“It was the best of times, it was the worst of times” This is the opening phrase of the opening paragraph from “A Tale of Two Cities” by the immortal Charles Dickens providing analysis of the disruptive state of affairs in 18th Century England, as well as across the Channel, in France. I can’t think of a better comparison to the disruptive state of affairs at this intersection where old world retail meets new world tech armed consumers. So a parallel phrase would be “it is the most exciting of times — it is the most challenging of times.” Exciting because of the enormous opportunity for retailers to transform their businesses for the better — and most challenging because of the necessity to do so — or die.
Over 5000 retail stores were closed in 2017 and continuing apace in 2018. It’s too simple to blame these closures solely on the rapidly growing ecommerce marketplace, with Amazon leading the pack. For sure the pure online players are stealing a lot of business from the traditional brick and mortar retail sector. However, once these legacy retailers build their own online business, they will gain back a big share of those fleeing dollars. But, there’s another more ominous existential threat: the new consumer mindset.
The millennial and Gen Z cohorts are now the largest consumer groups, replacing the retiring boomers. Having grown up with mobile devices stuck to their heads, and with an entirely different set of values and lifestyle desires than their parents, they have flipped traditional shopping behavior on its head. Not only are they more interested in the style of life and experiences than the stuff of life, they also expect personalized products and services, authenticity and sustainability.
Furthermore, they can scan more products and services in ten minutes on their mobile devices than they can spending an entire day at the mall or shopping for hours in a building full of stuff, aka, a traditional retail store. So, why even go to a store anymore?
That, folks, is the existential threat.
Therefore, while the legacy sector must race to build its online model, it must simultaneously transform their buildings full of stuff to buildings that are destinations as social gathering places, like communities, full of personalized experiences, entertainment, interactive services, restaurants and food courts, and all constantly changing and evolving to compel customers’ loyalty and more frequent visits.
Let’s face the facts:
- The biggest threat to traditional brick and mortar retailing is also its greatest opportunity, and that is the newly dominant young consumer base.
- The roughly 1200 regional malls are under the same threat and yet, have the same opportunity as the physical stores that reside in them.
- Small neighborhood shops and boutiques, as stand-alone or as part of a regional or national chain, have a great advantage over the giant traditional “big box” or department stores.
- For the traditional “big box” or department store retailers to survive it’s going to require a visionary radical leader at the very top and radical thinkers and innovative “doers” throughout the organization to radically transform their old models into compelling “must-go-to” destinations for the new, young consumer base.
- The most neurological addictive experiences are those that are co-created by both a proactive customer and the retailer, interacting in a mutually created experience.
- Pure e-commerce players like Amazon do not have the ability to create the physically experiential, entertaining and personalized social gathering places, that the brick and mortar retailers do. So, they must decide to either build or acquire physical stores or determine that their digital model is good enough as is.
- For the traditional big box and department stores, understanding the necessity to create compelling experiential “go-to-and-hangout” places, and the need for radically thinking and doing leadership to get it done, is priority number one. However, “speed” is the operative term, because the new young consumer base is not going to wait. There are simply hundreds of other, more compelling options.
By Robin Lewis