It’s no secret that brick-and-mortar retail seems to be in crisis. The Nasdaq blog puts it bluntly: “It’s 10 years into America’s longest economic expansion, yet the retail apocalypse shows no signs of letting up; leaving in its wake thousands of abandoned malls dotting the country like ghost towns from a forgotten era.”
In 2017, the sector broke records in how much store space it relinquished — 102 million square feet. But 2018 blasted that record out of the water with the shuttering of an additional 155 million square feet of retail space in 3,800 stores. True to the trend, 2019 is on track to see even more closures, with at least 4,300 stores set to bite the dust.
According to such numbers, the sector appears to be floundering. But is it really as bad as all that? There are bright spots in the darkness, which begs the question of whether brick-and-mortar retail is really done for or simply in the midst of a profound transition as customer priorities and behaviors shift, and global markets change how goods are produced and sold.
Andrew Myers, WorkJam’s vice president of Asia Pacific and global digital strategy, and former Chief Operations Officer at Target Australia, talks about four existential challenges retailers face: finding and affording the right property, competing with online retail, the changing cost of goods, and a rise in base wages globally.
Online retail’s influence is the factor that gets the most attention. Not only does the rise of online shopping mean more competition from different quarters, but it is also shifting how customers make buying decisions.
Shoppers often use the immediacy of brick-and-mortar and the informativeness of online shopping in tandem, roaming a store with phone in hand to check product reviews or search alternate items in real time. A buyer who in previous years may have simply entered a store and made a purchase now may be expected to go through a more prolonged and complex decision-making process that retailers find harder to predict and control.
These challenges are real, but the good news for the retail sector is they don’t spell the inevitable doom of every store on the block. There will be winners and losers in this new reality for brick-and-mortar retail. Those who don’t change with the times will find it difficult to survive, while those who adapt to all these changes will thrive. Companies can shift to meet these new challenges, for example, using technology to better leverage the strength of their workforce and to understand and capitalize on trends.
Online sales comprise only 10% of total retail sales. While online sales are growing at a faster rate than retail in general, brick-and-mortar retail still dwarfs the sales volumes of Internet sales. In the first quarter of 2019 for example, U.S. retails sales totaled $1.3 trillion, while e-commerce accounted for only $137.7 billion of that amount.
The National Retail Federation also reports that retailers in food, drugs, and convenience, as well as mass merchants like Costco are opening almost four times as many stores as they are closing. And 66% of store closures in general are due to only 16 retailers that have fallen on hard times. And more than half of retailers surveyed recently say they plan to open new stores this year. More than five times as many retailers will see their store numbers increase between 2018 and 2019 as will see them fall.
Of course, these encouraging numbers do not mean that retailers are in the clear. There are massive changes afoot, and retailers that stay on the cutting edge of these developments will be able to continue competing in the marketplace for years to come.
To learn more about developments in the retail space and how you can leverage technology to stay ahead, read WorkJam’s comprehensive white paper on the future of retail.