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Retail apocalypse? Mere culling of the herd? Whatever you want to call the decline of brick-and-mortar retail – and it’s getting worse, according to a few recent reports – it’s not good. That said, there is always opportunity in the strangest of places.
According to Coresight Research, U.S. merchants this year already have said they will shutter nearly 6,000 physical retail locations – that’s more than the nearly 5,900 closings for the entire year of 2018. A longer-term retail outlook, this one from investment firm UBS, said that an estimated 75,000 brick-and-mortar stores are likely to shut down by 2026.
The reason for all that?
Well, it’s not really a surprise: online shopping. UBS reported the average U.S. household spent $5,200 online last year, an increase of nearly 50 percent from five years earlier. And the report added that online shopping is expected to make up 25 percent of retail sales, with around 16 percent of overall sales made online.
It’s often pointed out that most retail spending still takes place in physical merchant locations, and that’s true – but as various observers have pointed out, the traditional brick-and-mortar business model is well on its way to apparent extinction.
In a PYMNTS column from earlier this year about the death of the physical store model, Karen Webster went beyond the demise of Sears to explore how 2018 financial reports for those stores and other factors foreshadowed coming trouble for that model. As she wrote, anyone who wants to operate a physical store must convince consumers it’s worth their time to go there to shop – but that won’t be a slam-dunk for traditional retailers. That’s because over the last half decade, customers have been trained that walking into a store isn’t nearly as satisfying or productive an experience as shopping online.
That said, many of those same merchants are trying to play hard at one of the hottest games in retail these days: offering consumers an experience, usually tied to digital or mobile, instead of what amounts to relatively old-fashioned transactions and selling.
Take high-end retailer Neiman Marcus, which offers one of the newest examples of this trend. It aims to open what it describes as a “multi-level retail experience” at a new development in Manhattan. The move comes as the retailer is looking to build a luxury platform, and recently appointed two executives to lead its customer and store strategies. The store itself, which is scheduled to open on Friday (March 15), will host three levels of luxury fashion and dining at The Shops and Restaurants at Hudson Yards. The 188,000-square-foot space is said to house three dining options along with iconic and emerging brands as well as exclusive products.
Will It Work?
Well, there’s more bad news for brick-and-mortar fans betting on such efforts to bring some sort of revival to physical retail: Those pushes might not work.
That’s at least the early, indicating message of another finding from Coresight Research: that offering such experiential consumer programs inside stores doesn’t serve to increase foot traffic, at least when it comes to stores located inside malls. In fact, there seems to be little evidence that anything really works when it comes to luring consumers back to malls, which were home to some two generations of U.S. economic life, to saying nothing of leisure and culture.
All this bad news for brick-and-mortal retail shows the promise of omnichannel retail – which, just a few years ago, was among the biggest promises for the physical store model – hasn’t really gained traction, at least not as its advocates imagined in all those interviews and white papers.
Sure, there is increasing merchant deployment of buy-online-pickup-in-store programs, and other offerings that seek to combine the online and offline store experience. But as Vijay Sondhi, CEO of NMI, said in a recent PYMNTS interview about the omnichannel experience, “omnichannel is still clunky.”
Whatever term you use, brick-and-mortar retail does seem to be entering into an “end of days” of sorts, but online merchants will be there to pick up the slack.
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