It has been just about a year since I last wrote about the battle between Brick and Mortar and Online and Device sales. And what a difference a year makes. Unfortunately a perfect storm of changes is challenging most physical store chains.
Recent retail chain earning reports offer spending clues: “American shoppers are willing to spend on their homes and buy new clothes, just not at traditional department stores.
Discount chains like TJX haven’t been the only companies taking share from department stores. Online retailers, particularly Amazon.com Inc., have also made inroads. Morgan Stanley analysts estimate that department stores in aggregate lost $348 million dollars in apparel revenue in the recently completed quarter, while Amazon likely grew its apparel sales by $1.4 billion in the period”.
During a recent Retail Marketing Society (RMS) breakfast featuring retail icon Allen Questrom, interviewed by The Robin Report founder and CEO Robin Lewis, said this: “I believe the big problem is that there are far too many stores: 23 square feet of shopping space for every person in America and store growth is five to 10 times our population growth.”
In fact a recent Wall Street Journal article calculated the number of stores that needed to close to bring back productivity levels to those achieved in 2006:
Many stores have been overhauling their businesses as they aim to cater to shoppers increasingly buying more online or heading more often to off-price stores to get deals. But the changing behavior could be accelerating, forcing those who don’t change fast enough to be left in the dust.
So in addition to trimming the number of outlets, major stores also need to experiment and change.
Target’s is testing new store experiences. For example, Target’s Connect Home space in San Francisco showcases how shoppers can use “smart” technology for the home like baby monitors and sprinklers. It had huge success with its Wonderland temporary store in Manhattan last holiday season. “These are learning labs that we can scale,” says Target’s Chief Strategy and Innovation Officer Casey Carl.
Target is also testing some new concepts in 25 LA stores. “Some of the enhancements include sleeker apparel fixtures, a better-lit fresh produce section that emphasizes organics, dedicated service stations for people to quickly pick up online orders, as well as the addition of specialists in key departments to help provide product knowledge.”
Meanwhile, a number of online-only retailers are now expanding with physical stores, but don’t expect to walk out with the products you buy. Andy Dunn, founder and CEO of Bonobos, which sells men’s clothes that boast a better fit, now operates 21 physical stores that are called “Guideshops.” There, customers can get fitted, and they will be able to order the items and have them delivered to their home.
One area Sam’s is working on is to become a destination for caregivers. Sam’s Club has a website for caregivers to be a one-stop destination where they can find information on everything from stress management to shopping for specific products that facilitate care such as lift chairs to getting automatic prescription refills to save time.
Retailers have implemented Omni-Channel initiatives enabling customers to shop in store, on the web and of course with their phones and tablets. Logistics has been difficult and costly as retailers to start shipping merchandise from the store to shoppers’ homes. Stores had enough problems making sure they had the right inventory in the store at the right time — and the right number of workers based on customer traffic. They now need to try new approaches to workload management, matching tasks to available resources.
A CNBC report relates Allen Questrom contention that retailers may be shifting too many resources from their brick-and-mortar stores to online retail, hurting service levels in the stores that still bring in the lion’s share of sales. “You cannot give up the bricks and mortar experience, because a customer has to come into the store and be excited. She has to see things that make her (or him) want to buy,” he said.
Finally interesting alliances are starting to bubble up. The rise of Amazon.com Inc. as a new destination for apparel shoppers hasn’t gone unnoticed at the headquarters of Gap Inc. The apparel chain’s chief executive, Art Peck, told shareholders that Gap is open to selling its merchandise on Amazon or other third parties in the U.S.
“To not be considering Amazon and others would be in my view delusional,” Mr. Peck said recently in response to an investor’s question at the annual shareholder meeting. “We are always considering all of our opportunities beyond our traditional mix of channels and stores.”