Shift Happens: 7 Factors That Defined A Decade Of Retail Disruption
(Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
As far as I can tell, retail has always been pretty darn dynamic. Certainly the past 50 or 60 years brought some big changes: the rise of the suburban regional shopping center, the emergence of discount mass merchants and category killers, the advent of home shopping and warehouse clubs and so on. Yet few would dispute that during the past decade we have witnessed the most seismic changes of all, largely driven by the spread of digital technology.
Indeed shift happens. It’s just happening faster and faster all the time. Below is my take on seven of the most profound factors that drove this decade’s epic retail revolution.
1. The end of scarcity. When it comes to retail, most folks point to online shopping as the most disruptive force. I beg to differ. While related, what the internet (and related technologies and platforms) did was dissolve or reduce many aspects of scarcity that helped determine the winners and losers of prior decades. Media, information, access, product choice, convenience and connection, once restricted, expensive or fraught with friction are, today, largely anything but. In many instances, it’s everything-now.
2. We no longer go online, we live online. During this past decade the widespread adoption of smart devices redefined the customer shopping journey and old notions of what makes for the best retail location. Smartphone by our side nearly 24/7, for most of us shopping is no longer an intentional, planned act defined by trafficking a physical store or waiting to get home or to the office to log on a computer. As a practical matter, many consumers can go from doing one thing to shopping in a nanosecond-and, increasingly, the best location for a retailer’s brand is showing up in remarkable ways on a mobile device.
3. The customer is the channel. No customer wants to be average. As scarcity in so many areas began to evaporate, the power shifted irretrievably away from brands into the hands of consumers. Faced with a world of choice, a tsunami of information, easily educated, constantly connected, the fact is no customer has to settle anymore for average or simply good enough.
Retailers may talk about the e-commerce channel or the brick-and-mortar channel, but our customers know better. It’s all just commerce and they-the every more powerful customer-has become the only channel that matters. The key now is to embrace the blur and execute a remarkable, harmonized customer experience.
4. Apocalypse? No. Earlier in the decade quite a few alleged experts predicted that physical retail was dying, leaning into some version of “software eats retail.” Later in the decade, headlines abounded about the so-called retail apocalypse. These predictions aren’t looking especially prophetic and, when it comes to brick-and-mortar stores going away, to paraphrase noted retail futurist Mark Twain, “reports of their death have been greatly exaggerated.”
While stores closings have grown dramatically (see below), the facts are clear: the vast majority of retail sales will be consummated in a physical store for the foreseeable future; many retailers continue to open large numbers of brick-and-mortar locations; and physical stores are often critical to drive online brand performance. And in a rather interesting bit of irony, many of the digitally-native brands that once eschewed those pesky things called stores are now opening them as fast as they can.
5. The collapse of the middle. Physical retail isn’t dead. Boring retail is. There is no question that we are seeing a major pullback and repurposing of retail space-and we’re not done yet. Much of this is an inevitable, long-overdue correction given the rampant overbuilding that occurred during an extended period of cheap money and wide-eyed optimism. Some, though less than is commonly believed, is the result of the dramatic growth of e-commerce. Most of the retrenchment, however, is concentrated among those retail brands that are stuck in the vast, undifferentiated and boring middle. Sales are growing-and stores are being opened-by those brands that offer strong value and convenience (e.g. Amazon, discount mass merchants, off-price retailers or dollar stores). At the other end of the spectrum, more specialized, upscale and “experiential” retailers (Lululemon, Ulta, Restoration Hardware, etc.) are seeing improving fortunes (and opening stores) despite being predominantly brick-and-mortar oriented.
6. Optimizing to extinction. Having just finished a book on retail disruption and innovation, it’s pretty easy for me to point out what retailers that are now gone or struggling to survive got wrong.
First, they seriously underestimated the impact of digital disruption. Second, they mostly watched as these forces began to reshape consumer behavior and competitive dynamics. Most critically (and, as it turns out, disastrously), they worked on the wrong problems. Instead of focusing on being more remarkable and customer relevant, they cut costs and closed stores. They vainly hoped that a slightly better version of mediocre could be a winning strategy. But good enough no longer is. And bailing doesn’t fix the hole.
7. The opposite is risky. In the decades the preceded the one that is now ending, for the most part, retail innovation spread slowly. Much of it manifested in a physical store and it turns out it that tends to take a fair bit of time and capital. So it was often risky back then to go big and bold. But if the last decade has taught us anything it should be that defending the status quo and being unwilling to embrace a culture of experimentation is the riskiest thing we can do. As Mark Zuckerberg puts it, “in a world that is changing rapidly, the only strategy that is guaranteed to fail is not taking risks.”
While new forces are certain to emerge in the years ahead, plenty of lessons can be learned by reflecting on what retail brands failed to pay adequate attention to, accept as the pressing new reality and, most critically, act upon in the recent past. As cliche as it is, the only real constant is change. And, as retired Army General Eric Shinseki reminds us, “if you dislike change, you’re going to dislike irrelevance even more.”
Originally published at https://www.forbes.com.
