The retail industry is increasingly transitioning from bricks to clicks.
According to CIT Commercial Services, a division of CIT Group, e-commerce has changed the way retailers conduct business among today’s demanding consumers, causing them to close unprofitable stores and invest in digital platforms.
In a report titled “E-Commerce Drives Retail Revolution,” CIT reiterated that consumers favor experiences over products, the furniture sector remains strong and consumer product companies selling to retail are still pursuing mergers and acquisitions.
The Millennial and teen shopper demographics are purchasing products differently from other adults. CIT found those generations have different shopping habits from their parents, opting to buy one specific item instead of multiple items when they shop at malls and stores.
“This difference can be attributed to the fact that Millennials are often accustomed to buying a specific item online rather than browsing for items in multiple stores,” said CIT commercial services president Marc Heller. “Consumers whose shopping behavior was established before the rise of e-commerce could be more likely to browse through a store or a mall, leading to the discovery of new items and greater sales.”
Instead of purchasing products, consumers today spend a majority of their funds on experiences, such as dining, health spas and vacations. Apparel and accessories sales have slowed down, compared to a few years ago where individuals spent more on clothing and handbags. Due to this shift in consumer preference, retailers are reinventing their businesses to accommodate lifestyle over materialization.
Despite lagging sales in apparel and accessories, the furniture industry continues to do well. CIT said it was busy at a recent furniture show in High Point, North Carolina. It’s not yet clear whether Asian suppliers will go direct to retail instead of using furniture companies in the U.S. for future furniture distribution.
Consumer product companies that sell to retail are also still pursuing mergers and acquisitions. They are looking to gain the front ends of businesses to increase revenue. Although acquirers may already have the warehousing and sourcing in place, acquisitions can expose them to new customers that it doesn’t already have. This locks in more revenue and exposure in the apparel, accessories and furniture industries.