Retail Stores Never Die


"I don't think retail is dead. Mediocre retail experiences are dead."

- Neil Blumenthal, Co-CEO @ Warby Parker, 1/17

The Quarterly Earning Reports season is here again. Most retailers, including JC Penny (JCP), Macy's (M), Nordstrom (JWN), Sears Holding (SHLD) and Walmart (WMT), performed horribly and planned to cut down the number of retail stores (Of course, consequentially caused thousands of jobs cut as well) and shift their business focuses more on e-commerce development to contending with Amazon (AMZN). Nevertheless, journalists and analysts declared the death of the retail store business model. Contrarily, Amazonbooks has its first two stores grand opening in NYC (May 25th) and more to come in this summer. But is it really the 800 lbs gorilla e-commerce killing other retailers? Or the retail stores themselves are simply lacking innovation to attract foot traffic?

Like I previously highlighted on my blog "No Offline/Online Boundary", the century-long existence of retail store will never die (AAPL plans to build more new Store worldwide). In Japan - a highly mature market, their physical retail business largely suppressed e-commerce business, where its share only represents 9% of total retail sales. But, why? First, high population density in their top10 cities does play a significant role in such a result. As is in its living condition, shopping locally is more convenient to consumers than waiting for their products delivered home even just a few hours. In every corner there, you will easily find yourself access to restaurants, 24/7 convenience stores, shopping boutiques and other retail services as needed. And that doesn't mean their logistic delivery services were underdeveloped. Indeed, Japan has one of the fastest delivery service networks in worldwide, is also the first few countries introduced next day door-to-door delivery. In addition, your packages can also be chosen to deliver to your local contracted convenience stores for pick-up at any given time (even after midnight), which is very common to the locals. Even still, that doesn't change their loves to do shopping in person. This mature country is not an isolated case bc the same happens in Taiwan as well. Window shopping will always be a part of our human natural behavior, an "addiction" (psychological reasons). Indeed, online shopping (webrooming) is still considering as and categorized/classified into this norm, but just in a different form; Customers always prefer visually navigating thru a variety of product selections (especially to women) before making purchase decisions. Rarely, a person wl blindly purchase a product and get 100% satisfied (Could occasionally happen to only male shoppers, but not common). Furthermore, by nature, human being gets easily exhausted or bored from seeing the identical visual effect/view or performing a very similar task. Again, a spell cast in our DNA. Therefore, if a store has the same windows setup over and over again, would you continue visiting? Highly possible that your visiting becomes less frequent and gradually stop going. And that's what the problem of today's retail front store is. From customer experience's point of view, merchants needed to stimulate/excite their five traditionally recognized senses repeatedly/consistently to retain the interest of their customer visits. That's exactly where all the department stores and retail chains left out.

In years ago, Best Buy (BBY) has witnessed a dramatical decline in foot traffic, so does McDonald's (MCD). Both companies contracted data analysts went thru a pile of customer data and tried solving the riddle. At the dawn of reforming business strategy, both lucidly believed in their data analysis results, misleadingly took a wrongful route in decision making, and erroneously assume customers desired stiffer discounts and better monetary value in products. Following then, they had learned a costly lesson that ain't the case at all. Their store traffic didn't regain momentum but dropped furthermore (Marketing 101: Lower Price Carries Lower Brand Value; As well, trained bad consumers behavior doubting if they received the best price value at first, and consequently triggered consumer's delay in making a purchase). Now, both companies have revolutionized their store design, (take noticed that Barnes & Noble (BKS) also has plan doing so), product menu/presentation, and last but not least, the digital customer services; And had seen better financial results after those corrective actions.

Generally speaking, the top priority in customers' mind is never the lowest price (WMT learnt their lesson and dropped their "Everyday Low Prices" campaign entirely), but rather that preferring a more premium, seamless shopping experience (willingly to pay more for) and not a 'Boring' one. Especially, to millennials, they're living off in an internet/digital age, and prioritizing the dynamics of their lifestyle very differently than their Baby Boomers parents. Until the day retail corporations understand their customers and kick out their extortion, we'll only, sadly and likely, see more retail stores closing down.

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REF:

1. Amazon’s Brick-And-Mortar Bookstores Are Not Built For People Who Actually Read

2. What Amazon's New Bookstore Can Teach Struggling Retailers

3. How Social And Digital Create The New Retail Experience

4. What China Reveals About the Future of Shopping

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