2019 Holiday Retail Sales Wrap-Up Part Two: Brick-and-Mortar
The reality is not so much about the ‘death of the high street’ or the ‘retail apocalypse’, but many physical retailers struggle with a lack of agility in their retail footprints. LiveArea’s Elliott Jacobs discusses what retailers can learn from the peak holiday season such as embracing shorter-term, agile approaches to the retail space.
January 21, 2020
Author: Elliott Jacobs
There’s no escaping the numbers surrounding physical retail and store closures. Due to the increase in labor, rental and operations costs margins have become incredibly tight. Brick-and-mortar sales over the holiday period lagged further behind digital than ever. A lack of festive success will likely mean further store closures in the near future, with this period so vital as the lifeblood of retail.
However, there are signs that brick-and-mortar retail isn’t dead, it’s just been redefined. Let’s start with a look at those numbers:
The US saw a 4.1% growth in holiday retail sales compared to 2018, to $730.2 billion.
UK total in-store sales for 2019 decreased by 0.1%, compared with 1.2% growth in 2018, making it the worst year on record.
In 2019, there were over 9,300 store closures in the US. Macy’s has already announced the closing of 29 stores in 2020 while Pier 1 Imports will close 450 stores. Chico’s and Gap have both announced they will close over 200 stores.
In the UK, there were 2,868 store closures in the first half of 2019 alone, with more inevitable after a tough Christmas. Karen Millen, Coast, Forever 21, Links, and Mothercare all disappeared from the high street last year. In addition, retailers including Topshop, Dorothy Perkins and Miss Selfridge owner Arcadia, HMV, Laura Ashley, Bathstore, LK Bennett, Patisserie Valerie, Debenhams and House of Fraser have closed a large number of outlets, while Bonmarché and Jessops have fallen into administration.
So, what does it all mean?
The reality is not so much about the ‘death of the high street’ or the ‘retail apocalypse’. People no longer differentiate between online and in-store shopping the way they used to – it’s all part of the same journey. The key for brands is mastering how digital and physical assets can enable a useful, engaging experience for their customers.
Any brand that does not treat these assets as part of the same customer journey is providing a poor customer experience.
The issue is, many physical retailers have a lack of agility in their retail footprints. Signing 20-year lease agreements might suit landlords, but this model can become incredibly restrictive for retailers themselves. A lot can change in 20 years – just ask Arcadia.
A shorter-term, agile approach has to be the way forward. We’ve seen a rise in retailers investing in experiential retailing around major events to create pop-up or store-in-store shops that provide exciting brand experiences. The spaces can also be used as temporary distribution centers to fulfill orders faster.
A shorter-term, agile approach has to be the way forward. Launching a pop-up costs an average of 80% less than opening a new brick-and-mortar store.
Experiential retail is a useful tool for retailers, and pop-ups have grown exponentially in number. What’s key in terms of experience is offering something in the physical world that cannot be found on smartphones or laptops. We know everything can be purchased online, so the future of the retail store lies in remaining relevant – and relevance lies in experience.
Retailers are being creative in offering innovative, fun, and Instagrammable experiences in-store, without breaking the bank. Product vending machines, customization stations, coffee bars, augmented and virtual reality activities, live product demonstrations and in-store treatments, virtual assistants, workshops, live product launches, there are many ways of engaging an audience in-store.
Physical locations are also being used as mini distribution centers. With the increase in demand for BOPIS/BORIS/ship from store, this helps greatly with overcoming last-mile fulfilment, through strategic distribution positioning.
The cost to rent and stock a small pop-up retail-unit-come-distribution-center, close to customers, is exponentially less than the cost of shipping from one or two large, centrally located facilities.
There are retail spaces, store-within-a-store concepts, kiosks and unleased spaces in malls that cater to short-term lease agreements and offer many perks for sellers. These spaces are usually centrally located, near existing infrastructure, see lots of foot traffic and are designed to hold large quantities of merchandise.
Then there’s the likes of Re:store, positioning itself as a ‘WeWork for e-tailers’. Brands pay upwards of $350 per month for a presence in the immersive, experiential and Instagrammable space, as well as a 20% commission. Texas’s Neighborhood Goods does something similar.
This can work fantastically well for peak times, 61% of shoppers list seasonal products as the main reason to shop at a pop-up store.
And pop-up shops don’t need to be a full-service experience. It’s often said 80% of sales come from 20% of a brand’s product range. Retailers can focus on targeted product types and open only during peak times, like the three months surrounding the holiday season. This saves on rent, shipping and year-round warehousing costs. Launching a pop-up costs an average of 80% less than opening a new brick-and-mortar store.