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Are Major Retail Stores in a Death Spiral?

Are Major Retail Stores in a Death Spiral?

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By Michelle Burton
Faculty Member, School of Business, American Public University

Several major retail companies have announced closures recently. For instance, JCPenney closed almost 40 stores in 2015 and is set to eliminate another seven stores by the end of 2016. In 2016, Macy’s announced the closings of approximately 36 stores.

In addition, Macy’s will shut down approximately 15% (100 stores) of the current store base in early 2017. Wal-Mart is set to close 269 stores, with 154 of them in the United States. Sears closed about a dozen or so stores this year.

We are seeing such stories in the press more frequently. It appears that traditional brick-and-mortar retailers we have come to know and love are dying. At the same time, ecommerce giants such as Amazon, Groupon and Zappos have emerged as dominant forces in the retail marketplace.

What’s Happening to Retail Stores?

There are several reasons behind this phenomenon. Customers are changing how they shop. Millennials specifically want products available at their fingertips at any given time. They want to shop instantaneously from their mobile devices, laptops and notepads.

Ninety percent of the population accesses a mobile device while they’re shopping and 49% of store purchases are influenced by digital experiences and interactions. Research shows customers look at their smartphones approximately 150 to 200 times a day.

Forrester research finds that 69% of consumers frequently purchase products online. Forrester data also shows us that online sales will reach $480 billion by 2019, an increase of $146 billion from 2015.

Convenience Has Become King

What is the motivation for going to a large department store, especially now that you can get two-day shipping? And in some cases, two-hour shipping?

Endlessly circling the parking lot to find a space at your favorite malls is becoming rare as consumers find the same products online. Customers are pulling away from mall environments. Instead, they now frequent strip malls and other freestanding locations that have much easier access and are closer to home.

Potential Solutions for Brick-and-Mortar Retail Stores

What are the workable solutions for traditional brick-and-mortar retailers? What do you do if you are JCPenney, Sears, Target or Macy’s? How do you keep your business alive?

First, retail stores should adopt digital enhancements in their stores to make the shopping experience easier and more enjoyable. Mobile checkouts, interactive fitting rooms and store displays are all new technologies that engage consumers and create a “wow” factor they simply can’t get online.

Being inside a store allows consumers to feel and examine the products. This is important because 60% of customers still say they would rather shop in store than online.

Second, traditional brick-and-mortar retail stores should seek to leverage their ecommerce sites. Many retailers have implemented online purchasing with in-store pickup.

Third, major retail stores should create a seamless purchasing experience by allowing customers to return purchases both online and in store.

Only time will tell if ecommerce sales continue to outpace the traditional brick-and-mortar retailers. Have we witnessed the first stage of failure for the likes of JCPenney and Macy’s? Perhaps not, if traditional brick-and-mortar retailers focus on technology, convenience and the strengths they have to create a more compelling experience for their customers.

About the Author

Michelle Burton is a faculty member in the School of Business, teaching retail management courses. Her academic credentials include an M.S. in merchandising from the University of North Texas and a B.B.A. in marketing from the University of Houston. Michelle also has a considerable background in the retail and merchandising industry, having worked for Designer Shoe Warehouse, Academy Sports and Outdoors, Macy’s, Nordstrom, Sephora and JC Penney. She has twice won the James Cash Penney award and sales awards from JC Penney.

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