What is the retail apocalypse?
The retail apocalypse is the shutting down of brick and motor stores in North America, starting in 2010 and still continuing onward.
Over 12,000 stores have closed since than and the estimation is that around 75,000 stores will be closed by 2026 which majorly includes clothing, electronics and furniture.
More than 5,600 stores announced their closure in 2019 ! Shocking?
Let me phrase another crazy fact!
On single day on March - 1,100 stores closed!
Today my topic is not particularly regarding the closure of retail stores as such but to talk about the real judgement of this apocalypse. To come out with final answer to the question:
is this apocalypse positive or negative in the long run?
Let’s talk about a few factors responsible behind these closures:
⦁ Online Shopping –
We all are aware of this factor and very much involved for shopping of almost everything online. Since everything is becoming digital now and things are marketed upon “one click sell only” concept, consumers tend to get inclined to more and more used to easy and convenient online shopping. On average every brand having both platforms have around 16% sales via online shopping which is expected to rise to 25% by 2025.
⦁ Over -Supply of malls –
Between 1970 to 2015 there was huge increase in development of new malls every year. The growth rate of malls in this period was twice the growth rate of population and as result, there was decline in mall visits by 50%. There appear to be many clearance signs on almost every store in these malls.
⦁ Change in Lifestyle –
With the change in generation the priorities of consumers are also changing. Earlier generations used to invest a lot on materialistic things like clothes, jewelry, furniture but millennial and Gen Z generation prioritizes more upon experiencing life and adventures. Their lifestyle is different rather than investing money upon materialistic things they believe in investing money on experiences. They spend money on traveling, trying out new restaurants and hanging out.
Every mall does have food courts and other dining places, but they don’t cater to experiences and are mainly product focused. This is a reason why malls have started evolving, about which I will discuss in my article later.
⦁ Bankruptcy Declaration –
Many big and small brands are declaring bankruptcies. Below is a list of major brands that declared bankruptcies in 2018 and 2019 which includes Diesel, Payless, Charlotte russe, Forever 21, Mattress Firm, David’s Bridal and many more. Amazon is not only to be blamed but these brands themselves are also responsible for this – major factors such as mounting debt and lack of adaptability according to frequent changes in consumer demands have largely contributed to a spike in retail bankruptcies.
As I stated earlier in this article, I will be discussing that whether this is positive or negative apocalypse.
So, my answer to this is that this is a positive apocalypse in the long run!
Now you might say that how could closing of stores be good?
In order to find this answer let’s dig more and talk about the impacts of this apocalypse.
⦁ Digital Rise-
There is no doubt in this that rate of people buying online is increasing every year, but this is also true that percentage of money spent in physical stores is 3 times more than money spent online. This closing of stores doesn’t mean that retail death is coming. It means that transformation is coming.
Analysts need time in order to collect data about consumer behavior. Analyst now are focusing towards analyzing the reaction of consumers on closure of stores. Based upon which business developers are opening new stores with new technologies accordingly.
64% of retailers are opening new stores in 2019 which is more than the percentage of stores closing.
You could say it in this way that one part of cycle is over, and second part of transformation has started.
⦁ Shopping Malls Transformation –
The reason behind opening malls in the first place was providing many stores at single place.
Now the malls understand shifting consumer wants and needs and started focusing on bringing the experience of many things to one place instead of bringing just stores to one place. Earlier people used to meet at malls during the day to catch up with friends and shopping but now they choose this destination for experiences and entertainment.
One recent big example of this is Hudson Yards, in New York. Recently I was lucky enough to be a part of guest lecture where guest speaker was the event coordinating manager for Hudson Yards. We were talking about this retail apocalypse situation with her. I asked her that why did Hudson Yards investors chose to open and invest in this mall when other malls are shutting down. She gave a reply in one statement which was the answer to many other questions regarding the future of malls globally, and especially in the United States.
The event coordinating manager replied to us that Hudson Yards doesn’t call itself a mall, they believe that they are creating a neighborhood, and they are giving a luxury experience that their target consumer love. They are offering great food, party places, apartments, offices, shopping stores and all this at one place. They have focused on almost all kinds of brands – Luxury brands, fast-fashion and middle brands.
According to analysts, the “Retail Apocalypse” is a myth. They are looking at the numbers of sales, new opening stores and occupancy rate which states the story otherwise. That is one of the reasons I have landed upon the conclusion that this is a positive apocalypse. They believe that this is a myth which was started by media just upon looking at closing rate and not looking and analyzing other numbers.
Now a question might come that what in case of bankruptcy then?
Many companies have declared bankruptcy, but it doesn’t mean that they are dead. There are many companies still functioning great who would have declared bankruptcy in 2005- 2010 many airlines company like United, Delta, American Airlines come under this category. Declaring bankruptcy also presents an opportunity to restructure the company while continuing to work.
Although E-Commerce is occupying large space every year in comparison to the previous one, brick and mortar is still above it in terms of sales, traffic and engagement. This change was majorly a step towards transformation which is needed by every store in order to keep their space exciting and entertaining for their consumers.
The closure of stores is taken as downsizing but in reality, we can consider this more as a “right sizing” of chain stores, as many may have simply over expanded in the last 10-20 years and are now re calibrating their business model.
Brick and mortar are still an existing story and will continue existing for long. The key is to keep growing with technology and keeping consumers entertained.