Anyone following the news knows the past few years have been difficult for bricks-and-mortar retailers. Aisha Al-Muslim (@AishaAlMuslim) reports, “The pace of retail bankruptcies and store closures in the U.S. has accelerated so far this year compared with 2018, due in part to last year’s lackluster holiday shopping season, a new report finds. More retail bankruptcy filings are expected in the second half of the year, and bricks-and-mortar stores will continue to close at a higher rate, according to a report released by professional services firm BDO USA LLP.”[1] With many economists predicting a downturn or recession thanks to the current trade war, retailers are eyeing the coming holiday season with less enthusiasm than in the past couple of years. The retail sector’s troubles have been labeled a Retail Apocalypse. An apocalypse is defined as an event involving destruction or damage on an awesome or catastrophic scale. A couple of years ago, Robin Wigglesworth (@RobinWigg) charted the beginnings of the Retail Apocalypse and noted it shouldn’t have been a surprise “given the vast overbuilding of stores and shopping malls in recent decades.”[2] Given all the bad news, one might think the bricks-and-mortar retail situation is clear and the future dim. There are, however, differing opinions about bricks-and-mortar retail’s future.

Retail Apocalypse

Al-Muslim notes, “Talk of a retail apocalypse has echoed throughout the industry for years as shoppers abandon the nation’s malls and flock to online sellers. But the expected increase in bankruptcies and closures means the industry’s recent pain shows little sign of easing. Retailers continue to grapple with excessive debt, over expansion, private equity-ownership pressures and changing consumer behavior.” On the other hand, Steve Laughlin (@splaughlin), General Manager of IBM’s Global Consumer Industries, notes, “Research shows that the industry is booming and that stores still matter.  … Data from the U.S. Census Bureau shows that less than 10 percent of all retail transactions happen online. So in the future, stores will play a new role to differentiate brands. With this in mind, retailers still have lots of work to do to cultivate good shopping experience if they are going to thrive even more. And opportunities abound.”[3]

He goes on to note that members of the newest generation of consumers, Generation Z, enjoy shopping in stores. “This generation,” he asserts, “is looking for new ways to touch, feel, and experience products before they buy them, physical experiences only accomplished in a store. And with the global Gen Z population set to reach 2.6 billion by 2020, retailers need to create more interactive engagement in their stores to serve the ‘always on,’ mobile-focused, high-spending demographic. We need to bring digital technology into the store to truly transform the customer’s experience.” Lori Mitchell-Keller (@LoriMitchellKel), global general manager of consumer industries at SAP, agrees with Laughlin that customer experience is essential if retailers hope to survive the apocalypse. “Retail’s new normal is here,” she writes. “It’s a time of disruption and intense competition, and we all must learn to adapt in a digital atmosphere that moves at an aggressive pace.”[4]

Gavin Silsby, Planning director at Haygarth, agrees bricks-and-mortar retailers have a future. He writes, “It’s easy to get carried away when discussing the influence of online retail. After all, less than 20% of all retail sales come from digital channels and of those, nearly a fifth come through one retailer. Despite what you hear, physical retail, bricks-and-mortar is still the major player, but this doesn’t mean we shouldn’t heed the lessons learnt in eCommerce in our physical stores — far from it.”[5] He continues, “There is a reason we talk about shoppers rather than purchasers, and that’s because the act of buying encompasses far more than just the final transaction. While the online world allows for instant and continuous movement between touch-points and across spheres of influence — from blog to style guide to social group to retailer — bricks-and-mortar provides the opportunity to meet customer needs on a deeper and more tangible level in one self-contained environment. By focusing on the shopping journey — inspiration, relevance, participation — rather than the destination — purchase — physical retail spaces can add value on their own terms rather than trying to compete with the convenience of online.”

Mall Apocalypse

If there is a real retail apocalypse, it may be found in enclosed malls. Elizabeth Winkler (@ElizWinkler) points to a number of failing or failed retailers and writes, “It is hard to miss what all of these retailers have in common: They are mall-based.”[6] Hundreds of malls have been abandoned across the United States and many of the remaining malls are struggling. Stephie Grob Plante argues, however, malls are not quite dead. She writes, “Rumors of the shopping mall’s death may be premature. … The future of enclosed malls is uncertain enough, and they’ve been around long enough, that symptoms of nostalgia are cropping up more and more in the mainstream. … Americans still go to the mall, spending some $2.5 trillion in 2014, according to the International Council of Shopping Centers. A 2018 study from the group — which is, admittedly, paid to promote brick-and-mortar retail — found that three-quarters of teens still prefer physical stores to shopping online. Certainly malls are changing, as the nation does.”[7]

She admits many of the 1,500 enclosed malls built since the 1950s have been abandoned. Some of those malls, however, are coming back to life. She calls them Zombie Malls. As you know zombies are fictional undead beings, who by one process or another, become reanimated corpses. Concerning undead, zombie malls, Plante notes some are being repurposed (e.g., as fulfillment centers and recreational venues), some are being redeveloped, and others are being reinhabited. She writes, “Out of the roughly 1,000 malls currently open, 9.3% of available space sits vacant. As Laughlin noted, Generation Z may be one the reanimating forces for malls. Jordyn Holman (@JordynJournals) reports, “Gen Z keeps confounding Corporate America. … Perhaps the biggest surprise about this new cohort of teenagers is the most unexpected of all: They love the shopping mall.”[8]

Or No Apocalypse

Retail analyst Andrew Busby (@andrewbusby) argues, “There is no retail apocalypse.”[9] He admits, “If you walk down most high streets or through shopping malls, you will see shuttered units, but this was always the case. It is simply part of a constant refresh and is no cause for alarm. The danger is that while the high street does require support it does not need knee-jerk reaction. There is plenty of great retail out there however, there is also a proportion of very average retail. Darwin is at work.” He argues great retailers make themselves relevant. “Relevance trumps discounting every time,” he writes. “Never was it so important and critical to be relevant.” To demonstrate bricks-and-mortar retail still has a future, Jason Goldberg (@retailgeek), Chief Commerce Strategy Officer at Publicis, cites a Forrester report that “estimates 86% of U.S. retail sales still happen in brick-and-mortar stores.”[10]

There is no single strategy that will help retailers remain relevant. Corinne Ruff (@corinnesusan) explains, “Humans are all different and they don’t all want the same experience. That means retailers can’t just pick one model and expect it to work in every real estate opportunity. Big stores, small stores, pop-up shops, express stores, kiosks — all of them are essential to a retail fleet that complements all the ways in which customers can and want to interact with brands today.” In the end, Busby is probably correct that calling the transformation of retail an apocalypse is an overstatement. Nevertheless, retailers must adapt or go the way of the dinosaur.

Footnotes
[1] Aisha Al-Muslim, “Retail Bankruptcies Rise, Store Closures Skyrocket in First Half of 2019,” The Wall Street Journal, 11 September 2019.
[2] Robin Wigglesworth, “Charting the US retail revolution,” Financial Times, 17 August 2017.
[3] Steve Laughlin, “Creating An In-Store Retail Revival,” IBM THINK Blog, 16 November 2017.
[4] Lori Mitchell-Keller, “How to thrive in retail’s new normal,” Retail Dive, 29 January 2018.
[5] Gavin Silsby, “Physical stores are for shoppers not purchasers,” The Drum, 31 July 2019.
[6] Elizabeth Winkler, “The Mall Meltdown Continues,” The Wall Street Journal, 3 June 2019.
[7] Stephie Grob Plante, “The Rise of the Zombie Mall,” Smithsonian Magazine, October 2019.
[8] Jordyn Holman, “Millennials Tried to Kill the American Mall, But Gen Z Might Save It,” Bloomberg BusinessWeek, 25 April 2019.
[9] Andrew Busby, “Separating Hype From Reality: Why There Is No Retail Apocalypse,” Forbes, 11 September 2019.
[10] Jason Goldberg, “The Future Of Brick-And-Mortar Retail Is Mobile,” Forbes, 26 November 2018.