Since the dawn of the digital age, economists, industry experts, ongoing retail trends, and consumer behaviors have all pointed to the changing portrait of the retail landscape. We’ve seen rolling hills transformed into a series of peaks and valleys as the image is weathered by the storms of change.
Much has happened to influence this transformation. The Internet has moved mountains, changing practically every aspect of our lives in mere decades. A struggling economy has gnawed away at the foundation of the business as we’ve fought through a life-changing recession for millions of Americans. These and hundreds of other influences impact our lives on a day-to-day basis and have had a dramatic and lasting impression on the retail customer, and the retail company.
We often talk about the growing demands of the retail customer, and how this can influence retail performance. But it’s not just retail sales that have been influenced by the tides of change. In fact, by most accounts it was a strong holiday season for America’s retailers. Consumer confidence has surged, thanks to low unemployment, and reports have indicated that holiday spending is up double digits over last year’s comparable sales. We can no longer simply focus on the way our customers spend. Today, retail trends demand that our attention clearly focuses on the way customers shop.
A Shift in the Shopping Experience
The traditional image of shopping malls packed with shoppers isn’t necessarily fading away, but it’s definitely providing us with a different picture. Several department store chains have performed poorly and/or below expectations leading to retail icons such as Macy’s, Sears, Kmart, Kohls, J.C. Penney, and others facing forbidding challenges in the new year.
It’s no secret where shoppers are turning instead of department stores. According to multiple reports, American consumers spent a record high $91.7 billion online over the holiday season alone, up 11% over 2015. Discount stores have also performed well, thriving at the expense of their higher-priced department store counterparts.
On the other hand, this past week Macy’s announced that 68 locations around the country will soon close, with a total of 100 store closures planned in the immediate future. Some 10,000 employees will be cut as well. Sears also announced that 78 more Kmart stores and 26 flagship retail locations would close this spring, with as many as 150 store closings in the works.
The closing of many of the department stores that anchor malls across the country are also likely to change the way traditional malls operate. With stores like Macy’s, Sears, J.C. Penney, and others leaving this space, the malls must find ways to adjust. Such changes can impact other lease agreements, overall mall traffic, and a host of other factors.
Traditional department store retailers can’t reverse retail trends that have been years in the making, and must accept the need for a new way of approaching the business. Consumers have grown steadily more comfortable making their purchases online, and at their own convenience. They’ve come to expect low prices, deep discounting, and a huge selection of rapidly changing merchandise—all factors that undercut the classic department store model.
What’s Next?
Does this necessarily point to the death of the retail department store? Not necessarily. But the ongoing struggles of department stores during the 2016 holidays should serve to reinforce the idea that retail is evolving quickly, and perhaps at a much faster pace than many traditional retailers may have anticipated. Survival clearly depends on the retailer’s ability to react to these changes, embrace retail technology, adopt omni-channel resources, and aggressively pursue new and innovative ways to appeal to the retail customer.
By the same respect, the picture might not be as grim as some anticipate. Despite these recent closures, the United States is still considered by many to be oversaturated with stores, with an access of available shopping space. According to a recent article in Business Insider, The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia—the next two countries with the highest retail space per capita.
“Across retail overall the US has too much space and too many shops,” said Neil Saunders, CEO of the retail consulting firm Conlumino. “As shopping patterns have changed, some of those shops are also in the wrong place and are of the wrong size or configuration.” If retailers in other nations can find success, there’s no reason why we shouldn’t be able to adapt as well.
It’s going to be another year of transition for many retail companies, and for some it may conclude as a year of reckoning. But as traditional department store retailers try to compete in an environment in which consumers can buy virtually any item by browsing online and without setting foot in a store, all signs point to a need to adapt and change.
In loss prevention, this only further underscores our need to evolve with the needs of the business. Finding ways to enhance profits becomes paramount in times of transition, and our efforts to reduce losses can have a direct and lasting impact on the success of the business. Keeping current with the dynamic retail trends that shape the retail industry exponentially increases our value to the organization, and will ultimately influence how the profession is perceived and how the future of retail will unfold.
For more on how loss prevention can influence the future of retail, please see the LP Magazine article “The Evolution of the Retail Loss Prevention Professional” by clicking here.