Article

Retail Stores Are Alive and Kicking

By Scott Fenwick,
Retail Stores Are Alive and Kicking Image

In June 1897, newspapers erroneously reported that American author Mark Twain became ill in London and died. In response, Twain wrote a correction in the New York Journal: “The report of my death was an exaggeration’."

The famous reply has lived on and it’s one that the retail industry can call to mind in the face of skepticism about the future. With the holiday season upon us, it’s critical for the retail industry to take an objective view of itself. Consumer confidence has been climbing, and recent analyst reports by Thomson Reuters project that same-store sales for the fourth quarter (November, December and January) will rise 1.7 percent over the year prior.

Analysts also predict this year’s holiday sales will be spearheaded by the clothing, appliance and general merchandise department stores and wholesale clubs.

That means shoppers in stores, ready to spend. So while some predict retail stores are on their way out, there are many other signs that signal retail stores aren’t going anywhere. Among some of the key statistics:

  • Ecommerce sales represented just 6.4 percent of all U.S. retail sales in Q2, according to Ycharts.com (August 2014)
     
  • According to an OpinionLab study, 37 percent of millennials indicate they would rather shop at the mall vs. 27 percent who prefer to shop online. It’s not the location – it’s the experience that needs to change.
     
  • A 2013 study found that 75 percent of shoppers rank sensory experience and product immersion as influencers in how they shop.
     
  • According to a Harris Poll, shoppers prefer to purchase clothing (37 percent), shoes (35 percent) and smartphone/cell phones (35 percent) in person.
     
  • A 2013 study by global management consulting firm AT Kearney of 3,200 U.S. and U.K. consumers found they spent 61 percent of their shopping time in stores.
     
  • AT Kearney’s study also indicates that traditional shopping — as in a physical storefront — still makes up the vast majority of all retail sales. The study found a whopping 90 percent of all retail sales occur in physical store locations, and 95 percent of retail sales overall go through businesses that maintain a brick and mortar presence.
     
  • Moreover, the same study found 40 percent of shoppers spent more than they had planned while shopping in brick-and-mortar stores. By comparison, only 25 percent of shoppers spent more than expected when shopping online.
     
  • Shopping-center owners continued to increase rents in the second quarter as a host of retailers in expansion mode jockeyed for dwindling available space in existing high-quality centers.
     
  • Vacancy rates at U.S. malls and strip malls remained minimal in the second quarter such that retailers seeking to move into the best centers often must wait for another tenant to leave.
     
  • Vacancies at strip centers declined to 10.3 percent in the second quarter, down 0.10 percentage points from the first quarter and now nearly a percentage point lower than a post-recession high set in the third quarter of 2011, according to data from Reis Inc. At malls, vacancy remained at 7.9 percent for the third consecutive quarter, down from a high of 9.4 percent set in the third quarter of 2011.
     
  • Retail landlords say that plenty of retailers are expanding, led by specialty grocers such as Whole Foods Market Inc. and Trader Joe's, sports and outdoors stores, discount apparel sellers, dollar stores and medical offices. The roster of shrinking retailers is the same that has been whittling store counts for the past two years: electronics retailers, booksellers, office-supply chains and toy sellers.

In addition to the above statistics, in general, a large portion of online retail promotion is being directed to and fulfilled from stores. This can mean top-line revenue and margin growth for retailers, and the continuation of the trend that’s turning brick-and-mortar into digital assets in an omnichannel world.

Technology and consumer preferences will continue to introduce new challenges and cause retailers to adapt and experiment with solutions that work best for them. One thing is clear, however—stores play a starring role in omnichannel success.

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