What we know: retail is radically different than it was 10 years ago, the new consumer doesn’t care about retailers trying to hold onto their decades-old ways and consumers will only want to shop in stores if the product is wildly compelling or if the experience somehow is.
What we don’t know: how to navigate any of that.
But there’s hope yet for retail, according to panelists speaking on a Texworld USA panel Monday on “Shifting Consumer Purchasing Patterns Spell Opportunity for the Nimble Retailer.” That opportunity, however, won’t come without some revelations first.
“We are in a very disruptive, transformational time in our industry and it’s because of one person: the consumer,” Judith Russell, global marketing strategist for Nilit, said.
That consumer is doing more with less time. She’s more connected with the rest of the world than ever before. She’s moving back to the city, paring down in the “stuff” department. She’s prioritizing filling her free time with travel and experience and exercise over filling her closet with clothes. And when she does decide to shop, she’s spending more and more time doing it online.
“It’s pretty clear that the retail environment has shifted,” Russell said. “Shoppers of all ages—and I’m not just talking about Millennials anymore—are spending an average of five hours a week making online purchases and that’s up from nothing a year ago.” Eighty percent of Americans have made an online purchase in the past month.
Another thing we know? Amazon is taking over everything and those that don’t play nice with it may only end up hurting themselves.
Nike—after years of holding out—recently agreed to sell some of its product on Amazon once it became clear that third-party sellers peddling its product were cutting into its pie.
“If you’re a brand and you don’t have an Amazon strategy, I suggest you get one pretty quickly,” Russell said.
In case that’s not unnerving enough: Amazon increased the number of apparel and accessory products on its site by 87 percent last year and its apparel sales reached $16.3 billion, according to an Internet Retailer report. What’s more, Amazon will add $50 billion in apparel sales in the next five years.
“According to a research report done by Goldman Sachs, if the current rate continues, the online penetration of total apparel sales will grow to 25 percent by 2020, double the level at the close of 2015,” Russell explained. “The accelerating trend will add another $50 billion in online apparel sales by 2020 —equal to the total category sales of Macy’s, Nordstrom and Kohl’s combined.”
The brands that “get it,” like Lululemon, Adidas, Superdry, Vetements, Free People, Victoria’s Secret and True & Co, according to Russell are doing five things right: they’re offering compelling, curated product; they’re providing superior customer experiences; they provide convenience, selection and service; they offer exclusivity and differentiation; and they connect with their consumers.
“There really is a need and a value for telling a story, being authentic and just creating product that goes above and beyond and does a little bit more,” Russell said. “It’s important to come to grips with the fact that the consumer is in complete control…If you’re not talking to your customer directly via social media, via whatever platform, then how are you really to know what she thinks of you, what she needs, what she wants?”
Chiming in on the state of stores, Bob McGee, senior editor for Formula4 Media and Sports Insight Extra, said citing a recent Fung Global Retail & Technology report, that 5,321 store closures have already been announced this year—a 218 percent spike over last year.
[Read more on the Fung Global retail report: Fung Global: 218% Spike in Store Closures a Necessary First Step]
And many of these store closures have come with the slew of retail bankruptcies we’ve seen this year. Since June alone, four retailers (Gymboree, Papaya, Sears Canada and Alfred Angelo) have filed for bankruptcy. Since last year, there have been at least 10 more.
The good news among all that bad news, according to McGee, is that the consolidation of retail space will bring higher operating leverage and greater productivity from remaining stores.
The bright spot in brick-and-mortar has been at specialty stores, which have so far proven themselves better at really connecting with their consumers and telling them an appealing story—whether it’s that the product is locally made or has a sustainability slant or completely transforming what it means for a woman to buy a bra—it’s curated and it’s compelling. Simply selling stuff and then marking it down won’t cut it.
For those brands that still can’t wrap their stores around that idea, the bankruptcies will continue. Even for the big brands we once never conceived could be uprooted.
“I think by this time next year, we’ll know who of the larges will still be alive,” McGee said. “The one’s that just sell stuff, sayonara.”