In retail, there is always a push to scale and expand while mitigating the risks that come with your storefront and stock. Modern pressures to drive down prices while your expenses keep climbing, and the fear of increased vandalism and theft make online retail an attractive avenue for growth. But should a push in this channel supplant or even replace your in-store experience and offer?
Defining the Retail Apocalypse
The term “retail apocalypse” refers to the closing of many brick-and-mortar retail stores, particularly those that sell clothing, electronics, and similar consumer goods. This trend is driven by a combination of factors, including the rise of ecommerce, changing consumer habits, and shifts in experiential retail.
The debate still rages on whether consumers are showrooming at stores like yours. Or have they shifted purchase habits so much that they’re coming in for something specific only when there’s an immediate need? As more consumers shop online and retailers struggle to compete with the convenience and lower prices offered by ecommerce giants like Amazon, many boutiques continue to close their doors.
Then came COVID-19, causing more than 200,000 additional business closures during its first year. And once you survived that gauntlet, inflation skyrocketed, and now some of the most dire predictions say that inflation could lead another 66 percent of small businesses to close. Inflation is trending in the right direction, and likely won’t harm that many businesses.
But, with those risks, perhaps shifting to an ecommerce-only model may prove fruitful.
Should You Fear This Apocalypse?
The threat of a retail apocalypse coming for your business depends on the specific retail category and your current operations. Retail businesses with a strong online presence that adapted to changing consumer habits may not be as affected by the retail apocalypse trend. Stable markets such as grocery stores, restaurants, specialty shops, and those that offer services alongside sales are likely to stay protected.
However, the trend may pose a significant threat to businesses that rely heavily on brick-and-mortar sales and have not adapted to ecommerce. The threat lives if you don’t have an alternative to pure in-store sales—from online shops or wholesales to offering subscriptions or services that support products.
Perhaps the biggest concern companies have right now is whether this apocalypse will lead to greater theft and crime. While many companies predicted that, some like Walgreens are now discussing how the “retail apocalypse” and growth of elements like self-checkout could be playing a role in declining shrinkage rates.
Should You Follow the Trend and Shut Stores?
Like any good lawyer or business mentor, the answer to this question will remain: it depends.
For some businesses, shifting focus to ecommerce may be smart. You’ll want to see how much value people get from coming into your store. Is this experience a core part of your sales? Do your shoppers browse and not know exactly what they want before coming to the door? Or are they in for something specific and looking for a fast turnaround? For the latter, an online shop with in-store pickup options may help you reach these customers and expand to national sales.
From a loss prevention standpoint, shifting stores to warehouses may reduce some risk. You’ve got reduced foot traffic that can minimize outside theft risks. Stores are designed with camera use in mind, so your location would naturally have points of visibility to minimize internal theft. Controlled access and increased monitoring also provide greater safety to staff and stock.
Many find it worth converting a storefront into a smaller warehouse for those security benefits. At the same time, you’re avoiding sunk costs if you still have time left on your lease. Then after the lease ends, you can reduce costs significantly by shifting to outsourced fulfillment centers specializing in products like yours. These companies can reduce storage and shipping costs while also preventing shrinkage.
Businesses should evaluate their specific circumstances and make the best decision for them.
Is Ecommerce Alone Right for You?
Expanding into ecommerce can generate more money for sellers in several ways. While the exact mix and opportunity depend on your sales, marketing, and products, there are several common ways that adopting online sales can improve operations.
- Increased Reach: An ecommerce platform allows sellers to reach a wider audience, including customers who may not have access to their physical store or live too far away. This can help to increase sales and drive revenue growth.
- Lower Overhead Costs: Operating an ecommerce store typically requires lower overhead costs than running a physical store. Beyond outsourcing, you can often buy in larger bulk quantities, run with a smaller staff, and reduce local advertising without a hit to overall sales. Shifting overhead may give you more money to invest in marketing and product development, driving more sales.
- Higher Profit Margins: Ecommerce businesses have the potential to increase profit margins compared to brick-and-mortar stores because they don’t have the same overhead costs.
- 24/7 Sales: With ecommerce, your doors are never closed. This can help you increase revenue by allowing customers anywhere to buy at any time. However, you need smart order processing to ensure these orders are filled quickly and accurately to drive repeat sales.
- Security and Safety: It’s often easier to secure facilities that are not open to the public. You can lock down entrances to parking lots as well as buildings. Scannable badges help you track who is entering when and where. And you can deploy more active monitoring tools to not only track shrinkage and prevent theft, but to keep your people free from harm from outside actors.
- Crime: Warehouse shrinkage is generally easier to control compared to retail. There are fewer people who can be involved in crime and more opportunities to catch potential bad actors. Your staff is also safer from violent outside crime and things like register scams. While employee theft is a risk, you’re removing many potential areas of fraud and abuse by shifting to an online model. It’s a good way to manage loss prevention without giving up sales.
Overall, expanding into ecommerce can help sellers increase their reach, lower their costs, better target shoppers, and generate more money for their business.
Would a Warning Today Be a Valid Concern or Hype?
The retail apocalypse trend is a real phenomenon that is affecting many brick-and-mortar retail businesses. But the warning that doom is all around you may be more hype at this point. Existing retailers have survived the pandemic, inflation is trending in the right direction, diesel prices (which impact inbound shipments and ecommerce deliveries) are coming down, and people are looking for work again.
The real work here is to review your operations. Does this warning highlight areas of liability that you have? Or does it show you areas where your business can thrive in the current moment? Take this potential seriously but evaluate your situation and don’t make hasty decisions based on the trend alone.
Loss prevention always has a home in a retail operation, even if you’re purely online. Don’t neglect this area of spending and investment, so that your team can maximize potential and reduce risk. While online only operations have fewer theft and loss verticals, it’s still important to keep your people and your products safe from all threats.
Jake Rheude is the vice president of marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.