With the closure of shopping malls and big chain stores, the retail industry has been experiencing a challenging couple of years. There has been a spate of liquidations and bankruptcies in 2017 including Sports Authority and Payless. More than 20 iconic names – including Macy’s, J.C. Penney and Sears – have announced hundreds of store closures. This cycle of bankruptcies, store closures and uncertainty is known as the ‘retail apocalypse.’
What’s causing the retail apocalypse?
Despite the gloomy picture, spending on retail is growing gradually. The National Retail Federation (NRF) predicted that retail sales would increase by between 3.7% and 4.2% in 2017. Consumers are still spending, so what’s behind the recent wave of store closures? Here are four things that could explain the retail apocalypse.
1. More people are shopping online
Global information company, The NPD Group, found that holiday shoppers will spend about 70% more online than in-store only. This percentage translates to an average spend of $793 online compared to $467 in brick-and-mortar stores. The rise of Amazon appears to have put the squeeze on physical stores. During a six-year period, Amazon’s sales increased from $16 billion to $80 billion. It’s reported that almost half of households in the U.S have an Amazon Prime membership.
The advancement of mobile shopping has also fuelled the growth in online sales. Mobile wallets and apps make it easier and more convenient to order from cell phones. Mobile commerce continues to grow – with 23.16% of all digital e-commerce dollars being spent via mobile devices.
2. Too many malls
Some commentators argue that the retail apocalypse means the death of malls, but others view the latest developments as the natural market correction from building too many malls in the first place. Known as the ‘over-retailing’ phenomenon, the U.S has roughly 26 sq. ft. of retail for every person compared to just 2.5 sq. ft. per capita in Europe.
3. Habits changing from materialism to experiences
Consumers are diverting their spending from clothes in favor of experiences like travelling and dining out. Spending on clothes is in decline but sales of food and drink services are on the increase. A cultural shift has seen millennials and their parents eating out more often. Eating out is a shared experience and is a reflection of the social media age. People are spending more on experiences they can enjoy with friends and share via social media platforms.
4. Unsustainable debt
Another possible reason for the retail apocalypse is that private equity firms bought retail chains and the retailers are now unable to repay their debt. It’s estimated that retailers will owe billions in repayments over the next few years and this level of debt has become unsustainable.
The retail apocalypse and your small business
Some ‘big boy’ retailers are clearly struggling at the moment, but what does this mean for your small business? It’s not inevitable that small business must follow where the big retailers lead. Being proactive means that there’s a good chance that your small business can reap positive benefits from the retail apocalypse.
Here are five tips to increase the chances of your small business surviving the retail apocalypse.
1. Take inspiration from those bucking the retail apocalypse trend.
It might seem like all big retailers are closing their physical stores, but there are some examples of others going the opposite way. The online giant, Amazon, has 10 mini-stores within existing Kohl’s stores. Amazon has also opened trial grocery stores and is looking to launch 15 physical stores in France. Google is also set to open physical retail stores. Smaller retailers like the online glasses specialist, Warby Parker, have physical stores and the popular ecommerce mattress company, Casper, is aiming to open 15 pop-up brick and mortar shops.
2. Up your online game.
There’s no denying that online strategy should form part of any business, regardless of the size. It can be daunting to think about your small business successfully competing with Amazon. E-commerce giants offer convenience, but consumers also want unique products that aren’t available anywhere else.
To standout in the online world, you need to think about what differentiates your service or product from everyone else’s. Turn your website into the go-to resource by writing blogs and creating other types content to keep your customers engaged with your business.
It’s a good idea to create an ecommerce plan to work out what you want to achieve and how you’ll get there. An ecommerce plan would be useful to your business even if you already have a website. Keep the following in mind when thinking about your ecommerce strategy:
- Consult experts if you need help creating your ecommerce strategy and building a website. The website is only one part of the online success of your business. An expert will give you ideas about how to market and attract traffic to your website.
- Cross-sell to boost sales. You should take every opportunity to upsell or downsell on your website. It’s up to you to present options that your customers may not have previously considered.
- Concentrate on your most popular products. Just like a physical store window, your website also needs to showcase your top products upfront. Feature top-sellers and recommended products on your home page.
3. Provide an in-store experience.
The experience economy is on the rise. This is evidenced by more spending on things like trips, concerts and dining out. Consumers have access to online shopping if they want to buy something. Increasingly, they’ll leave their homes to experience something that makes them feel good.
Starbucks’ announcement that it’s closing online stores to concentrate on in-person experience demonstrates the value of customer experiences. Consumer appetites for creative experiences have given birth to popular businesses like the Museum of Ice Cream. This space isn’t about fascinating facts about ice cream. It’s not strictly a store or an ice cream parlor, but is described by its founder as “an experience.”
Shopping malls that are bucking the retail apocalypse trend are also focusing on providing experiences for consumers. The Platform mall offers leases to retailers that provide exclusive experiences based on the mall’s location. The stores in the Platform mall have incorporated unique moments to keep customers coming back.
You’ll need to get creative if you want to use customer experiences to help your small business survive the retail apocalypse. For example, the outdoor clothing company, Eddie Bauer, designed an ‘ice box’ with temperatures as low as 10 degrees along with high-powered fans to replicate a wind chill. Customers can test clothes before they buy to see how they would fare in real life. The ‘ice box’ adds a new and fun dimension to buying winter clothes.
Any small business can take advantage of consumers’ desire for experiences. If you own a restaurant, why not have ‘meet the chef’ nights? Perhaps you own a florist. How about hosting floral arrangement classes? The possibilities are endless when it comes to providing experiences to get your customers invested in your business.
4. Focus on your values.
Consumers want to know and understand the philosophy and higher purpose of a business. These shared values help consumers to form an emotional connection with your business. The Meaningful Brands study found that:
- Adding meaning by communicating your values can increase share of wallet by nine times.
- Meaningful brands outperformed the stock market by 206% between 2006 and 2016.
- Only 32% of brands in North America are trusted.
- Retail and food are number two and three (respectively) of the world’s most meaningful industries.
- 75% of respondents expect brands to make more of a contribution to their well-being and quality of life yet only 40% believe brands are doing so.
Consumers want to know what your business stands for. As a small business owner, you’re perfectly positioned to tell your story and communicate your values. Consumers can get cynical about big business values because this can be regarded as a PR stunt. As a small business, you can talk genuinely about the higher purpose of your business and how this benefits your customer, your community and even the world.
Placing the spotlight on your values isn’t just about words. It also involves taking action to show that you’re serious and genuine. An example of a business ‘walking the talk’ of their values is the retailer, Recreational Equipment, Inc. (REI). On Black Friday, they shut down their business including retail stores and headquarters. The campaign was called #OptOutside. REI encouraged their staff to take the day off to explore the great outdoors. Sharing their values in a meaningful way paid off for REI. Last year, they reported a 9.3% increase in revenue and a 23% boost in online sales.
It isn’t necessary to close your business on the busiest shopping day of the year. Instead, you can meaningfully communicate your values by donating a percentage of your sales or volunteering your time to an aligned charity.
5. Make your store Instagram-ready.
Social media is the new word-of-mouth marketing and a social element now runs through most things we do. Finding fun ways to get your customers to showcase your business on social media can help your small business survive the retail apocalypse. This type of earned content (free media) saves on costs and increases credibility because your customers promote your business for you.
Restaurants are perfectly placed to take advantage of a social media and Instagram world. Not only are more people visiting restaurants, but pictures of food are a popular category on Instagram. People want to show their friends what they eat and where they hangout. As a restaurant owner, create a unique dish that tastes good and is camera-ready. A well-placed picture of your food posted on Instagram can increase the foot traffic in your restaurant.
As a picture is worth a thousand words, you don’t have to be a restaurateur to benefit from Instagram. Make the following tweaks to your small business to encourage your customers to use pictures to tell the story of your business:
- Make your decor Instagram-ready. The founder of The Museum of Ice Cream uses backdrops and themes that would look great on Instagram. Redecorating your whole store can be expensive, so focus on decorating one specific area – for example, your changing rooms. You could also paint an interesting mural on the wall. Your decor has to entice people to want to show their friends that they’ve discovered something cool, fun and unique.
- After you’ve decorated your Instagram-worthy area, encourage your customers to take pictures. Hang a sign somewhere visible and ask them to get clicking.
- You can run Instagram contests where you ask consumers to share a hashtag for a chance to win one of your products. You could also offer a discount to those who have found your store via Instagram.
- Find and connect with local influencers to work out a deal on promoting your business. Influencers have a large and loyal following who are likely to follow their recommendations.
Despite the widespread evidence that these are bleak days for retail, there’s research to refute the retail apocalypse theory. Apparently, 4,080 more retail stores opened in 2017 than are closing. However you wish to classify the closure of big stores, it’s wise to pay attention and get your small business prepared. Whether retail apocalypse is real or not, the above tips can only help to safeguard your business against future negative changes, even if these changes aren’t of the apocalyptic kind.
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