This Is the Real Reason Traditional Retail is Dying (Hint: It’s Not Amazon)
Failing retailers like Macy’s love to blame online shopping for their demise. “It’s all Amazon’s fault!” they cry while announcing store closures. Abandoned malls dot the country like ghost towns from a forgotten era.
But the truth about what happened to so many retailers is a lot more complicated. Just like millennials aren’t wholly to blame for killing Applebee’s, online shopping is not the only catalyst for the changing landscape of retail. Want proof? Today’s e-commerce sales account for just 8.5% of overall retail sales in the US. That means 91.5% of purchases are still being made in physical stores.
So if Amazon isn’t killing the mighty department store… what is? Read on to find out why retail is changing and where people are still shopping (page five).
Online sales are growing
Even though shopping in physical store locations is still exponentially more popular than purchasing products online, the difference between the two is that online sales are increasing while traditional retail purchases are on a rapid decline. While mall traffic virtually dries up, online sales increased a whopping 15% in 2017.
Next: This was the biggest mistake retailers made.
Retailers expanded too aggressively
Back in the 1990s, retail business was thriving, which led to a rapid expansion of store real estate that was overly aggressive. When the recession hit, those stores had far less foot traffic, and the sheer volume of retail space meant that they were never able to bounce back.
The United States currently has 23.5 square feet of retail space per person, which is insane compared to places like Canada and Australia, which have 16.4 square feet and 11.1 square feet per person respectively.
Next: People aren’t shopping the same way they used to.
Consumer shopping habits are changing
One of the biggest reasons that so many stores are failing is that people aren’t shopping the same way they used to. Rather than spending whole afternoons walking around the mall, many people prefer to shop in their pajamas at home. Shopping isn’t a pastime like it used to be — it’s more transactional.
Next: People don’t want as many things.
People are more careful with their spending
It’s not just that people are lazy — they also prefer to spend their dollars elsewhere. With a focus on experiences over possessions, downsizing, and minimalism, American consumers just aren’t falling for the line that the more you own, the better you feel. In fact, people who get stressed over having too much clutter may tell you the opposite is true.
The fewer items people buy, the less of a need there is for all those shopping malls.
Next: These stores are still performing well.
Off-price retail stores are thriving
The one thing people fail to mention when discussing the retail apocalypse is this: Not all brick and mortar stores are facing rampant closures. In fact, one sector is thriving.
Discount stores like TJ Maxx, Marshall’s, and Ross are raking in cash by offering discounted merchandise that consumers can’t find anywhere else. Their price-slashing tactics aren’t easily replicated online (plus, who wants to pay for shipping?). The experience of shopping at a discount store is like a treasure hunt, so it’s very different from shopping at traditional department stores.
Next: People spend money in these places.
Everything is more expensive
The other problem for the industry is that people simply can’t afford to shop like they used to. The rising costs of healthcare, housing, groceries, technology, and education are all affecting discretionary spending. Meanwhile, wages stay stubbornly stagnant.
Next: This is what people care about for their shopping experiences.
Price comparing is so easy
There was a time when you just went to Macy’s and bought a shirt because you liked it. Now you can go there, scan the UPC code, find the cheapest price (either in the mall or online) and make your decision that way. That’s a huge reason why electronics retailers are suffering.
Next: Here’s how retailers can win again.
It’s possible for retailers to bounce back
Contrary to what you may have heard, retail is not dead. There will always be people who want the instant gratification that comes from buying a new item in person instead of waiting for delivery. But if they want to remain competitive, retailers need to pay attention to market demand and conform their stores to changing consumer habits.
They’ll need cheaper products spread out over less floor space. But if retailers can figure out a way to cut costs and keep products enticing, their is a chance for survival no matter what Amazon does.
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