging as ever to find a property in a good location with rent that is sustainable for the business. If anything, this factor of the business has become more difficult as brick-and-mortar retailers increasingly feel the need to act as inviting showrooms as much as purveyors of goods
- Competition with online retail. This challenge is probably the most talked-about since online retail has been steadily stealing sales from brick-and-mortar for years. Storefronts have new purposes; they aren’t just places people come when they need to buy something, but places people come to gather info, connect with a brand or company, comparison shop, and spend leisure time. Shoppers who are actively in the market for an item may or may not make the final purchase at a physical store. Accordingly, storefronts that can make themselves into experiences rather than merchants will compete most effectively in this new reality.
- Cost of goods. Geopolitical and global economic forces are affecting the cost of goods. Prices on electronics or parts from China may be driven up by inflation or trade wars. Produce may cost more due to changes in the climate. Other raw goods may be made cheaper by mechanization or shifts in labor markets. Retailers must be nimble to keep up with the constant fluctuations in costs.
- Cost of labor. Retailers face inflation in the employee market as base wages are pushed up in many parts of the world by changing economic realities. Along with the changing cost of goods, the cost of labor can be difficult for retailers to afford and can shift precipitously, leaving employers scrambling.
Brick-and-mortar retail in the digital age presents some unique challenges, and more are sure to come along as the situation develops. Retailers who want to succeed should consider combining online retail with a brick-and-mortar presence.
Physical locations staffed with knowledgeable employees can act as showrooms or experiential connectors to bring shoppers into a deeper relationship with a brand. That relationship can then play out online or in-store, allowing the retailer to take advantage of both avenues to make sales.
To learn more about the challenges facing brick-and-mortar retailers and how tech solutions can help meet them, read WorkJam’s comprehensive white paper about the future of retail.