Dear Retailers, in this Post I am sharing the second preview of some content you’ll find on my new white-paper titled “The importance of brick-and-mortar stores in an omnichannel world” that you will be able to download on this blogsite very soon – please stay put…!
[Preview#2] Why things are changing in Retail…!!
Where’s the money…?!
As ecommerce is becoming widespread (…we’re in the post Amazon-era, aren’t we…?), traditional retailers are losing their exclusive role of distribution-points for goods.
That’s why the old, traditional store business model is not sustainable anymore: retail revenues and profits move elsewhere, while costs and investments don’t.
By the way, where do retail revenues and profits move to, exactly?
Fundamentally they relocate to:
- pure e-retailers (e.g. Amazon) – these are brand new players, starting from scratch
- manufacturers that now sell direct to consumers through their ecommerce websites – these are players new to the retail arena, applying the “disintermediation” paradigm
- traditional retailers’ ecommerce websites – these are known players that apply the “channel multiplication” paradigm
…that’s why “comp” store sales (“comp” = comparable) are often disappointing (they’re flat or declining) and physical stores suffer eroding margins and slipping market-share.
Dear retailers, this is a Big Change, isn’t it?
…wondering what triggered it?
The cause of the Big Change – without doubt – is the economic downturn combined with the explosion of digital technologies; these two elements are radically changing the consumers’ behavior everywhere… …and once the consumers’ behavior changes, also the buying-and-selling equation changes.
The economic downturn
The economic downturn (e.g. negligible wage growth, etc.) is still hindering spending for many consumers in many Countries.
… for example, I don’t think you realize how screwed the Old Continent middle class is… …what about the US? Fortunately recovery is underway, nevertheless in several areas jobs are still very, very hard to find.
Since the economy is morose, consumers’ confidence is not stable – in other words, consumers are quite afraid to spend.
“Deflation” (which basically means decreasing-prices) is another reason why consumers tend to delay purchases (…again, it happens especially in Europe…).
Consider all the above and see why shoppers are so price-sensitive.
Or, to be more precise, they’re value-sensitive – low prices and (very) low quality is a no-go…
The explosion of digital technologies
To catalyze the Retail Big Change, just add the proliferation of digital technologies: consumers are more informed than ever about products, prices, promotions, etc. thanks to web/mobile technologies, social media tools and so on – their shopping decisions haven’t ever been more savvy…
Now I think it’s clear why traditional brick-and-mortar stores cannot play according to the old rules any more.
…don’t be fooled!
It is no coincidence that everywhere you read: “…traditional Retail is experiencing slow/anemic/stagnant growth, significant decline, lackluster results, disappointing sales, drop in store traffic, poor numbers, […insert additional gloomy terms and sad faces 😦 here…]”.
Please don’t be fooled by clichés… …this is a general, but not very accurate description of the Retail situation; for instance, traditional brick-and-mortar players like Dollar General and T.J. Maxx (in the US) are success stories; similarly, many luxury retailers are literally thriving all over the world…
The real – and more accurate – story is: many traditional retailers are in (deep) trouble, while few others are going (very) well: average numbers suck, nevertheless there are many significant, fortunate “local maximums”; in point of fact, “local maximums” are more often than not localized on the opposite sides of the market: off-price retailers vs. upscale retailers.
…stuck in the middle?
That’s not good, dear Retailers, so you must either:
- OPTION#1 – fight openly on price and convenience
- OPTION#2 – surprise shoppers with such exceptional shopping-experiences that they can’t help spending their money
I’m all for OPTION#2 and, as a matter of fact, I am strongly convinced that your physical stores are perfect to wow (WOW!) your shoppers.
…yes, I’m talking about creating an exceptional in-store shopping-experience.
More about it in my next Post: “[Preview#3] Revamping the brick-and-mortar store”.
Andy Cavallini – firstname.lastname@example.org