A renowned luxury fashion brand announces deep job cuts. A multinational discount shoe retailer files for bankruptcy protection. A major department store chain, once the biggest name in retail, admits that its future is now in doubt.
These examples are just a sampling of the stunning headlines coming out of the retail sector. Dubbed the “retail apocalypse,” the recent wave of retail closures is one of the biggest the business world has ever seen.
(Source: Business Insider)
So, what’s causing retail’s meltdown? E-commerce and the undeniable dominance of Amazon is one obvious answer, but as a recent Atlantic article points out, the full story is more complex than that. For one, the closure of many brick-and-mortar stores is a direct result of “the death of malls.” America has way too many malls, and the decline is an inevitable correction of the market.
The Atlantic also puts the blame on shifting customer preferences. More people today value experiences over material things, so while a Millennial might not think twice about shelling out a couple thousand dollars on a beach vacation, she might be more hesitant to go to a mall and buy a pair of jeans.
The scary part: We’re in the early days of the retail apocalypse. “This is creating a slow-rolling crisis,” Mark Cohen, director of retail studies, explains to Business Insider. “The people that work in retail stores will lose their jobs, then spend less money in retail stores because they are no longer employed. That creates a cascade of economic challenges.”
Experts estimate that more than 3,000 stores will close over the next several months.
How retailers are bucking the trend
It’s not all bad news for retailers. Companies like Nordstrom, Walmart and Dick’s Sporting Goods actually plan to open more stores in the next 12 months. But in order to reinvigorate sales, the retail industry needs to reimagine the customer experience—and it needs to do so quickly.
One way companies are bucking the trend is by driving costs down. For instance, Dollar General, which plans to open 1,000 new stores this year, finds success by keeping its prices low and minimizing labor and infrastructure costs while offering a wide breadth of products. The low-cost strategy, however, isn’t appropriate for all retailers. For many high-end companies, for instance, discounting prices will hurt both their revenue and their brand equity.
Other retail companies are placing their bets on experiential retailing. Athleisure companies like Nike, Adidas and Lululemon have recently opened concept stores that provide a more engaging brand experience for customers.
In a similar move, many retailers are investing in new technologies in their stores. From beacons to virtual reality, companies are experimenting with new ways to make the brick-and-mortar experience seamless and more enjoyable than before.
These approaches are promising, but they won’t succeed in driving sales unless they’re grounded in an understanding of retail customers. The meltdown of many retailers today is a byproduct of not anticipating what customers need and want. Many retailers struggling today failed to see the rise of e-commerce and the evolving consumer attitudes towards malls. To drive sales, the retail sector needs to close the gap between what customers want and what the industry is offering.
87 percent of retailers are now prioritizing customer retention over revenue.
The good news: Retailers seem to be waking up to the call of customer-centricity. A 2017 report shows that over 87 percent of retailers are now prioritizing customer retention over revenue, and 83 percent recognize that customers are now in control of the brand-customer experience.
But in the end, retailers need to demonstrate to their customers that they’re listening. The brands that use customer intelligence to drive business decisions are more likely to survive the retail apocalypse. In this time of uncertainty, getting closer to and building trust with customers has never been more critical.