Can Innovation Save Traditional Retail?
For Baby Boomers and Gen Xers, the stores of their youth are disappearing. While Toys ‘R’ Us is the latest major retailer to liquidate and close, the U.S. retail market has also seen Sears and J C Penney close many locations. Claire’s, a mainstay of many shopping malls, recently filed for Chapter 11 bankruptcy protection.
There’s a widespread perception that malls across the U.S. are dying. But according to “Consumers Match Analysts’ Confidence in Malls,” research shows “about 165 million consumers went to a mall in the past three months” and that “82% of adults believe that shopping malls will still exist in the next five to 10 years.
However, online retailers are outperforming traditional brick and mortar retailers. According to Deloitte’s 2017 Holiday Survey, more shoppers planned to buy gifts online than in stores. But it’s not just online retailers like Amazon and Walmart (yes, they are a “traditional” retailer, but they are also a big player in e-commerce) who are taking business away from traditional stores. Traditional retailers are also seeing competition from multi-level marketing (or network marketing) companies.
The problem is more than that of customers purchasing “a product” online or through a friend or acquaintance. When a shopper is not walking through the doors of a retailer, the revenue lost is that of their intended purchase, and that of any impulse purchases that could take place during that shopping trip. For example, research shows that 84% of Americans make impulse purchases and that 8 out of 10 impulse purchases are made in a store. The corresponding revenue loss can be significant.
All of this does point to the death of traditional retailers and malls. But that doesn’t have to be the case. Retail is ripe for widespread innovation. Perhaps ripe is not the right word – retail desperately needs to innovate in order to survive, and eventually thrive again.
Innovation in Retail
Earlier this winter the National Retail Federation held its annual tradeshow. This year the show featured an Innovation Lab, which provided a “who’s-who look at all of the top retail innovations and start-ups out there.” These innovations ranged from ways to enhance the online shopping experience, expand mobile shopping experiences, and even bring AR and VR into the shopping environment. Other innovations focused on back-office operations and warehouse operations. All of which are cool and potentially helpful to the bottom line but do nothing to bring shoppers back in to stores. And that’s where innovation can play a meaningful role for traditional brick and mortar retailers.
The Answer: Bring People Back to Stores
There’s no one answer to how to bring people back in to stores. But if retailers (and shopping mall management companies) make this their primary mission, that innovation can take many forms. It should all be focused on making the experience of being in the store meaningful, engaging, worthwhile, and maybe even fun. Research from the International Council of Shopping Centers (ICSC) shows that shopping centers “need to create an engaging experience that combines shopping and entertainment.”
That might incorporate new technologies, or it might be – like Nordstrom – understanding that the brand’s value is in its customer service, and making customer service the cornerstone of the shopping experience. Maybe it’s turning shopping malls into mixed-use spaces. The key is to make the physical shopping experience so enjoyable and rewarding that it becomes more compelling than the ease of making a few clicks and having a product show up at one’s door.