Debunking the doom and gloom myth

The retail apocalypse

Bricks and mortar retail is anything but doomed, with a series of reports indicating the sector continues to not just survive but in some cases even thrive as physical stores use the digital age to their advantage.

The statistics come despite headlines that prophesise doom and gloom in the retail sector.

Or as Inside Retail eloquently put it this week:

“The retail apocalypse myth dominates the industry narrative, spreading via sensationalist headlines about big-brand closures and bankruptcies, repeated assertions that all retail will ultimately move online, and the use of skewed statistics about retail spending trends.”

Inside Retail then went on to dedicate some serious column space to debunking the myth, and it turns out a wealth of statistics further support their claims.

Different yes, dead no

There’s little doubt the retail sector has changed and online retail is a component of many traditional retailers’ marketing strategy in the “must buy now” digital era.

But online is not having the dire impact that many previously predicted. A recent study by Australia Post, found online purchases only accounted for eight per cent of Australian retail sales in 2017.

This was a modest rise of one per cent on the year prior, and the report further predicted by 2020, 10 per cent of retail sales would be made online.

So yes, online retail is rising but not at a rate likely to devastate real-world retail any time soon.

Furthermore, when you consider a proportion of those sales have come from a real-world retailer with an additional online presence, the imminent threat dilutes even further.

Online a bricks and mortar sales tool

Instead of decimating bricks and mortar, in many cases, online acts as a vehicle in the sales process, with consumers, using it to research products, source the best price, and ascertain the availability of the stock they require.

In fact, a recent report by Boston Retail Partners found before they entered a store, shoppers were heading online to:

  • Compare prices – 76 per cent
  • Look at reviews – 62 per cent
  • Check local store inventory – 47 per cent

But that doesn’t mean they’re not entering the physical retail environment.

Earlier this year Monash Business School’s Australian Consumer, Retail and Services (ACRS) research unit released research indicating Australians are far from fleeing the physical retail environment, with 65 per cent preferring the bricks and mortar experience

Meanwhile, in many cases, real-world retail is actually growing.

Bucking the trend

In response to the endless apocalyptic predictions for real-world retail, US firm IHL Group recently conducted a comprehensive study of bricks and mortar store openings and closures, including the statistics on smaller retailers.

And the results they found indicated overall retail was bucking the doom and gloom trend.

They noted in the US in 2017, retailers and restaurants opened 4080 more locations than were closed and retail sales through to July 2017 were up US$121.5b on the same period the year prior.

Meanwhile, a further report by Business Insider found digitally native brands were part of the bricks and mortar growth, with plans to establish 850 stores across the US over the next five years.

A sector-specific rise

IHL also noted, however, the rise in retail trade was category specific. Sectors experiencing growth were:

  • Convenience/Gas up 8.4%
  • DIY and home goods up 6.8%
  • Furniture up 3.8%
  • Cosmetics and Vitamins up 4.0%
  • Restaurants up 3.0%
  • Mass Merchants, Dollar Sores and Off-price up 4.5%
  • Jewellery up 2.6%
  • Supercentres and warehouse clubs up 2.0%
  • Food and beverage stores up 1.8%

On the flip side, seven specific segments didn’t fare so well.

  • Sporting goods were down 8.1%
  • Department stores down 4.3%
  • Electronics down 1.3%
  • Clothing down 0.1%
  • Shoes down 0.9%
  • Drug stores and pharmacies down 0.9%

In Australia, the latest ABS figures illustrate a similar trend in terms of winners and losers over the month.

Their figures for August 2018 indicate the winners were:

  • Food retailing up 0.2%
  • Other retailing up 0.6%
  • Cafes, restaurants and takeaway food services up 0.4%,
  • Clothing, footwear and personal accessory retailing up 0.3%.

Meanwhile, sectors taking a small dip included:

  • Household goods retailing down 0.2%
  • Department Stores down 0.1%

Change is inevitable

There’s been a lot of talk about the death of the department store, both in Australia and the US, but according to the report by IHL, much of that may have been their own doing.

“Quite frankly, many department stores and speciality retailers got lazy in their customer service, relying on the strength of their brands,” they state.

This was a sentiment echoed in Australia earlier this year by the head of one of the nation’s most prestigious department stores.

Announcing a major revamp of their flagship Sydney store in June, David Jones CEO David Thomas told News Ltd the stores were currently “too big”, “too empty” and “too bland”.

“A lot of people ask, is the department store dying? We like to think of the department store as becoming more relevant but the way we need to run it is changing,” Mr Thomas said.

“Retail across the world has been massively disrupted by online and digital, customers are more informed and have more choice than they have ever had – that’s not going away.”

“But the physical and tangible experience of a true flagship store is fundamentally important for our business and fundamentally important to shape the customers’ view of us as a brand.”

And according to both IHL and ACRS, it’s the potential of the customer experience that real-world retailers need to embrace.

Back to bricks and mortar

According to Monash Business School’s ACRS, current trends show that Australians shop more frequently today than they did two years ago, and they do this at bricks-and-mortar stores instead of online.

“We are also seeing similar trends overseas. Nearly 80 per cent of shoppers in the US purchased more than half of their items in-store in 2017. Australian retailers need to understand that customers want the experience the physical store can bring. Retailers just need to provide it,” ACRS research unit managing director Dr Rebecca Dare told GiftGuide.

“We see trends overseas with empathic, human-centred design and advanced technologies that make shopping easier and/or more pleasurable, however, in Australia it’s all too common to see that in some cases the basics aren’t right―stock is piled high to the ceiling, merchandise is displayed poorly, and finding personalised customer service can be difficult.”

“There is a return to the importance of customer experience at physical stores. Human touches and the sensory experiences of a store visit is increasingly important, particularly with millennials, who prefer to spend more money on experiences than on material things,” Dr Dare added.

“Shoppers miss the customer experience of physical stores; ‘real life’ connection with other people, touching things and trying them on is not an experience you get online.”