Talk about the death of retail is great click bait. Media outlets from the Wall Street Journal to Fortune to USA Today have trumpeted news about store closings, retail bankruptcies, and the end of retail as we know it. If we’re to believe these articles, we’ll all be buying from Amazon.com, and malls will become old age homes for Baby Boomers. And the rest of us should just close up shop now, and put an end to the pain.
The only trouble with these stories is … they’re baloney. They serve to frighten the industry, allow retail observers to pontificate endlessly, and give “everyman” a new slow-moving train wreck to watch. And they don’t do much more than that.
Following are five reasons, in no particular order, that shatter the notion that “retail is reeling.”
1 – Retail sales in the first quarter of 2017 increased 4.1% over the first quarter of 2016. As my friend Greg Buzek of IHL points out, retail has a very cyclical sales cycle. Comparing sales to a month immediately preceding it is nonsense. Think about it. Can we compare November to December, for example? Of course we can’t. One is the slow period right before Black Friday, and the other is the heat of the holiday season. If we look at those numbers, we’d think retailers are blowing the doors off. Ironically, in 2016, Easter fell in March vs. April in 2017, so by rights, we should have seen a year-over-year dampening effect in Q1. We didn’t. Retail isn’t reeling. Some retailers are. Others are doing just fine, thank you.
2 – Most of the chains closing stores have seen their problems build over decades. An infographic published on LinkedIn helpfully gave some examples of retailers closing stores. The list is instructive.
- Sears and Kmart – Two chains (one holding company) that have struggled to find their identities for more than a decade, and who have been run by someone with no retailing experience at all are closing stores. Are we surprised?
- RadioShack – Seriously? I’m sort of shocked it even got the opportunity for another go-round. Why should that chain exist anymore?
- Various specialty apparel retailers – This list includes Rue21, The Limited, Wet Seal, Bebe and American Apparel. While American Apparel has its own unique issues, the others are struggling against the emergence of Fast Fashion. Quite simply, their market is shrinking. We could argue that they over-expanded in the first place, but none of these make me gasp and say “oh my, the sky is falling.” They just didn’t keep up with changing times and tastes. Others are taking their place.
- J.C. Penney – This is a chain that has come back from the dead and a series of missteps that almost killed it off completely. Clearly the world has changed. JCP isn’t as relevant as it used to be, and its customer is aging out of the market. Shrinking the chain is a good idea, and ultimately should help it become more profitable.
- Macy’s – I’m going to give some real props to Terry Lundgren here. When Macy’s acquired May Department Stores in 2005, I thought they were in for some big trouble. Eliminating iconic banners like Marshall-Fields, Filene’s, Foley’s and others seemed very risky and the store count seemed insanely high. Yet Mr. Lundgren found his Omnichannel niche, went aggressively after Millennials and seemed to be steering the ship in the right direction. Now, fast fashion and changing tastes are threatening the behemoth. But perhaps a single chain just isn’t supposed to have that many stores. It makes for a very boring mall shopping experience, frankly.
3 – There are thousands of retail stores OPENING in 2017. Again, Mr. Buzek lists nineteen chains that have announced the opening a total of 2,861 stores in the same period that store closings were announced. Some iconic names include Dollar General and Dollar Tree, Autozone, Ulta (flying off the charts, by the way), Kroger, TJ Maxx and many others across multiple segments. And Mr. Buzek didn’t consider the many online-only retailers that are magically opening stores in every city, like Warby Parker. Category killers may be on the way out. But retailers selling interesting items and curated assortments are doing really, really well.
4 – Retailers are making long overdue investments in people. The early 2000s brought with it a move towards self-service in stores. The business model continually quoted was, “Look how well the airlines are managing self-service check-in.” My response was, and remains, “avoidance of pain does not constitute a good customer service experience.” If someone wants to self-serve, it’s really easier to do it from the comfort of their own homes. If they want to be served by robots, Google and Amazon both offer in-home robots that will find you whatever you’re looking for. But my company’s data tells us that retailers, especially those of the “big box” variety, are adding a lot of employees into their stores over the coming three years. When shoppers become confident that employees are actually adding value, they’ll come to stores. Otherwise, of course they stay home!
5 – Malls and retailers are working to bring experiences back into their doors. Aventura Mall, for example, is adding a 315,000-square-foot, three-level expansion wing that will include retailers, restaurants, contemporary art, a food hall and a VIP lounge. The wing will also include a 93-foot-high sculpture that visitors will be able to slide down. This is just one example of many. Recognizing that experiences and hospitality are a big part of the next-generation retail experience is a huge step toward continued invigoration of the formats. Microsoft and Nike have created new, far more experiential retail flagship experiences as well. They’re not alone.
I would be remiss if I didn’t highlight one area where retail MUST change; where it must shift. The industry has under-invested in technology for as long as I can remember. Also, in some cases, it has been forced to invest those scarce dollars in non-value-added functions around data security. First, the PCI-DSS standard put forth by Visa in the early 2000s, which cost hundreds of millions of dollars to implement, followed by the new EMV chip-and-signature payment standard over the last five years which required mammoth hardware and software changes. There’s value to not having your data stolen, but you can’t take it home and wear it or eat it either. Nor does it help you find the right product in stock in the right location when you’re ready to buy it.
