As a professional observer of the retail industry for 30 plus years, it may be a tired point, but I don’t believe hyperbolic, to say that the changes we are experiencing are epic. Terms like apocalypse are routinely bandied about with all of the intended effect of panic and sensation. Indeed, this emotion-charged description of the current state of the physical retail world does indeed seem to fit the mood of a significant minority of the players. However, I am more in favor of another descriptive term that has gained currency in recent years: disruption. The difference between apocalypse and disruption is the difference between oblivion and a possible tomorrow. For brick and mortar retail, I not only think there will be a tomorrow, but that it is a very promising one.
The phenomenon of consequential disruption in retail is not a new one. When I began my career in site analytics in the 1980’s, an exciting new retail force was just being unleashed. “Big box” retail, and its power center format, was in full conquest mode and radically changing the American landscape. In the wake of this vibrant new retail development was a long obituary page of independent and regional chains that previously dominated the scene, and obsolete shopping centers looking for new incarnations. The previous “power” format, the regional and super-regional mall, was waning with signs of its weakened position already evident. Of course, in this period there was no cry of apocalypse - but there was major disruption and the inevitable adaptive evolution that followed for nearly two decades.
The Evolution of the Shopping Center Type
Annual GLA by Classification Delivered: 1960-2017
Source: Pitney Bowes, 2017
The trajectory of the era just described came to an abrupt end in the fall of 2008 through 2009. Let us not forget that disruption and the very real apocalyptic fears that accompanied this relatively short window of time. The gradual recovery and growth that followed has been much more sober in its pace, but nonetheless had the calming effect of portraying a world that was normalizing – that is until very recently.
Welcome to the age of hyper-change. Unlike previous cataclysms, the challenges today not only revolve around winners and losers on the ground, but also winners and losers in the consumer’s mind. It’s no longer just about choices of shopping venues that are distinguished by varying degrees of convenience, selection and price. Rather, today’s choices challenge the very concept of what a store is - and what it will become once the intermingling of physical and digital retailing settles into its logical limits.
Now that’s disruption!
Despite the head-spinning predictions, the dramatic impact on the physical shopping landscape has mostly yet to be observed. There is no question that some impacts will be far reaching and, in ways, unprecedented, but we are far from experiencing anything as dire as the headlines scream. In fact, there remains ample evidence that much of physical retail is quite healthy. Overall growth is continuing, albeit dwarfed in rate of its growth by the e-commerce channel.
The turbulence is already reflecting new realities. There is a documented retail bifurcation occurring that favors the needs and tastes of the extremities of the consumer income poles over a contacting, moribund middle. There is also a related decline associated with retailers shackled to sameness of experience, and commoditized products, contrasted with expansion for those featuring the imaginative and differentiated. The delivery of excellence in consumer experience has become a mission critical addition to yesterday’s drivers of selection, convenience and value.
Ironically, one of the key culprits for the impending disruption also holds the promise to be highly stabilizing over time. I am referring to the key facilitator of e-commerce: the explosive availability of data. “Big data” provides unprecedented insights, creating in a sense, a new social contract between purveyor and consumer. As an example, it holds great promise for optimizing the network of stores, benefitting the retailer through expanded margins, as well as the consumer through a leaner, more balanced physical shopping landscape. Better customer source data, often enhanced with mobile trace capabilities, can guide the process of store deployment and rationalize the physical component of an omni-channel brand.
The inherent risks of store expansion can now be further mitigated through the use of mobile marketing. Once the site intelligence has directed the decision process to a physical location, the passive practice of “opening the doors”, can be powerfully enhanced. Replacing the broad-stroked grand opening campaign with its ribbons and balloons would be a hyper-targeted and highly relevant outreach to the customer base in a way unheard of until very recently. This can include “priming” the audience for weeks, or even months, in advance of the opening with pre-opening specials, sales, invite-only events, and highly-cultivated shopping experiences that bridge the digital and physical into a unified retail experience.
Despite the coming disruption and the inevitable “pain and loss” that will be incurred by some, I believe we are on the verge of a transformative era in retail. It will transform the very concept of brand with touchpoints reflecting highly flexible channels and a deep consideration of consumer needs. I truly believe, if they heed the signs, today’s chain store operators will, in the future, be able to retail with confidence.