Saturday, March 11, 2017

The Death of Retail?




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Just last week JC Penny announced that it would be closing stores and offering early retirement for F6000 employees, Macy's announced they would be closing some of their stores, Family Christian Stores are closing all of their locations. Sounds rough right, well that is only the beginning. Sears/Kmart close a few more stores every single year and Lowe's is laying off full-time employees in an attempt to "restructure" their staffing model.

After all of these announcements I saw a blog article entitled "Retail Apocalypse". Now I will be honest I didn't read it, the title alone was enough for me to just smile and move along. But there is a question out there that is worth answering. Are we seeing the death of retail? Sadly this is not a new question. Just a quick internet search renders lots of people proclaiming the death of retail. I'm not just talking about fringe blogs here either. Forbes in 2014 posted an article entitled "The Death of Retail--And Perhaps a Resurrection", The very next year Forbes had an article entitled "Don't Buy the Death of Retail Story" So the same publication contradicted itself in the period of a little over a year. Which is true?



The Changing Consumer

There are really two primary types of shoppers. Those shopper types are the things that determine their method about a purchasing decision. There is the efficient shopper and the experience shopper.

The Efficient Shopper

The efficient shopper really is all that worried about the atmosphere. As long as it is safe and clean that is really all that is required. The efficient shopper does all of their research ahead of time, limits their options to only a couple and then wants to go somewhere that they will be able to compare their product finalists. For these people shopping is a chore not an adventure. Shopping really is about getting the things they need or want in a timely manner. These people hate having to spend hours out shopping. They are more of a get in, get it, and get out personality.

The efficient shopper is the least important to the retail corporations. They are typically the ones who spend just enough money to get the items they want. I am pretty solidly in this group as is my wife.

The Experience Shopper

 The experience shopper is the one retailers love. The search and discovery of an item is part of the joy of shopping. These are the people that will dedicate an entire day to getting a new outfit. For these people it is relaxing and even rewarding to spend hours looking for this or that. I have known people that spent time each week for over a month looking for a pair of shoes. There is an emotional component to their search. If they don't have an emotional reaction to the item, they won't buy it.

The experience shopper is the group for which malls and shopping centers were created. They are also the ones that sales were created for. If they want a new pair of shoes, but are unwilling to spend $100 for the ones they want, a simple sign of 15% of can be enough to sway them.The emotional part of them is convinced they got a bargain. This is true even if the price went up a week before the sale and they really didn't save very much at all. All that matters is they think they have saved money.

Division of Shoppers Within Each Type

I am going to further talk about shopping habits here and how they have an impact on the retail market. The following list of sub types of consumers that you will find in both the efficent shopper and the experience shopper.

Price Only Shopper

The price only shopper is one of the biggest problems for the retail market. If they were to look at 2 products that have the same function, say on is $3 and one is $10. The less expensive one is made of cheaper material and will honestly last about 3 years. The one that is $10 is made of much more durable materials and is likely to last say 15 years. The price only shopper will automatically go to the $3 item. Very little consideration is given to quality or longevity of the product.

The Value Shopper

This is the area that I try to be in most of the time, but I will admit that I bounce back and forward between price only and value. The value shopper is one who is willing to pay more for quality. The quality must be consistent with the increase in price. It must meat the ratio of product life expectancy to price. It must be a superior value. For example if a $5 item will last one year and a $10 item 2 years eccetera there is really not enough motivation to purchase the higher priced item because the value is the same.

T-shirts are an excellent example for this. I can go to the local big department store and purchase a t-shirt for $5. It is made of very thin material, it may have a cool design on it, but for regular use its life expectancy is at most one year. However I have t-shirts that I spent $12 dollars for has lasted me over 10 years. That is value.

The Prestige Shopper

These are the people that are logo/name brand focused. They have to have this designer or that. Some of these people even get part of their identity from the brands they buy. These are the people that are catered to by the upper end retailers and are honestly the primary target of the sales. Each group can benefit from a sale, but the prestige shopper is the primary target. These people are proud of spending large amounts of money on items because they have a designers name.


Both Types of Shoppers are Changing

With increased access and familiarity to online shopping has come a major shift of behavior for all of the customer types and sub-types listed above. The more online shopping improves the more pressure that will be placed on brick and mortar retail sellers. Online retail will continue to grow.

Convenience

There is something just really cool about being able to shop in your pjs anytime you want. No need to get up, or dressed or anything. When you add the benefits to online programs like Amazon Prime, which provided free 2 day delivery for most items, it is difficult to argue against online shopping. We personally love Amazon Prime.

Selection

The average brick and mortar retail location can have between 50,000 and 125,000 items on site. The same retailer may have in excess of 3 million items available online. Rather that driving all over the place and looking for "the item" sometimes even visiting the same store just different locations. You can fine whatever you want online with a few clicks of your mouse.

Price

In general online shopping is going to be less expensive. The reason is quite simple, OVERHEAD.
The companies that are exclusively online are always open, 24 hours a day 7  days a week. They don't have the expense of location scattered across the countryside. They don't need as many employees. Utilities costs, insurance costs, labor costs, really all of the costs of operating a business are much lower. These lower costs are what make lower prices available online.

How Does This Effect Us


Obviously if we work in retail our jobs are less secure that at any time in history. If not, we will be being pushed to online purchases. All online purchases are traceable so there will be greater data available about our purchasing habits.

There is no doubt that retail is changing, and companies that can change with the trend will do well. I do believe that we will see lots more store closures, but at the end of the day retail will not go away but it may change forms.

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