Traditional Retail and the Shift to Online Shopping
If you’re a traditional fashion shopper, you’ve probably spent much of your time window shopping at retail stores. You enjoy the social aspect of it, such as grabbing a coffee and strolling around or interacting with merchants. You also love trying things on, feeling the material, seeing how it looks on “you” and not a mannequin. After all, getting a feel for a product physically is one key selling point for retailers which is something online merchants can’t provide.
Retail stores are in trouble
The traditional retail industry model is in trouble. You can see the signs, with store closures statistics increasing year by year. Business Insider reported retailers had closed a record 102 million square feet of store space in 2017, then smashed that record in 2018 by closing another 155 million square feet, according to estimates by the commercial real-estate firm CoStar Group. It is so apparent that it has been dubbed the “retail apocalypse”.
Realistically speaking, are we moving to an online only model in the coming future? Definitely not! What we will see though is an increasing shift by retailers to the online shopping space as oppose to the traditional bricks and mortar (B&M). Retail store space will shrink significantly but will never disappear, as we see today.
It’s all about customer experience
If you’re a customer, an important aspect of shopping is customer experience. If you reside in a densely populated urban city or metro area, then you probably know what I’m talking about. To get to the mall on a weekend; the traffic, construction, parking (paid in some regions), and crowds are major deterrents. Add to that finding an item, waiting for changing rooms, the line to pay, dealing with some of the not-so-friendly staff and it becomes a task only for the die-hard shopper.
In many cases, shoppers are forced to make an online purchase not by choice but out of necessity. You’ve gone to a department store, after seeing a pretty dress on their website, only to find it’s not available in that store. Or you’ve found that perfect shoe, but the size 6 is a bit tight, and the 7 has some space, you figure you’re a 6.5 in that style, but you’re not sure and they don’t have a 6.5.
You’re faced with the decision to order online, get it shipped to you, or forget about it. It’s hard to say no to a good find so you order it, but it still leaves a bad taste in your mouth. You feel disappointed because the expectation is that retail stores provide products you can try on, in your size. That is one of the key advantages B&M stores have over online retailers and that benefit is slowly deteriorating.
Why retail stores struggle to adapt
As a result of the challenges retail stores are facing, they’ve acknowledged the need to have a strong online presence, and specifically with subscription service offerings of their own. Lululemon announced in 2018 that it is testing a $128 annual subscription service. For that amount, customers get a pair of pants or shorts, the ability to attend curated workout classes and free expedited shipping. Banana Republic followed by introducing “Style Passport”, a new rental subscription service for women. These services offer great alternatives for customers that want to skip the line at retail but will they work?
Many consumers want brand diversity, they usually get their handbags from two or more stores, their shoes from a different store than their dresses. So startups have the advantage here, they can provide a multitude of different brand name products sourced from various stores and outlets.
The second intangible benefit which all large companies struggle with is innovation and versatility; it’s the same reason Netflix eclipsed Blockbuster. In 2010 Netflix had around 2,000 employees, while Blockbuster had over 6,500 stores at the beginning of 2010. Think about that for a second, from a resource perspective this should never happen. But the root of the problem is the mindset. It doesn’t matter how many employees you have, if something has been working for years, it’s very difficult for large corporations to change the culture mindset and shift gears to something new.
Finally, companies fear that online offerings will cannibalize retail store sales. Some companies have started to think more positively about this, and see online sales as an overall net gain, even if they cause a slight decrease in retail store sales. However, there is still this large physical retail store presence which the company has to continue to justify and make profitable. So it’s difficult to genuinely push for strong online retail marketing when your entire business is structured around physical retail presence.
Many of the challenges faced by businesses and consumers alike in the traditional retail store model have a good solution in the online subscription model. Stay tuned for the next article “The Case for Subscription Services”, where we discuss in-depth the advantages of subscription service offerings.