Are Your Brick-and-Mortar Stores Finished? Or on the Verge of a Transformation?

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According to The Wall Street Journal retailers have announced 2,800 store closures in the last year. 

RadioShack and Payless ShoeSource stores are the major closures, accounting for half of that number. Macy's cited changing consumer behavior when it released a statement that it would be closing 68 of its 870 stores. Sears Holding Corp. reported that it was shutting down 108 Kmart stores. Sears said in a statement that the action was required to "strengthen the company's operations and fund its transformation."

Amazon is not your biggest problem.

From low-end to high-end retail outlets, the number of store closures is rising. Obviously the Internet is a big part of the reason, and Amazon is the major culprit.

Here is the thing, though. Amazon still only accounts for a 5 percent share of the total retail market. Online sales from all retailers contributed to less than 10 percent of all retail activity in 2016. That means online competition can only be partly to blame for the decline in bricks and mortar retail. A look at retail history reveals a more complex story.

Where Brick and Mortar Retailers Went Wrong

As the Internet was just starting to gain momentum, brick-and-mortar retailers, instead of investing in this new marketplace, tried to compete by building more physical locations. Eager developers were building malls at a record pace, 140 a year in the 1990s, and department stores filled them up almost as fast as they could be built. These brick-and-mortar retail stores did understand the need to compete with online retail, but they went about it in the wrong way. Instead of focusing on creating a better customer experience and investing in online technology, they tried to beat their online competitors by price discounting.

It didn't work.

Too many stores created excessive overhead by spending too much on the upkeep of their storefronts, the presentation of their merchandise, and large staffs. Employee morale sagged due to low wages and high stress, creating significant turnover, which only added to the declining customer experience. As margins grew thin, retailers didn't invest in the upkeep of their stores. All this was happening just as Amazon's Jeff Bezos made customer relations his number one priority in his squeaky clean virtual marketplace.

When Closing Stores Can Be a Good Sign

Closing stores in large numbers is never a good sign, but it is a good strategy if your company can satisfy your customers. There is still a lot of opportunity to capture the 90 percent of sales that don't happen on the Internet. The human touch is still a valuable thing. Even Amazon appreciates their customers' desire for human interaction in the physical world. That's why they purchased Whole Foods, which has more than 400 physical locations and opened seven brick-and-mortar bookstores that sell reading material and gadgets like their Kindle e-reader, Amazon Echo, and streaming media players. In addition to providing superior customer service, the Amazon brick and mortar stores focus on data-mining technologies and automation, which Internet commerce has essentially perfected.

To See The Future, Look at What Some Retailers are Doing Today

It's no secret that retailers like Amazon, Wal-mart and Target are using data mining so they can understand each customer's purchase patterns and connect them to the merchandise they are more likely to buy. For example, Amazon uses data from its online market to stock the shelves of its physical locations. That's why only the highest-rated books are available for purchase there. 

Automation is used to "enhance" the retail experience by using technology to assist customers. Recently, Walmart patented a motorized shopping cart. These robo-carts move freely and can be summoned by customers for assistance while driving safely from parking lots to docking areas after they are used. In addition, they can check inventory, and scan and retrieve items. Lowes uses autonomous robots at some of its stores to assist customers with locating items in the store. They can also check and update inventory for their sales staff. 

The outlook for brick and mortar chains committed to transformation remains positive. But you must  mine your data to offer your customers the products they want, use automation to meet customer demand during high traffic periods and offer a superior customer service experience by putting real people in front of your customers who can connect with them on a personal level.  The question remains, "Who is prepared to do all of these things?" The answer is the retail chains who will survive and prosper in the years to come.

About Brick to Click!

With decades of experience in retail marketing, Gina Lee De Freitas, President of IMM, and Corien de Jong, SVP Executive Creative Director, have the insights and strategies you need to take your in-store and online retail traffic to the next level.

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