Fear, uncertainty and doubt (aka FUD): the infamous sales and marketing technique has become even more common in our digital age. So when retailers find themselves exposed to a barrage of scary information about the impending retail apocalypse, they should be wary – someone is definitely trying to sell them something.
The retail apocalypse myth dominates the industry narrative, spreading via sensationalist headlines about big-brand closures and bankruptcies, repeated assertions that all retail will ultimately move online, and the use of skewed statistics about retail spending trends. Let me reveal the real story behind the news.
Stores remain retail’s vanguard
Contrary to all the noise in the media about the demise of physical retail, according to recent research from IHL Group, North American retailers will open 12,663 stores and close 8828 stores in 2018, a net increase of 3835 store locations. Indeed, some high-profile brands have closed their doors, but this only represents a handful of retailers and certainly not the entire market. Retail bankruptcies have been with us since well before the emergence of e-commerce. Remember Brash and McEwans? What about Go-Lo and Crazy Clarks?
The omnichannel trend actually works both ways. Just as physical retailers expand online, many pure-play businesses have opened bricks-and-mortar stores, with some intriguing success stories.
The Hustle recently reported on how online apparel startup Goodlife defied convention to achieve impressive growth. Founded in 2014, the e-tailer embraced bricks-and-mortar early in its journey, starting with a five-location trial in 2016 and now set to be in all 125 Nordstrom department stores by the end of 2018. At the same time, their online store is pushing 400 per cent year-on-year growth.
With all the hype around e-commerce, the brand and experience value of a physical retail presence often gets forgotten. In fact, when a retailer closes a store, online sales in its catchment area usually drop by 20 per cent.
E-commerce can be overhyped
In the last few weeks, there have been numerous reports about online retailer Shoes of Prey’s decision to cease its operations. One reporter immediately drew the conclusion that “e-commerce retailers are not immune to the tough market”.
Contrary to the article’s premise, Shoes of Prey, like many other conceptually alluring startups, had never been subjected to market
forces. It was a speculative venture based on easy access to capital, which was burned with the hope that it would get traction
with customers. It didn’t.
The idea failed because it made no money, which obviously was not sustainable in the long term. The market had nothing to do with
it. Unfortunately for investors, the concept was flawed.
The venture also had a direct negative impact on legitimate operators. Real retailers suffered a loss as millions of dollars that
would otherwise have been profitable sales went to Shoes of Prey, which effectively gave it away.
Regrettably, such stories are all too common, with the misguided investor frenzy being fed by the fictional universally online future of
retail, fuelled by the bricks-and-mortar retail apocalypse storyline.
An innocent mistake or fear-mongering conspiracy?
As the retail apocalypse storyline continues, I’ve identified a pattern in media reports on retail spending growth to support the narrative. I would like to give the mainstream media the benefit of the doubt here, but they appear to be working hard to dissuade me.
Take July 2018 as an example. Comparing sales with the previous month, a media story lamented “flat growth in retail”, suggesting
that consumers have become wary about spending. A host of semirational reasons was provided, such as falling house prices and weak
wages growth. The Australian dollar even dipped a fifth of a US cent in response to the disappointing data.
However, after turning to the ABS to find year-on-year figures, I discovered that retail spending actually grew approximately 3.5
per cent against July 2017. Quite a different story: solid growth.
Makes you wonder about the intent behind the manipulation and presentation of the data.
The power of physical retail
Refreshingly, the more I research the industry, the more evidence I see that fundamentally traditional retail has intrinsic strengths. Physical stores serve core human needs, forming the foundation to the creation and measurement of experience, community
E-commerce simply cannot produce meaningful connection or provide a tactile experience. It can only augment the real experience.
In some cases it can also give people access to goods not available locally, like the good old-fashioned mail orders.
Philosopher and intellectual Marshall McLuhan coined the phrase “the medium is the message”. In that vein, bricks-and-mortar stores
are becoming the media in retail, delivering a retailer’s authentic message via sheer presence alone.
Though a few product verticals such as DVDs will fully transition into digital, forget the hysteria – stores are here to stay. Just stick to
the basics: remain frugal and have the right stock at the right price in the right location – if you do, you will do exceptionally well.
Remember that in 1910 the media prophesied that by 1920 all bricks-and-mortar stores would be wiped out because all shopping
would migrate to mail order. Like all prophets of the apocalypse, modern media has held the course, simply moving the date back
every time the world has failed to end as promised.
Justin Cohen is the marketing manager at Retail Directions. He has worked in marketing and media for more than 15 years, mostly in the digital space. He has augmented his journalism studies with extensive travel, giving him unique insights into commercial and social spheres of life.