Retail Apocalypse
When one thinks of an apocalypse, images of destruction, chaos and even zombies may come to mind. While these are unlikely to transpire, an equally horrifying sight has reared its head: dead malls. Prior to the COVID-19 pandemic, retail stores and malls were in rapid decline. The retail apocalypse started in 2010, and continues as more retail stores continue to die off. In what became known as "The Great Retail Apocalypse of 2017," seven major retailers filed for bankruptcy, and stocks, such as American Eagle and Lululemon, sank to all-time lows. While retail stores were already facing their demise, the pandemic accelerated the downfall of these stores.
But how is it that these destinations once beloved by so many are now becoming empty? Even before the pandemic, e-commerce was rising. According to an article written by BBC news, “In 2018, [Amazon] became the world's second-ever public company to be valued at $1 trillion , after Apple, and today it has the third-highest market valuation in the US, after Apple and Microsoft.” Other retailers are simply unable to compete with the ease of online shopping. And it makes sense –– why go to the store to buy an item when it is more convenient to purchase online? Rather than spend time walking around stores, one can use the Amazon or Google search bars. Retailers failed because their in-store experiences were not enticing enough for consumers, with one example being the once-popular Toys-R-Us, which filed for bankruptcy in part due to its inability to compete with Amazon, as well as with stores that offered unique, innovative shopping experiences such as the Lego Store’s customization stations.
In response to this, stores made necessary improvements. Kohl’s reduced the square footage of their stores, allowing customers to feel less stressed with a reduced item selection. American Eagle implemented interactive fitting rooms equipped with digital screens. Sephora now offers an in-store smart mirror, allowing consumers to virtually experiment with makeup available for purchase on nearby shelves. Amazon Go stores allow customers to purchase items without the hassle of waiting for a register. Customers can walk out with their items, and in-store scanners paired with a phone app will charge them remotely. Target offers an app guiding in-store shoppers to the location of the items they wish to purchase. The use of virtual reality has increased in stores too, allowing customers to virtually try out experiences. Virgin Hotels and Holiday Inn experimented with a VR headset for customers to try out travel destinations. According to their study for a 2018 trial of VR, “The 50 stores that featured the VR headsets saw 81% more sales for Riviera Maya compared to the 50 stores that did not.” In addition, the pandemic led to fear of enclosed public spaces and caused consumers to avoid staying inside stores for lengths of time. It also changed the way consumers shop and look at items. These techniques upgrade the shopping experience by making it more efficient and timely. This has helped retailers improve before the pandemic and has allowed them to stay afloat during these challenging times.
Despite the pandemic, retailers like TJ Maxx, Five Below and Dollar Tree are opening more locations as these types of “discount chain stores” have found an in-person method that works at piquing customers’ interests. Discount stores typically receive overstock from popular brands which they sell in limited quantities at a lower price. At TJ Maxx, high-end brands such as Tommy Hilfiger and Michael Kors are available at a large discount. In a study done by Accenture, it was discovered that 64 percent of consumers are concerned about their job security, and 88 percent are worried about economic impacts from the pandemic. These worries have resulted in a shift in consumer behavior towards discount stores. While e-commerce is a growing market causing many traditional retail stores to go out of business, understanding consumer behavior and implementing strategy accordingly allows retail stores to better compete with online giants.
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Photo caption: Shuttered retail stores
Photo Credit: Pixabay
