The industry is changing quickly — from how we consume it to what it looks like.
Remember the mall? The big building full of stores where you could get clothes, CDs, cinnamon buns and anything else you needed — or didn’t need?
Not long ago, as the holiday shopping season peaked, it would be hard to find an open seat in the food court. But now, many shopping centers have become ghost malls where you’re more likely to find silence than a sale.
And it’s not just malls. Retail is changing, and not always for the better.
A deep recession might explain an extinction-level event for large retailers. But GDP has been growing for eight straight years, gas prices are low, unemployment is under 5 percent, and the last 18 months have been quietly excellent years for wage growth, particularly for middle- and lower-income Americans.
So, what the heck is going on? The reality is that overall retail spending continues to grow steadily, if a little meagerly. But several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—have conspired to change the face of American shopping.
The article goes on to offer three possible explanations: People are buying everything online; there were too many malls in the first place; or maybe people are spending their money on experiences — concerts, meals, etc. — rather than things.
But reports of the death of retail might be premature. A study from Deloitte found that it isn’t all stores that are closing, just one particular kind of store.
“Balanced” retailers (which deliver value through a combination of price and promotion) are generally doing worse than either price-based retailers (which deliver value by selling at the lowest possible prices) or premier retailers (which deliver value via premier or highly differentiated product and/or experience offerings). Specifically, premium retailers have seen their revenues soar 81 percent over the last five years, while price-based retailers have seen their revenues steadily increase 37 percent over the same period. This contrasts with balanced retailers, whose revenue has increased only 2 percent.1 What’s more, consumers are more likely to recommend premier or price-based retailers than balanced, suggesting that retailers at either end of the spectrum are more in tune with the changing needs and are better at meeting the expectations of consumers than those in the middle.
On this cyber Monday, we’ll get a price check on the future of brick and mortar.
- Barbara E. Kahn Professor of marketing, Wharton School, University of Pennsylvania; author, "The Shopping Revolution: How Successful Retailers Win Customers in an Era of Endless Disruption"; @barbarakahn
- Paula Rosenblum Co-founder and managing partner, RSR Research; @paula_rosenblum
- Julie Egermayer Owner, Violet Boutique; @ShopVioletDC
- Louis R. Hyman Economic historian, professor, Cornell University; author, "Temp: How American Work, American Business, and the American Dream Became Temporary"; @louishyman
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