Retail Digital Transformation: From Malls to Digital Commerce
Peter Crosby | May 6, 2016
Learn what retailers must do to stay competitive
The Takeaway: Brands and retailers must start seeing digital commerce as a complementary aspect of their in-store shopping experience - not a competitive one. Or physical retail will go extinct.
Department stores are closing their doors. And if current trends continue, entire malls could be next.
That's what Business Insider contributor Hayley Peterson gleaned from a report written by Green Street Advisors. Peterson explained that Macy's, Nordstrom, JCPenney , Sears and other department stores have seen in-store sales per square foot decline 24 percent since 2006. Unsurprisingly, given poor performance, many of these shops are shutting down: JCPenney will turn off the lights at seven locations, Macy's will close 40 stores, and, this summer, Sears expects 78 closures. But Peterson pointed out that many more department stores will have to close if those retailers hope to bring productivity levels back to their 2006 benchmarks.
And if those shops are shut down, malls will follow suit. The departure of these "mall anchors" will leave these hubs of physical commerce empty, Peterson asserted. After all, if the biggest, most established retailers cannot keep their doors open, there aren't many replacement brands lining up to take those large spaces.
So what's the problem here?
Why are physical stores struggling to draw in shoppers and earn sales?
Some point to the rise of digital commerce as the challenge, arguing that ecommerce channels are stealing their sales.
The Chicago Tribune's Lauren Zumbach reported that retailers are on course to layoff over 37,000 employees in 2016 - the biggest purge since 2008.
"These layoffs are clearly an attempt to deal with the decline in brick-and-mortar productivity, as brick-and-mortar sales are lost to ecommerce while store expenses grow due to increasing wages," read a Credit Suisse report, according to Zumbach.
But the popularity of digital commerce really isn't to blame here - retailers with the inability to adapt are the reason why in-store sales are declining.
"The popularity of digital commerce really isn't to blame."
99 problems but digital commerce ain't one
See, in the era of distributed commerce, it's all about giving shoppers options - allowing consumers to buy products however, whenever and wherever they want. It's also about personalization and creating a seamless, engaging and memorable shopping experience regardless of what channel customers are using.
In other words, digital is not a threat. Digital commerce is the solution. Retailers that are seeing in-store sales drop month over month need to shift to a distributed commerce model with an emphasis on injecting digital into physical and vice versa.
Look at Bonobos, for example. (There are some lessons that department stores can learn from this brand.) A decade ago, when physical retail sales started to slip, Bonobos CEO Andy Dunn "thought stores were going away," according to Zumbach, penning a different article for the Chicago Tribune. But now, Bonobos has two physical stores, which the brand calls "guideshops," and Dunn has plans to open 28 more of these guideshops this year alone.
Consumers - not just Bonobos' loyal customers - want to try before they buy.
Bonobos leverages physical as a complementary experience to its digital commerce strategy, and other brands and retailers should take note. The company has a completely unique approach to remaining relevant in an ecommerce-first world.
A blend of digital with physical: The ultimate shopping experience
The lesson here is that, largely, people are going to stores with a purpose. They typically have already identified something that they want to buy, and going to the store is the final step in those buyers' journeys, not the first. They want to ensure they're making smart purchase decisions by actually seeing products.
Some of you might be asking, "Well, if that's the case, then how can I make my stores the first stop in a buyer's journey?"
You can start by offering in-store experiences that are more engaging and therefore more memorable by harnessing digital and leveraging it as a tool for the physical retail shopping experience. According to a report from Swirl, 88 percent of consumers indicated that they would be more likely to shop at a retailer if it "connected online, mobile and in-store experiences."
That's how you win at distributed commerce. Things like beacon technology, mobile apps optimized for in-store shopping and other digital capabilities make physical retail stores more interesting and worthwhile to visit. (Check out this article on how Adobe is helping to bring tech into physical stores to improve experiences.)
But you also don't need to be the first stop. You can use digital commerce channels to bring shoppers into your physical locations, as long as you offer consumers a seamless transition from online to in-store and in-store to online. Bonobos is doing exactly that while cutting down the cost of running a brick-and-mortar shop with some crafty inventory management practices.
Don't treat digital commerce as an enemy - treat it as a support structure that helps you drive sales on all channels.
For more on distributed commerce and adjusting to the changing nature of retail, check out our newest guide for brands. "Winning at Distributed Commerce."