Department stores are on their way out, and specialty stores won’t be far behind, according to Scott Galloway, professor of marketing at NYU’s Stern School of Business.
Galloway led a discussion surrounding the latest retail trends at ReCode’s Code Commerce conference last week, and told his captive audience that the mall-based giants are “dead, whether they know it or not.”
“Young people and time-starved consumers won’t put up with this format anymore,” he said, referring to the sprawling, meandering nature of department stores, which he views as a time and energy suck for shoppers with busy lives. “No millennial under the age of 40 with any options will ever take an escalator to shop,” he added.
Instead, the department store model—characterized by a wide selection of products—has been “eaten alive” by Amazon, which is the No. 1 search engine for products, beating out Google. Consumers are able to choose from a near-limitless selection, but target their searches to save time.
More people have a Prime membership in their household (78 percent) than own a landline (47 percent) or voted in the last election (50 percent), Galloway said. “There’s essentially two retail economies—Amazon, and everyone else,” he added.
The company’s unrelenting rise is a death knell for retailers that can’t keep up with changing consumer appetites.
“Specialty retail is about to get their turn at the woodshed,” Galloway said, adding that these channels will go through the same disruption that department stores have for the past decade. There have been a total of 6,096 specialty store closures in 2019 alone, he noted.
“You’re basically paying a margin for experience, and for someone who has better taste than you. [Brand] voice and merchandising are the core values,” he said—and they aren’t enough to keep consumers from scrolling through their smartphones to find the best deal.
As Instagram continues to grow as both a discovery and retail platform, it will pull market share away from specialty stores. And though people are looking at Amazon as being the disruptor of specialty retail, Galloway believes that fast fashion has actually taken more market share from the stores.
Fast fashion’s time may be coming to an end, too, he said, with Inditex and H&M faltering in recent years.
So what kind of retail has the potential to make a mark on the industry?
Galloway argued that the most disruptive force in apparel is secondhand, which has tapped into sustainability concerns worrying younger consumers. People want to do more with less, and now more than ever, they need to, Galloway said.
Driven by the appetites of young Gen Z and millennial shoppers, the secondhand market is projected to be bigger than fast fashion by 2028. More than half (51 percent) of consumers say they plan to spend more time in secondhand stores over the next five years, and 39 percent said they planned to spend less time in department stores.
Galloway pointed to online re-sale site The RealReal as a force that could truly re-shape the apparel industry. But when it comes to other technology companies that paint themselves as disruptors, he was flippant about their ultimate impact.
“I believe we’re in an era of non-innovation,” Galloway said pointedly.
“Some very well-publicized companies, many of whom will be on this stage, give us the illusion—mostly fueled by the media—that we’re in this enormous era of innovation,” he said, pointing to a “tyrannical onslaught of technology” that has bred monopolies within the industry.
“We seem to have lost the script and no longer hold these firms to the same account that we’ve held every other company in the history of our economy,” he added.