Buy online, pick-up in store is often heralded as the future of retail: Customers shopping on their own terms, as efficiently as possible. But it might end up being a bigger lift than expected for retail stores. Large retailers like Target, Walmart, Kroger and Home Depot are using store pickup to cut delivery costs, encourage customer interaction with associates, and drive in-store sales growth. Using stores to fulfill online orders lets retailers add supply chain muscle to their e-commerce businesses. But it does come with risks. As demand grows for in-store pickup, in-store fulfillment could put pressure on traditional store operations.
Wounded from the so-called retail apocalypse that defined 2017, some of the nation's most established brands have been faced with the fact that they either have to adapt or die. As a result, many have been forced to take lessons from trendy young startups that have swooped in and redefined the way we shop. From Gucci and Balenciaga to Crocs and Glossier, these are some of the most explosively successful brands of 2018.
Here’s how former big-box stores transform into seasonal Halloween pop-ups. Despite the brick-and-mortar retail apocalypse taking place across the country, Halloween pop-ups like Spirit have endured. When traditional retailers file for bankruptcy and leave empty big-box stores in their wake, they also give Halloween retailers more potential locations to choose from. Shockingly, even the rise of online shopping can’t seem to kill the Halloween store. All of this would be impossible without the existence of vacant retail properties in need of tenants, even if those tenants only plan on being there for a few weeks. What’s bad for retail is good for Halloween pop-ups, at least to a point. These companies need vacant spaces to fill, but they also need nearby stores to draw in consumers.
Everyone in retail, it seems, is playing in the toy game this year after the country's biggest toy store liquidated. But will there really be any surprises about who wins? The retail market for toys, on the whole, is worth $36.8 billion in revenue and covers more than 60,000 players. Store-based retailing of traditional toys and games is worth nearly $4.8 billion, down from about $6 billion in 2012.
It made shopping a national pastime, long before Amazon and big-box stores. Even though it’s easy enough to dismiss Sears stores, with their bare shelves and empty parking lots, as an irrelevant relic of retailing’s past, the fact is that Sears was a pioneer, a household name that wasn’t just America’s largest retailer until Walmart overtook it, but a company that changed how Americans shopped and set the stage for the eretailers that would follow.
Retail is changing faster than ever. New technology is increasingly being infused into stores, and the results are finally starting to show. Though there has been a lot of talk about how online shopping is changing the retail landscape, forcing traditional shopping centers like malls to close, it's only now that the future of the industry is truly coming into focus. And yes, it's digital, just as we were promised. Amazon and, more recently, Nike, have debuted store concepts that put their digital smarts front-and-center as they offer new experiences to customers. The advent of tech-focused physical stores proves that brick-and-mortar retail isn't going anywhere soon.
Soothe me, heal me, while nourishing my mind, body and soul, said the masses. As everyday consumers push the health-and-wellness movement from the earthy-crunchy margins to the mainstream, retailers are going beyond selling Fitbit wellness trackers and organic, gluten-free bread. Ushering in the next iteration of healthy-living consumerism, merchants are taking on the overtones of the medical, psychotherapeutic and fitness communities. They’re wrapping the sale of “better for you goods” in services and experiences that aim at a kind of holistic, mind-body-soul approach to wellness, from a “Soul Lounge” that sells custom-orthotics at DSW to meditation workshops at Eileen Fisher stores.
These brands shift their marketing-strategy investments from pre-promotion and sales to after-purchase brand loyalty. This builds brand-value advocacy in their consumers' lives, rather than accomplishing the short-lived benefit of a one-off sale. All have started thinking of new ways to provide value and build ongoing relationships with their customers, treating them more as members or users than one-time purchasers. Digitally savvy startup brands, in fact, obsess over experience, not revenue.
Look around your town and think back to what it looked like 10 years ago. Chances are, the stores that line the streets or anchor the malls are different. Circuit City, Linens-n-Things and Radio Shack are all gone. In their place are names like Nordstrom Rack, Saks Off Fifth and Zara. It's a physical representation of how the consumer has changed over the last decade. The financial crisis of 2008 left an indelible mark on consumer behaviors that still affect how Americans spend today. There may be new reckoning to face as the advent of online shopping allowed for a new cohort of retailers to multiply. These new retail companies launched their businesses online and built their brands unencumbered by costly stores and past debts. Among them, Bonobos, Warby Parker and Allbirds, used the internet to grow their reach. Now established, they are chartering new territory by launching stores slowly and methodically.
Loyalty comes through experiences and creating memories. The last several years have challenged retailers to become digital and then mobile brands. They’ve had to shift their focus from selling products to creating memorable experiences for consumers. Now the time has come for all brands to prioritize the user experience (UX), designing every customer-brand interaction with the user’s emotions and exact needs in mind. The UX mindset is more software developer than salesperson, and it works. Retailers today must treat visitors as ongoing users instead of merely potential buyers. Brands including Nordstrom, Sephora, Glossier and Warby Parker have implemented UX practices in retail to increase long-term customer loyalty.
From Anthropologie to Walmart, old-school chains are starting to get a handle on this whole shopping-in-the-digital-age thing. The clearest signs of strength have come from the big-box category, where Walmart posted its best comparable sales growth in more than a decade and Target roared with its biggest increase on this metric in more than 13 years. Nordstrom Inc. saw solid results at both its department stores and off-price concept, and Urban Outfitters Inc. saw eye-popping double-digit increases in comparable sales growth at its namesake chain as well as Anthropologie and Free People. Just look at some of the pleasant surprises.
The bazaar, the souk, the forum—wherever it emerges and whatever it’s called, the market has long served as the center of society. When the invention of agriculture brought the need for trade, towns grew around central gathering places where people could exchange not only goods and services but also ideas and inspiration. Along the way, the market became the mall, the mall became a Costco and the Costco became Amazon. As commerce increasingly became a commodity, the social functions of the authentic, community-making aspects of the market largely retreated behind shelves promising unlimited choice and convenience. As a result, a new paradigm emerged, one where community building and shareable, physical experiences serve as the foundation of commerce.
Amazon is schooling the retail industry on how to turn "1+1" into science. Hopefully, retailers are taking notes. Prime Day has pushed up the shopping season by nearly a month. More important: The report finds that Prime Day back-to-school shoppers spend 17% more at brick-and-mortar stores and 16% more at combined brick-and-click stores, compared with shoppers who don’t participate in the event. A major contributor to the earlier kickoff of the back-to-school shopping season is that other retailers, such as Target, have responded to Prime Day with their own earlier promotions. In addition to higher sales, however, several studies reveal that how shoppers buy their clothes, backpacks and dorm-room furniture is shifting in important ways that could predict the course of school shopping in years to come.
The best retailers are constantly curious, continually in the market, and actively shopping in order to unpick retail experiences, and unlock inspiration. And they don’t just keep a check on their own category. While it’s important to know what your competitors are up to, all that may do is reinforce existing paradigms. The sharpest retail merchants look beyond their own category for inspiration, and they steal shamelessly, but also inventively. Being a student of retail is not about mindless duplication, however. As Picasso said (and Steve Jobs endorsed), “good artists copy, great artists steal.” Learn from others, but make those learnings your own.
Bon-Ton, Toys R Us, Sears, Claire's, Abercrombie & Fitch and Sam's Club are just a few of the major retailers that have shut hundreds of locations altogether across the U.S. this year, leaving a glut of commercial real estate on the market. Now, foreign brands and "e-tailers" like Warby Parker are helping to fill some of the millions of square feet of retail space that went dark last year. The new tenants have helped to ease concerns about an uncertain 2018 for shopping center owners.
The 33-year-old brand has 140 stores worldwide. How does it stay relevant amid fierce competition from retail juggernauts and direct-to-consumer brands?
Francis Pierrel, Club Monaco’s CEO, has been tinkering with a little experiment: What if an established brand like Club Monaco remade itself in the image of a fledgling company? “Not so long ago, the better retailer was the one who had as many stores as possible. But customers no longer treat stores like warehouses, where they go to pick up products in their size; they go to stores to hear a brand’s story and to be entertained.”
Digital transformation is a term on the lips of many a retail CEO. There are a lot of ways to digitally transform a business, especially in retail. With its staggering size and reach, the retail industry is one of the few business sectors that has a tangible impact on the daily lives of average consumers. But the industry is famously slow to adopt new technologies, and many retailers wind up sticking to legacy operations for fear of upending painfully tight profit margins.
“The impact of AI on business as a whole is poised to be more dramatic—and disruptive—than the Internet.” As the Cannes Lions International Festival of Creativity kicks off today, bets are high that the realization that advertising is broken and humans alone can’t fix it will be top of mind among the nearly 20,000 marketers, advertisers and tech companies set to descend on the event. Indeed, there is no overlooking the numbers that underline a dangerous disconnect in what brands want to say and what people want to hear. Millions of ads are ignored every hour by consumers and evidence is mounting that people crave meaningful experiences, not marketing speak. However, the work required to deliver personalization at scale has moved beyond human capacity.
Supplements and aromatherapy aren’t just for Goop anymore. Traditional retailers want in on the wide-ranging, $3.7 trillion, so-called “health and wellness” category. Today’s consumer is far more informed and therefore plays a far bigger role in dictating the nature of new products. That shift is changing how retailers position and market themselves. “This is just an extension of everybody wanting to live a healthier life in general, companies are just trying to target multiple facets of people’s lives. Beauty is not just for the sake of vanity anymore. Companies are trying to provide an additional benefit to consumers.”
U.S. retail is definitely not dying, but it is certainly evolving at an accelerated rate. Week by week, the brick-and-mortar retail landscape is changing rapidly—and, in some cases, belatedly—in response to shifts in how and where consumers shop. The mall of the future is coming, and it promises shoppers a richer, more varied experience than they have seen in the past.