In Connected Intelligence Platform, Customer Intelligence & Insights, Retail

retail-apocalypse-blog-jeff-abbott-tcs-dssPerhaps not surprisingly, the term “retail apocalypse” has earned itself a Wikipedia entry. It’s defined as “The closing of a large number of North American brick-and-mortar retail stores, especially those of large chains, starting in 2010 and continuing through 2018.”

Contrary to popular belief, it’s not all because of Amazon.

Wikipedia cites the reasons for many thousands of physical stores closing as a combination of: “over-expansion of malls, rising rents, bankruptcies of leveraged buyouts, low quarterly profits outside holiday binge spending, delayed effects of the Great Recession, and changes in spending habits.”

And, to state the obvious, there is the rise of online-only vendors (yes, Amazon).

In 2017 there were more than 7,000 closures and it appears that 2018 was about the same. But statistics can be deceiving. IHL reports that for every retailer closing a store, two are opening stores. It also found a mere handful of companies (16) represent 66% of the total closings. In fact, the U.S. Census Bureau reports that offline retail is not actually declining. It’s still growing, just more slowly than online retail.

A closer look at underlying patterns helps explain which types of retailers are at risk, why some are still growing, and importantly, what all retailers should be doing now to avoid becoming the next casualty.

First, let’s look at which types of retailers have suffered the greatest losses. Recent headlines report Chapter 11 filings and widespread store closures from the likes of Sears/Kmart, Toys R Us, Macy’s, JC Penny, J. Crew, Abercrombie & Fitch, Claire’s, Brookstone, Footlocker, Guess?, Michael Kors, Gap, GNC, Bon-Ton, Subway, Ann Taylor, Rockport, Nine West, and Mattress Firm.

You’ll notice that these retailers tend to be traditional departments stores and big box chains with a lot of floor space that have somewhat unfocused product lines that are suffering. They tend to not stand out in any particular way. According to Bloomberg, they also include older companies overloaded with debt over time as a result of leveraged buyouts from private equity firms.

Now let’s look at which retailers opened the most stores in 2018. According to a report by Michael Timmermann of Clark.com, the stores with the most openings are discount retailers.

  • Dollar General (900 planned openings in 2018 and 1,315 openings in 2017)
  • Ross Dress for Less and dd’s DISCOUNTS (more than 100 store openings)
  • J Maxx, Marshalls and HomeGoods (258 store openings)
  • Target (30 store openings)
  • Dick’s Sporting Goods (19 store openings)
  • Dollar Tree and Family Dollar (603 store openings)
  • Aldi Food Market (150 store openings)
  • Old Navy and Athleta (25 net openings, including closures from Gap)
  • Hobby Lobby (60 store openings)
  • Five Below (125 store openings)

When we compare these two groups, we see that price and product focus matter.

The other key trend fueling success in retail is the consumer shift toward experience-based shopping. Winning brands in the U.S. CX Index such as Trader Joe’s, Costco, Hobby Lobby, PetSmart, BJ’s, Ikea, Cabelas, Neiman Marcus, and Publix are providing superior shopping experiences. These retailers produce high rankings in customer satisfaction and loyalty, which drive shopping basket size and overall customer visits. They are bundling products and services to create value added offerings. They are partnering with third parties to sell more holistic, experience-base offerings. They are building connected social communities of like-minded customers. They are integrating mobile apps and augmented reality to deliver immersive, in-store experiences. They are streamlining the purchasing experience with technologies such as scan-and-go. Most importantly, they are using customer data and analytics to personalize and optimize each customer journey.

The new field of customer journey analytics is one of the areas where both niche and large platform players and competing for mindshare. At TCS Digital Software and Solutions Group (DS&S), we developed unique software with retail-specific use cases and a supporting analytics platform to target the connected omni-channel customer journey opportunity.

At NRF 2019 we’ll be available for meetings by request to help retailers understand the technology and processes to master the customer journey. To meet one of our specialists at NRF and learn how to deliver connected customer experiences, please contact: Aditya.busa@tcs.com

And for more information about our new approach to CX, visit Customer Intelligence & Insights for Retail.

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