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The Great Retail Myth: Brick-and-Mortar Stores Are Dying

Posted By Administration, Thursday, June 19, 2014
Updated: Tuesday, June 17, 2014

by Dwight D. Hill, The Retail Advisory LLC


A rumor based on few facts began circulating in the press several years ago. It sounded something like the following: "…retail stores are dying…" or "…the store is dead…" or even better "…e-commerce is making the store irrelevant…" These headlines certainly have garnered attention and continue to do so. Who can argue the point given the store closure announcements we are inundated with almost on a daily basis? Here are a few announcements for anyone who may have missed them1:

  • Abercrombie & Fitch: 180 stores closed by 2015
  • Barnes & Noble: approximately 33% of stores will close over the next 10 years
  • Aeropostale: 40-50 stores to close in 2014, for a total of 175 over the next few years
  • JCPenney: 33 stores to close in 2014
  • Office Depot: 22 stores to closes in the new combined entity
  • Sears Holdings: 300 stores closing
  • Staples: 225 stores closing

Thus it's hard not to be a pessimist in this environment and it's certainly troubling to see these headlines – and we're not even approaching the "dying mall" topic that is yet another story permeating media outlets. While the reasons behind each and every retailer's store closure decisions are complex and varied, they nearly all relate to dynamic shifts in consumer behavior that extend well beyond the four walls of the store.

Some of the most far-reaching trends include:

1: Store Traffic is Declining. Brick-and-mortar foot traffic during the November/December holiday season has dropped by nearly half since 2010. As a result, retailers are grappling with their store base – paying for the "if we build it they will come" real estate approach from the past several years.

2: Digital Retailing Continues to Grow Exponentially, with Growth Rates in the 13-15% Range. Consider eMarketer's April 2013 projection that online sales will grow from $225.5 billion in 2012 to $434.2 billion in 2017.2

3: Mobile Commerce: The "Store" in the Palm of Your Customer's Hand is Being Increasingly Adopted as the Channel of Choice. According to eMarketer, mobile commerce sales (including both smartphones and tablets) are projected to be $58 billion and 19% of total web sales in 2014, growing to $133 billion, nearly 27% of web sales by 2018.3

While the customer is rapidly shifting to the added convenience and transparency of the e-commerce channel, is brick-and-mortar retail doomed and does this signal the end of the retail store as we know it? Yes…AND no! These trends are forcing retailers to modify their customer experience and begin to think about their channels in a slightly different way. Consider the following questions and topic areas as a way to develop a strategy within your own brand:

1. What is your customer's journey through your brand? How does she interact with your brand and through which channels? Retailers must map the customer's journey across the brand and gain insights into how she interacts across channels. In this environment the customer is shopping brands across multiple channels and entry points and is very likely encountering inconsistencies ranging from service policies to pricing to inventory levels and service. To ensure consistency and reach the desired customer experience, retailers must map their customer's journey from initial consideration to ultimate purchase and beyond. Retailers must work diligently to engineer the customer experience that best suits their brand promise.

2. What elements of the shopping experience can be simplified or enhanced to improve conversion? Customers are demanding a convenient shopping experience across all channels. In thinking through this journey, retailers must determine how to satisfy their customer's desire for transparent information and ease in their shopping experience. According to a recent survey by Baynote, over 50% of customers use their mobile devices to compare prices during store visits, redeem coupons while in store, and look at product ratings while in store.4 Thus a cross channel dialogue must be taking place to understand and develop solutions for the root causes of failed shopping missions, or worse, customer defection.

3. How can the brick-and-mortar base be leveraged to enhance the cross channel customer experience? What elements of the mobile or e-commerce experience can be integrated into brick-and-mortar? What new metrics should be employed to measure cross channel effectiveness? Is the role of the brick-and-mortar store as simply an outlet for merchandise forever changed – in fact now rendered obsolete? Absolutely. Brick-and-mortar stores are now part product showroom, distribution center, social gathering spot, and are a critical element in the customer's shopping journey. E-commerce sales are growing at an average rate of 20% per year according the Commerce Department, but e-commerce volume remains only 10% or so of the business for most retailers. In addition, numerous studies have proven brick-and-mortar stores influence e-commerce sales – and vice versa. As a result, retailers must be developing strategies and measurement mechanisms that will enhance these cross channel sales, to ensure their own organization effectiveness does not get in the way of the customer experience.

Back to those headlines for a moment – is the brick-and-mortar store as we once knew it dead? Yes. The entity that has emerged in a cross channel environment, however, has proven to be an essential element of the customer's shopping experience and progressive retailers are working capitalize on these assets. Retailers that do not recognize or capitalize upon these trends will likely lose the customer to the competition – only one or two clicks away!

[1] "Nine Retailers Closing the Most Stores: Douglas A. McIntyre and Alexander E.M. Hess, 24/7 Wall St., March 12, 2014
[2] http://www.internetretailer.com/trends/sales/ 
[3] http://www.internetretailer.com/2014/04/21/mobile-commerce-critical-internet-retailings-future
[4] http://www.baynote.com/wp-content/uploads/2012/12/Holiday-Survey-2014-Final-PDF.pdf


Dwight D. Hill, whose background includes leadership roles with Neiman Marcus and Deloitte LLP, is Founder and Retailer Strategist, The Retail Advisory LLC.  Dwight can be reached at dhill@theretailadvisory.com.

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Tags:  Brick-and-Mortar  Cross Channel  e-commerce  Omni-Channel 

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