For the past decade, the idea that ‘brick and mortar’ shops are disappearing has somehow become pervasive. It seems like almost every financial publication and newspaper has run with some version of this story. And there is some truth to it, but not as much as they’d have you believe.
According to Pew Research Center figures, today, roughly eight in ten American consumers are online shoppers, as opposed to 22% in 2000. Still, of total retail sales in the U.S., less than fifteen percent are actually done online. 65% of online consumers say they’d rather buy in person, but that the single major factor in choosing online vs ‘brick and mortar’ is price.
The sectors that are struggling are mainly department stores such as Macy’s and Sears, which were traditionally known as mall anchors, driving traffic to that great American tradition of suburbia. Ten years ago, they were expanding like crazy, assuming an expected growth that failed to materialize after the Great Recession. With that, America became “over-stored”. These closures respond to that, as well, perhaps more so than to a true decline in sales. They’re simply spread too thin.
Projections in a 2016 report by Green Street Advisors claimed that 800 department stores must be closed, in order to return to 2006 productivity levels. Department store sales have been declining for the past decade, and their subsequent closures have left malls with giant spaces, which owners have attempted to fill with cinemas and discount retailers like Marshalls and TJ Maxx. Many times, though, it’s simply impossible to absorb the loss, and shopping centers across the country are feeling the hits, in a long, slow death spiral.
South Hills Mall - Poughkeepsie, New York (Kristen Miller, deadmalls.com)
Retailers like American Apparel, Aéropostale and Pacific Sunware have been struggling as well. They’ve also been the slowest to make the move to online sales, despite their target audience having grown up completely on smart phones. This, combined with the fact that teens are increasingly more interested in things other than clothing, such as concerts and social media-worthy events, have combined to spell out the teen retailer’s demise, unless they can figure out how to appeal to their notoriously fickle market.
Though this certainly seems to indicate a sea-change in consumer attitudes, it doesn’t necessarily bear up under close scrutiny, since many online retailers have been quietly opening those self same physical stores they’re supposedly cannibalizing.
Online shopping comes with its own series of challenges for both sellers and consumers. Retailers have to contend with the fact that they’re in virtual competition with 800,000 other stores, all vying for attention. In the case of personal items like jewelry, eyewear and clothing, many shoppers still prefer to be able to touch and try on the products, to verify quality in person, and to save the hassle of having to return merchandise when it doesn’t fit or suit them.
Amazon, the largest and most successful online seller, has opened a series of physical bookstores and convenience stores, as well as a Zappos location and a warehouse in Manhattan for their Prime Now service of one-hour deliveries. They also have a fully automated, Amazon Go employee-only store in Seattle, in which customers walk through aisles, and their phones record the items picked up and taken away. No need for more than six to ten employees or any cash registers at all, since once they’ve finished, shoppers simply walk out the door, with the costs billed automatically to their accounts.
Amazon isn’t alone in online retailers’ push to open physical stores: Indochino, M.Gemi, Warby Parker, Blue Nile, Bonobos, AHA Front, Pintrill and The Arrivals are all getting in on it as well. According to Census, a division of the Department of Commerce, retail has been showing the most solid growth it’s had since March 2014. Even though online sales are increasing, partly just due to the fact that they’re able to offer a wider selection of merchandise and prices, the undisputed king of shopping is the physical store.
When Bonobos recognized this, they developed the concept of the “guideshop”, in which you try on clothing that is then ordered online and sent to your home. The concept has proved so successful that the average guideshop order size is double that of an online purchase, with a higher proportion of new customers familiarizing themselves with the brand. This last bit holds true for other companies as well. Warby Parker reported a halo effect in which the physical stores generate brand awareness and drive traffic to their website. They consider their more than 46 -- as of this writing -- physical locations simply another form of marketing.
Perhaps, rather than presenting online and physical shopping as two opposing propositions, they’re actually complementary? For certain industries, such as apparel or large home appliances, physical stores can drive online sales. Other markets respond to different pressures, however, and in an era when consumers are increasingly cost-conscious, brick-and-mortar retailers are going to have to step up their game to address customer’s concerns. Walmart, for example, has done just that with its purchases of Michigan-based online retailer Moosejaw, e-commerce firm Jet.com, and online retailer Modcloth.
The fact is, more often than not, online shopping can be less expensive and have a wider selection than you can find in any physical store. Check out our ten best of the year and see for yourself!