It seems all the retail headlines these days are concerned with the annihilation of retail as we know it. While this perception is being fueled by some failing regional shopping malls, highly publicized store closings and general economic skepticism, that’s only a small part of the story. The truth is, retail is flourishing – just not in the traditional sense, and not for everyone.
We’re always keeping our ears to the ground of retail market, and after digging through some recent research from IHL, it appears that certain segments of the retail market are being impacted more by the changing consumer tastes and behaviors — sporting goods, department stores, and specialty apparel, specifically. These segments are not evolving to meet changing consumer behaviors and industry trends, and if they don’t embrace change and innovation, they could be looking at the end of the road.
There are a vast number of variables in the market that eventually affect retail, and today we’re seeing the fuller impact of trends and behaviors that started years ago. For example, low interest rates led to overexpansion for many retailers, and now they are recalibrating their spread based on demand and operational need.
Consumers’ need for speed and cost sensitivity extended to the fashion industry in a big way over the past few years, with clothing subscription services and off-price retailing taking market share from traditional department store models. We also saw a huge consumer spending shift to experiences rather than goods and increasing costs of healthcare, college, child care, and food that put downward pressure on other spending. None of these variables are killing retail, but they are forcing a shift in how the industry functions, challenging traditional brick and mortar models, and pushing retailers to be faster and more creative with their offerings.
Who’s not dying out – and how
As mentioned, not everyone in retail is struggling. In fact, the IHL study noted that mass merchandisers (think Action, Dollar Tree, etc.) and convenience stores are opening more brick and mortar locations, and segments like DIY, furniture, cosmetics, mass merchants/discount, jewelry, and supercenters/warehouse clubs are all up across the board.
So, what should retailers do to keep up? Put simply: innovate.
Ok, not so simple, but retailers can start by improving their consumer experience in the store and online, increasing IT spend, and investing in technology. We see retail leaders are far outpacing the rest in IT budget, and a focus on technology can solve inventory problems, speed product innovation, and improve efficiency across the retail supply chain. Technology advances and the need to stay ahead of consumer trends are driving a new environment where retailers must embrace change or be left in the ruins of an abandoned strip mall.
Embrace change and succeed. Learn more about staying ahead of the retail evolution and adapting for your customers to beat the competition.