Brick and Mortar No More?
Have you noticed that the stores of your youth are slowly disappearing? The growing trend of brick and mortar stores fading away into oblivion is real. However, the better question that needs asking is: “Are these stores closing permanently or will they continue to exist but in a different form?” Retailers have an opportunity to evolve the store to better match the purchase behaviors of the much sought after millennials, consumers between the ages of 20 and 35. As the millennials and to a large extent, the general public seek “experiences” over “things”, brick and mortar retailers are struggling to stay relevant. Six in 10 Millennials would rather spend money on experiences than material things according to a survey completed by MMGY Global. This growing trend has had an impact on traditional retail stores as evidenced by recent store closures announced by Macy’s, Sports Authority, Sears, and even Wal-Mart. At Macy’s, in-store traffic the last two months of 2015 dropped 6.4% and all store traffic declined by an average of 9% during the holidays.That said, there is a growth segment within brick and mortar and that is “off-price retail”, companies that buy excess brand name inventory at a deep discount, then resell them. In 2015, Nordstrom Rack, Macy’s Backstage, Off Fifth Stores and Ross were among high-end stores that opened 604 off-price stores. In 2015 off-price retail store fronts increased 12%, an eye-opening number considering the uncertain future of brick and mortar stores in general. An additional bright spot in the retail store shopping experience is the increased popularity of beacons. Hi-tech beacons interact with mobile apps to support augmented in-store experiences and simplify the purchasing experience. Apple, Target and Lord & Taylor have taken the lead in deploying beacons to their stores. Beacons are forecasted to drive over $44 billion in retail sales in 2016. And like we discussed in last month’s blog, pick-up in store is gaining traction, particularly with millennials, so some retailers are converting underutilized retail space into a warehouse and fulfillment operation. So maybe brick and mortar stores aren’t dead after all? The answer to our question will likely land somewhere in the middle. Brick and mortar stores will not disappear completely, but they are changing and retailers and their service providers must get ahead of the curve to ensure their future existence. How do you see brick and mortar retail evolving? We’d welcome your thoughts and comments below!