The Coming Retail Sea Change

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I have, for some time now, been asking the question:  “When will the tipping point for big box
retailing occur?”  That moment when the
internet has syphoned off just enough consumers so that it is no longer
possible to maintain 200,000 square foot stores
and the multiplicity of
distribution centers that support them.  One writer thinks its going to take place in 2016; more on that in a minute.

First, let's consider the two big existential questions confronting big box retailers like Wal-Mart and Target:

  • What size physical infrastructure in terms of
    store size and store counts is going to make sense to serve a rising generation
    of shoppers who would rather shop at home?
  • How long can bricks and mortar retailers afford to provide ecommerce
    providers with free showroom space?

These two questions, both generated by the digital age,
are going to define retailing in the coming decades.  Michael Hiatt, writing for Retailing Today
(“The Ultimate Age of Retail”) sees retailing as on the cusp of one of its 20
year sea changes.  Here is how he puts it
in the opening to his article:  “Retail
innovation cycles last approximately 20 years. As we take a look at retail
history, this cycle becomes self-evident. From the general store to department
stores to discount stores and so forth, each variety has their day in the sun
as the leading channel for most purchases.”

He goes on to note that retailing is going through an
inherently unstable period in which two forms of retailing are
co-existing:  Bricks and mortar retailers
and ecommerce providers
.  The problem is
bricks and mortar stores function as unintended but “well-apportioned,
visibly-appealing showrooms” for consumers who want to assess a product which
they then purchase from an ecommerce provider at a lower price via their cell
phone.

Hiatt does an excellent job of noting possible
outcomes.  One I found to be prescient
was the idea that bricks and mortar retailers will progressively offer fewer
registers
by allowing consumers to check out via their cell phones. 

My prediction is that we will see fewer and smaller big
box retailers
while at the same time some more adventurous etailers opening their own showrooms. 
I also see local home delivery, now being


pioneered by food ecommerce
providers like Fresh Direct and Peapod becoming a bigger part of the bricks
and mortar experience.  Go on line and
you can have your purchase in your home in hours if all it has to do is cross
town. 

Hiatt sees the tipping point for bricks and mortar occurring
in 2016.  He may or may not be correct on
that exact date but he won’t be far off. 
The demographics and the technology are creating enormous headwinds for
the Wal-Marts, Targets and KMarts of the world. 

But what does this mean for the smaller bricks and mortar
retailer?  That in my next posting.

 

4 thoughts

  1. I doubt the Big Box retailers are looking at aggressive opening programs, more how to ultilize surplus space for engaging activities that run parallel to the main thrust of retailing.
    I don’t mean ever more cafes selling junk food, more in the line of after school/vacation activity classes and so on that are relevant and interesting to their audience, quite possibly needing a more varied supplier base to support these activities.

  2. Dear Richard:
    I would respectfully suggest that the demise of the Big Box is a long way off as the percentage of business that they do is still most significent compaired to all of the E-tailers.
    The two big questions that all big box retailers need to answer to continue their success is how can they get the consumer to visit the store more often and develop specific lines of product exclusively for themselfs.
    Bob

  3. Times are changing. Manufacturers, retailers, inventors, everyone needs to be moving with the arrival of the digital age. How can brick and mortars compete with e-commerce? They need to be what e-commerce can’t. Personable. Take Marbles. They demo every product they sell. They have Brain Coaches selling their products. Take Snakes and Lattes, the games cafe in Toronto. They are a place where people come and play games. They created a retail space only after people kept asking them, “where do we buy this?”. Now they have a large retail presence. They have game gurus on staff to teach the thousands of games in their collection. These are game examples. It could work the same with toys. Create a personable environment. E-commerce can’t do that.

  4. I think the way for retailers to win is to become more experiential. Take those toys out of the boxes and let the children play! Think Sephora for toys. I prefer to shop at Sephora where I can ‘play’ with the offerings than order online. In fact, Sephora, and before it, The Beauty Bar and in Canada, MAC Cosmetics, were all inspired by toy stores! They wanted to let women play! Now it’s time for big box retailers to be inspired by the beauty world.
    Plus, how wonderful would it be for toy brands to see how children interact with their toys and games in the real world?
    Get on the floor and play!

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