Nearly 4,200 retail store closures have been announced nationwide this year in the United States, from the likes of Victoria’s Secret, Tesla, Abercrombie & Fitch, Gap, J.C. Penney and even Amazon.
Yes, even the strongest brands aren’t immune from issues, and while Amazon closing pop-up shops in Whole Foods stores isn’t quite the same as Gap shutting down all 230 of its stores, the message is still out there: Things are changing in the brick-and-mortar world — and it’s not just the rise in digital shopping that is to be blamed for it. In this post, we’ll take a closer look at how retail stores are trending and what factors need to be taken into consideration to avoid future closures.
The Current State of the Retail Industry
Before we get too much into 2019, it’s first worth revisiting 2018. More than 5,500 stores were closed last year, a number that was actually down from a year before when more than 8,100 were shuttered in 2017. At the same time, e-Commerce sales are on the upswing. In 2017, they increased from 9 percent of all retail sales to 10 percent. Last year, they increased again, and this year they’re projected to increase to up to 11 percent. By 2021, e-Commerce retail projects to be at almost 14 percent.
Yes, rising e-Commerce sales are taking more revenue away from traditional brick-and-mortar stores. But at the same time, the National Retail Federation (NRF) says that brick-and-mortar revenue, overall, is going up. According to the NRF, retail revenue in physical stores are expected to increase by up to 4.5 percent from a year ago. And digital sales aren’t the entire problem, because many traditional retailers also offer online purchasing options — so there’s a bit of double dipping going on in some cases. The bigger issue when it comes to shuttering retailers is that they’ve failed to embrace change and lived with outdated sales strategies in a time when adaptation is so direly needed. It’s not so much a death sentence on brick-and-mortar retailers as it is on ineffective leadership and business management.
Why Physical Stores Still Matter
If you need proof that physical retail stores still matter, you needn’t look any further than stores like Target and Best Buy. Let’s focus on Best Buy for a moment, an electronics store that is becoming one of the best case studies for brick-and-mortar resurgence after being left for dead years ago. And what’s really notable about Best Buy is that its resurgence came without any significant store closures.
So, why is Best Buy the poster child of a retailer comeback? Consider this: Back in 2012, the company was in chaos. Sales were low and so was the stock. Then came Hubert Joly, a new CEO, with the daunting task of turning around an electronics store in an increasingly digital retail world. By completely revamping the way Best Buy did things, cutting waste and working smarter, Best Buy’s comeback began about 2 years later after a successful Black Friday. Today, if you walk into a Best Buy, you’ll find many stores-within-a-store, notably when it comes to cell phone service providers. It also adjusted prices, added omnichannel retailing, and embraced the Internet with buy online, pickup in store options. In other words, Best Buy acknowledged its competitors and the increasing digital environment to adapt to it. This is unlike several of its former competitors, like Circuit City and Radio Shack.
Target is an example of another retailer that has fully embraced the Internet, and used it to its advantage.
It’s proof that physical stores still matter, they just need a concrete business plan to work with. Those who haven’t figured that out are now paying for it — and surely there will be more stores that follow suit now and in the future. But those that realize the need to change the way things are done are much more likely to have staying power.
In a world where even Amazon is closing its pop up stores, brick-and-mortar retailers need to work hard to ensure the products or services they’re offering cannot be acquired anywhere else. It’s the key to their survival.