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The Retail Apocalypse May Not Be What You Think It Is

By Daniel B. Kline - Mar 19, 2018 at 7:17AM

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A new report shows why some brands are winning while others are going away.

While the so-called retail apocalypse looks like a collapse of brick-and-mortar chains driven by online retailers, that's not actually what's happening. The companies that have gone bankrupt, struggled, or are teetering on the edge are largely the brands that have not embraced omnichannel retail.

Even Amazon (AMZN 1.10%), a one-time pure-digital company, has seen the benefits of physical locations. It uses its Whole Foods stores as delivery hubs, has partnered with Kohl's on taking returns, and the online giant has bookstores, a prototype grocery store, and more physical ideas being tested.

Certainly, the current market has been an apocalypse for some chains, but the annual State of Retailing Online study from the National Retail Federation (NRF) and Forrester shows that consumers aren't abandoning retail. Instead, they expect traditional and digital retailing to be intertwined.

"This report shows more than ever that retail is retail regardless of where a sale is made or how the product is delivered," NRF Vice President for Research Development Mark Mathews said in a press release.

An Amazon Prime truck.

Amazon has set the standard for delivery. Image source: Amazon.

What's happening in retail?

About one-third (32%) of companies surveyed are purely digital retailers. Most of the rest (57%) are multichannel retailers mixing brick-and-mortar stores with online sales.

More than 4 in 10 of the store-based retailers (43%) expect to have a net increase in locations while only 16% expect a reduction. In addition, many physical chains are actively managing their real estate portfolio. This includes testing pop-up locations (24%) and opening new warehouses or distribution centers (12%).

"More brands plan to open stores versus close them this year, which proves that the physical retail store is not doomed as many think it is," Forrester Vice President Sucharita Kodali said. "Smart retailers understand that the two go hand-in-hand, but customer-obsessed retailers will continue investing in areas like omnichannel to provide customers with the seamless on and offline experiences they expect and now require."

Stores matter

Amazon first established two-day delivery as a standard and now it has been leveraging its distribution centers and Whole Foods locations to offer same-day two-hour delivery. That's emerging as a new benchmark and rivals have either been racing to build their own same-day delivery infrastructure or partner with existing providers like Instacart

New stores remain a priority for some retailers because 42% told the NRF that faster delivery of online orders is their top customer-facing priority, and "many plan to use stores to achieve that goal." After that, omnichannel services like being able to buy online and pickup in store were cited by 21% of those surveyed while 15% named ship-from-store as a priority.

"Products ordered online are increasingly picked up in-store or shipped from a nearby store, and digital technology being used at bricks-and-mortar locations lets retailers help customers find what they want or make the sale even if the product is out of stock," Matthews said. "Traditional retailers have seen the opportunities of online selling for years now, and those selling online increasingly see that stores are part of the key to success."

Give consumers what they want

At the core of retail is customer service. Give people what they want, when and how they want it, and they will be happy. The retailers that have failed are largely the ones that dropped the ball on that. Omnichannel is really just a way of meeting evolving customer demand.

When going to a store and shopping in person was the principle way to buy things consumer expectations were based on the convenience of the in-store experience. Now that more is not only possible, but the norm, people expect more. It is failing to deliver on that expectation that will quickly get a brand in trouble.

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