The Reports of My Death Are Greatly Exaggerated

So goes the famous quip from Mark Twain and so goes the public sentiment about retail bricks and mortar stores. The trendy news headline these days is "X Retailer Closing Stores," rarely do you read the opposite. While it would be a stretch to say nothing could be farther from the truth it's certainly a message with a lot of gray area to it.

Not too long ago I was in Scottsdale, AZ. As I walked through the beautiful town center stylings of the Scottsdale Quarter and adjacent Kierland Commons an observation jumped out at me; many of the storefronts I was looking at were online only stores not all that long ago. Bonobos, Blue Mercury, Warby Parker, the list goes on. These were all internet only retailers that have expanded into the world of bricks and mortar. Why would they do that if storefronts were becoming obsolete?

While I'm not going to bog you down with reams of data points - after all, there are much (much) smarter people than I out there producing said data - I contest that bricks and mortar stores are not going away, the industry is merely evolving. Some retailers are proving that they are able to evolve with the consumers and the industry as a whole and they'll be fine coming out of this transitional period. Conversely, like many of our homonid ancestors, many retailers have not been able to evolve and will slowly die off into extinction and lore and whose fossils we will analyze for years to come pondering why they couldn't survive.

Everything about modern civilization is changing, particularly technological disruptions which are in turn rapidly changing consumer's behavioral patterns and many retailers are struggling to keep up. A few key points worth noting:

• The internet, smart phone and constant connectivity has provided access to information the ease and likes of which no human civilization has ever known or could anticipate.
• Consumer shopping habits are dramatically shifting from buying "stuff" to buying "experiences."
• The substantial population shift back into the cities present challenges and limitations for retailers to expand, particularly for mid and big box retailers to service these markets.
• Convenience is becoming a critical component of the retail store/supply chain. While historically there has been a wife/mother at home to go out and do the shopping on a daily basis, in the modern era more households are two job households and people have less time and opportunity to shop. Besides which again modern technology has made shopping incredibly easy from anywhere, anytime.
• Many consumer products simply don't necessitate a store to sell them. Books and consumer electronics for example, some of the hardest hit industries, can easily be researched and bought online. One could argue that as a standalone store that only offers books and/or electronics without any other sweeteners as a model is obsolete and unnecessary.

I could go on with example after example about why people are gravitating to using the internet more for retail but the reality of the situation is that recent studies by several data tracking industry insiders including the NRF, ICSC and PwC have shown that internet shopping still only makes up approximately 10% of the nearly $3.4 trillion United States retail market. Its becoming increasingly obvious that its incredibly difficult to make money as an internet only retailer. Hence the buzz word of the decade, omnichannel.

Omnichannel (denoting or relating to a type of retail that integrates the different methods of shopping available to consumers; per wikipedia) has allowed retailers to branch out into that sweet spot of mixing "bricks and clicks" as they say. Historically internet only retailers are utilizing the bricks as a vehicle for marketing and supply chain fulfillment that wasn't previously available to them while brick and mortar retailers are using the clicks to achieve a level of convenience, responsiveness and market penetration that was never available to them. The two are inexorably interconnected now and certainly will continue to be so for the foreseeable future. This is best demonstrated by recent findings that bricks and mortar retailers who close stores tend to see a correlating drop in online sales in that market and conversely online sales tend to spike in markets where they open stores.

We're also seeing a new and steadily growing trend of buy online pickup in store or BOPUS (also sometimes referred to as BOPS). In fact, Kohl's most recent quarterly report denoted a 24% conversion rate in BOPUS wherein 24% of all of their customers who bought products on the Kohl's website went to a store to pick the item(s) up. Even more intriguing, according to research done by the ICSC, some 69% of customers who went to a store to pick up an item they purchased online ended up buying additional merchandise. Taking that one step even further 36% of those BOPUS shoppers went on to make purchases in adjacent stores as well.

The moral of the story is that retail is not dead, stores are not dead, bricks and mortar is not dead and/or dying, they are merely trying to survive our own version of the retail Permian Extinction Event. Retailers must evolve to survive and that includes both internet and bricks and mortar retailers. The ones who can adapt and do their best to fulfill the needs of the 21st century consumer will be part of the retail landscape in the years to come. What exactly that landscape will look like in ten years is anyone's guess at this point and for those of you who know the answer to that, please tell me, I could use a few good stock tips.

Please excuse all errors in grammar and spelling, i'm not a writer.

A few worthwhile reads below that flesh out some of my ideas: