Earlier this month, national retailer Macy’s announced it’s plans to close 63 stores. Shortly after, Sears announced it would close 150 stores and The Limited has announced it plans to close ALL of its 250 locations nationwide, relying solely on online sales. On top of these closures, the stock price of Macy’s, Sears, Kohl’s, Nordstrom, and JCPenney have plummeted following a lackluster holiday season. This isn’t a proclamation of the death of retail, but instead a wake up call that the tried and true methods of yesterday just don’t work anymore.
A recent chart from Yahoo Finance compares the current market value of brick and mortar retailers to their value in 2006 and the results are shocking. Aside from Walmart, each retailer experienced massive decline over the last 10 years, including Sears who lost 95% of its market value.
Not all brick & mortar stores are suffering; there are categories within retail, such as specialty stores, that manage to thrive in niche markets. People are still buying just as much stuff, if not more, so what exactly has happened? Amazon’s position in the chart hints at the answer with its staggering 1,910% increase. A recent report from eMarketer found worldwide E-commerce sales hit $1.915 trillion in 2016 and are expected to reach $4 trillion by 2020. Shoppers around the world are flocking to online retail giants like Amazon due to their convenience and wide selections. While it’s easy to put the blame on Amazon for the fall of the brick and mortar retailer, there’s another side to the story.
Much of the decline of large retailers lies in their failure to adapt to constant changes in consumer preferences. We’ve hit the point where customers can buy almost anything online from the comfort of their own home. Retail brands failed to join the online marketplace early and have spent millions playing catch up.
What can retail brands do to combat the rise of online marketplaces and keep customers coming back? The key is to embrace digital but also understand what makes brick and mortar retail stores unique. Many retailers have attempted to compete head to head with Amazon by creating their own digital stores, but have failed to keep up with Amazon’s infrastructure and pricing model. A few weeks ago, COO of Waterfall, John Mclane, wrote about how marketers have ignored the power of offline sales and how they could get that back. People haven’t neglected retail, they just need to be given some incentive to return to the store. Using technologies like SMS/MMS, mobile wallet, and push each have different benefits that can help keep customers loyal while bringing back others they may have lost. SMS/MMS campaigns encourage customers to come back to the store with store-only coupons sent straight to their phone. Push notifications attract a customer’s attention based on their proximity to a store and bring in that extra foot traffic. Wallet loyalty cards help keep customers coming back to the store in hopes of a reward.
Retail is far from dead, but further failure to adapt could see a decline that may not be recoverable. Embracing the digital space while highlighting what makes retail unique may just be the saving grace the industry needs.
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