Apocalypse? No. Retail faces a reset
Is the retail industry sinking in a quagmire of its own making? Is it succumbing to a heartless assault by Amazon.com, or are we witnessing a transformation wrought by a convergence of technological, economic and behavioral trends?
At this year’s Global Retailing Conference hosted by the Terry J. Lundgren Center for Retailing at the University of Arizona in Tucson, the conversation included references to the “Fourth Industrial Revolution” and the “Retail Apocalypse.”
“Wall Street has a list of retailers on a death watch,” said Tom Schwarztrauber, director – global category management & strategic planning North America, Nestlé Purina PetCare. He cited predictions from financial analysts that as many as 80,000 stores would likely close in the U.S. over the next five years.
Large as that number is, it’s about seven percent of current total retail locations, according to the U.S. Census American FactFinder. By comparison, 13 percent of 2017 total retail sales were transacted online, the U.S. Dept. of Commerce reported.
While it may be easy to blame the bulk of the disruption on Amazon, Mr. Schwarztrauber added, “It’s only part of what is happening.”
In fact, physical retailers face multiple sources of pressure that threaten their businesses.
“Shoppers are in charge now, due to the presence of the inter-web,” he said. “They are no longer geographically contained around local stores. The nation is over-stored. There has been a fragmentation of the mass market. Manufacturing scale has gone out the window. The internet has permanently blown up the purchase funnel.”
What steps should retailers take to ensure a relevant, prosperous future? Mr. Schwarztrauber offered advice across several areas of business practice. Now that the era of growth by expanding store counts is over, he urged retailers to cultivate shopper communities by creating experiential environments through storytelling and focusing less on what suppliers want them to sell and more on what, where and how shoppers want to buy. With mass selling losing much of its relevance, he stressed the importance of making shoppers fell like you know their needs.
Further, retailers need a new set of metrics to support these new customer-centric approaches. They should find ways to put customer experience measures on their performance dashboards in addition to sales and conversion metrics.
Mr. Schwarztrauber told the audience to advance beyond a survival from quarter-to-quarter mindset. Track those who are thriving and emulate them.
And forget “omnichannel.” Start planning around the moments you have as a retailer to gain your shoppers’ attention and connect with them.
DISCUSSION QUESTIONS: Is it time to bury the retail apocalypse trope and start a more thoughtful dialog about transformation? What practices do you think will enable retailers to prevail in the next era? What practices will lead them to ruin?