The Real Reason Retail Is In Trouble

Today, yet another chain announced it is filing for bankruptcy, HH Gregg a consumer electronics retailer. The closings, downsizings and bankruptcies seem to be piling up faster and faster. It would be very easy to say there’s too many stores anyway and we’re probably heading for a recession and online sales are crushing bricks and mortar. Those are easy answers and may have some impact. But the reality is a little more complex. It has to do with shifting consumer expectations, technology and economics.

Online Retail is Not Crushing Bricks and Mortar

In the UK it’s estimated consumers spent GBP$133 Billion in 2016 and in the US at $394 Billion. Big numbers, but nothing compared to the billions in brick and mortar stores. Online retail sales have yet to break the 15% mark of the total. When they do, then the revolution will really be underway. So that’s one part of the puzzle.

The Retail Experience is Boring

We’ve done a lot of brand analysis at Well Researched of what consumers are saying about their shopping experiences via social media. It’s the kind of insights a phone survey or focus group can never reveal. What we continually find is that consumers are increasingly fed up with retail shopping in bricks and mortar stores. Out of a sample size of n=15,000 consumers, over 72% said they don’t enjoy the shopping experience anymore. We’ll share more data in another post.

Consumers Will Wait Longer

Used to be that retail was all about being able to take the product home; instant gratification. Not so much anymore. In our research, consumers were 67% more willing to wait 48-72 hours for a delivery than they were in 2014.

Disposable Income is Declining

This is a harsh economic reality. The income gap is widening. Canadian consumers have always had less disposable income than American. But even Americans are feeling the pinch. Retailers refuse to pay higher wages (sometimes they really just can't anyway) and income gaps are widening. 

Economic Uncertainty

The new US administration is threatening trade wars and other countries are responding. Just today Mexico halted sugar shipments to the USA until at least April. While the markets have been up, there are signs the bubble may burst. Many economists say a recession is looming. Either way, there is uncertainty.

Consumers Want Experiences

A key insight from our research has been that consumers are seeking an experience when they go out and retail is not seen as an experience anymore, but rather, a chore. Food & beverage sales in hospitality are increasing. Restaurants and bars offer experiences and social engagement. Stores don’t.

Retailers Don’t Get Front-of-House Technology

When it comes to supply chain management, shipping logistics, warehousing and inventory management and online sales, the major retailers are fairly adept at deploying technology. But not when it comes to technology in the store. Installing LCD screens with videos and tablets with cool videos does not an experience make. Retailers need to be more creative or understand better how consumers are using mobile and other technologies. Many retailers are struggling to really "get" digital strategy from a corporate perspective, often getting more complex, rather than simpler.

The Complexities Factors

All of the above are a number of factors that are all playing into retails decline in Western nations. It’s tempting to blame the usual suspects and some shareholders may accept that, for the short term. As the evidence shows however, it is a more complex situation. The answer most likely lies in a more holistic understanding of the situation that involves business models, digital transformation and understanding the connected consumer better.

Stay tuned for some interesting data on what social media insights can tell the retail industry.

What would you add to the mix?