Consumers’ changing behavior, it seems, still has retailers reeling, but solutions for improvement in the increasingly complex retail environment, really aren’t that complex.
Speaking at a user conference for corporate demand visibility provider 7thonline in New York Thursday, Deborah Weinswig, managing director for Fung Global Retail & Technology, broke it down into one really clear conclusion—and while it isn’t a new one, brands still don’t seem to get it.
Put simply, consumers want fewer things and more experiences.
“The consumer still wants to go into stores, but she wants an experience. And what are stores not giving her?” Weinswig posed, noting that despite knowledge of what consumers want, retailers aren’t really giving it to them.
How to make retail fun again
Shifting shopper preferences and price deflation have curbed spending on clothing and footwear, capsule collections are seeing more success and minimalism has gone mainstream.
Most retailers could stand to lessen their store counts and square footage, though others could just use that square footage more wisely.
Retailers could consider—if they ventured a bit outside of the box—clearing out space to make room for startups that consumers could start interacting with and feel like they “discovered” something, for example. Department stores could make beauty categories more fun and interactive. Store associates could be more interactive and more engaged. Brands might even consider (and some already have) adding coffee shops to their stores and encouraging shoppers to “check in” so that their friends know where they are in and that it’s cool to be there.
“Shopping can be fun. We can make it fun again,” Weinswig said.
How to make retail profitable again
More than just fun, retailers can make shopping profitable again.
The success of made-up holidays like Alibaba’s 11.11 and Amazon’s Prime Day show that consumers like a hyped up excuse to shop, where they feel like the deals they’re getting are increasing the value of what they buy.
In a very short period of time, Alibaba, China’s major e-commerce company, has taken Nov. 11 from a nondescript day to one that brought in roughly $525 million in sales in 2015 and could drum up more than $2 million this year based on how growth patterns have gone.
Offline purchases still comprise more than 90 percent of sales, but online accounts for most of the growth. In the second quarter this year, U.S. online retail sales were just 8.1% of total sales, up from just 4.8% growth in the same period five years ago. That’s where brands have the biggest opportunity to tap consumers for additional dollars.
“Sell them what they don’t know that they want,” Weinswig said.
Who will benefit in 2016/2017?
Fashion at a value will win in the second half of this year, according to Weinswig, as retailers continue to experience deflationary pricing and further bifurcation of the market.
More specifically, T.J. Maxx will emerge with the greatest spoils.
“T.J. Maxx is bigger than the entire department store sector from a market cap perspective,” Weinswig said before repeating the comment to drive the point home, and adding that brands should consider that when making product and looking at who they’re making it for.
The off-price retailer is winning because it offers shoppers an experience. There’s an element of discovery there, where consumers can visit, find something they didn’t expect to and then tell their friends all about it. Most retailers still leave little (or nothing) for consumers to write home about after shopping in their stores.
Who is closing stores? Who is opening them?
The point about experience and value is further driven home when looking at which brands are closing stores and which are opening them.
In a chart outlining announced store closures in 2016, Office Depot led with 400 closures, followed by Men’s Warehouse/Jos A. Bank with 250, The Children’s Place with 200 and Gap with 175.
Looking at those retailers opening stores, Dollar General led with 1,000 store openings this year, followed by Forever 21 with 600, 400 for H&M and 350 for Dollar Tree.
Discount and fast fashion retailers are accelerating store openings as consumers continue to choose value.
What’s happening with malls?
The number of malls is reaching a plateau this year, and in the future there will be fewer—but higher quality—malls.
Only 20 percent of malls (the elite, A malls) generate 72 percent of all mall sales. The struggling, lower sales per square footage D malls don’t even account for 1 percent of all mall sales.
“About 30 percent of retail real estate in the U.S. should be eliminated in order to increase profitability,” Weinswig said.
Exported retail formats make for more competition
Budget and Internet retail brands are coming from Europe to the U.S. and vice versa, and the moves will make for even more competition.
With this new wave of exported retail formats, Amazon Fashion, Primark, Asos, Boohoo, T.K. Maxx and Saks Off 5th, will be the ones to watch.
What role will 3-D printing play in all of this?
If there were one thing that could single-handedly elevate the consumer shopping experience, 3-D might be it.
“We’re changing the way we do things in terms of 3-D printing,” Weinswig said.
Now consumers can get things like custom earphones 3-D printed and scarves with their names on them in a matter of one or two days, or even within minutes. If shoppers have the opportunity and the access to do these types of personalized, customized things in stores, that will be a retail experience.
“This is how you create theater in your stores,” Weinswig said.
What if a consumer could go into a store and buy a handbag or a clutch and put a personalized little emoji on it right there in the store? That’t the type of question brands should be asking themselves and the type of experience to consider for drumming up much-needed foot traffic.
“I do think there’s a huge opportunity to drive additional sales,” Weinswig said. “And that’s what I think it’s all about right now.”