Retail apocalypse

FULL DISCLOSURE - Fidel Abalos (Tsek.ph) - January 23, 2021 - 12:00am

Three years ago (2017), long before COVID-19 wreaked havoc globally, the bricks-and-mortar businesses in the USA were either downsizing or closing. They called it retail apocalypse. It started in 2010. Over-expansion of malls, exorbitant rental rates, low profits on regular months (with no holidays that trigger spending sprees like Christmas) delayed effects of the Great Recession were among multitude of factors they considered that led to it.

Sadly, Credit Suisse (in 2017) predicted that “between 20% and 25% of the nation’s shopping malls will close in the next five years” (or until 2012) in the USA as “e-commerce will continue to pull shoppers away from bricks-and-mortar retailers.”  This prediction then was well validated by the values that year of Sears, JCPenney, NORDSTROM, KOHL’S, *macy’s, Best Buy and Target which all went down by 96%, 86%, 33%, 64%, 55%, 54% and 21% respectively.  

As the pandemic continues to influence the USA in a bad way, will the retail apocalypse continue to be the norm in the years to come? What about in us? Will this probably happen in the country? Or, is it seeping in now. 

In answering these questions, there is a need to go deeper into the developments in the USA. In doing so, we might be able to learn and glean some wisdom from their experiences. 

As mentioned earlier, retail apocalypse in the USA started in 2010. With this date in mind, it is good to remember that Amazon was established on July 5, 1994. Though it started with books, CDs and DVDs were put in its shelves in 1998. In 1999, it added toys and games. Then, in 2000, not only that health and beauty products were added to the marketplace, it allowed “individual sellers and outside merchants to sell their products to Amazon customers.” 

Ten years after (that’s 2010), came the retail apocalypse. As mentioned earlier, in 2017, the bricks-and-mortar companies got the beating of their lives. Though pundits singled out over-expansion of malls, delayed effect of the Great Recession and high rent as among the culprits, that same year, Amazon’s value went up by a whopping 1,934%. Though one may argue that its value rose exponentially because it expanded into cloud computing, digital streaming, and artificial intelligence, the fact remains that its online retail is still a major contributor. 

Somehow, it is also worth mentioning that Wal-Mart, another bricks-and-mortar company, remained stable and its value just dropped by 1% in 2017. Practically unaffected by Amazon’s surge.

Why? Wal-Mart embraced the ways of the “click and mortar” in 2000. Ten years earlier from the start of the retail apocalypse. Also called “clicks and bricks”, this business model embraces both offline and online channels. Simply put, it has both the physical store and a website. The best of both worlds, so to speak. With this model, shoppers have the benefits of faster and more comfortable online transactions and the traditional face-to-face service. To some extent, the physical stores become the showroom where they can feel and fit the products. Then, purchase them online. 

These facts considered, will we see the demise of bricks-and-mortar businesses in the country, we may ask. It depends. With traffic jams a daily struggle and earning a livelihood a rat race, if they will remain purely bricks-and-mortar, most of them will certainly close. Why? Convenience and time with family become more valuable, so, customers will shop at the comforts of their homes.

As online retailers like Amazon or Lazada will continue to surge, there is, in fact, a need for “click and mortar” businesses to do something more.   

For instance, while shoppers are in the premises, they may engage with them. Through the shoppers’ smartphones, they may inform them of special offers, items at huge bargains, new arrivals, etc. They may inform them of the locations of products and where they can see, touch or fit them before going home and order them online. This way, they will be able to highlight their advantages by showing shoppers that usual frustration in just browsing and buying online.  On purchases way below expectations.

Moreover, they must be more analytical. Not only that, they must be able to see the future vividly not by guesswork but by the use of reliable information. Information that are scientifically gathered. Simply put, through the use of appropriate tools that are already available.

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