Is Brick-and-Mortar Retail Making a Comeback?
by Sandra Cariglio and Eliot Salandy Brown
For the retail sector, 2021 has been a year of pandemic jitters and supply-chain jams that has seen a flurry of store closures. Big department stores like Neiman Marcus, JC Penney, and Debenhams all filed for bankruptcy. Speak to a retail exec today and you’ll find them nervous, pondering what the future of brick-and-mortar holds, especially as so many aspects of our life, from entertainment to dating, migrate online.
But there are hopeful signs in the air. US retail sales are actually up, and Amazon recently announced its plan to open a fleet of physical stores. In other positive news for retail, 81% of the GenZ generation say they prefer shopping in stores to shopping online.
Could this holiday season mark the triumphant return of large brick-and-mortar retail?
The decline of the department store precedes the pandemic. Rising retail rents, increased competition from other sectors, and soaring labor costs all squeezed their profit margins in a way that made it difficult to splurge on splashy aesthetics or perks to pamper shoppers.
That helps explain why today they look and feel more like impersonal airport duty-free shops. Gone is the old-world pomp one felt entering a flagship store like Harrod’s or Macy’s. These shops at once celebrated conspicuous consumption while elevating the spectacle of the department store as a social space.
Their grandeur rode a wave of Cold War-era mass consumerism. Back then, malls grew twice as fast as America’s population, and retail was seen as a key driver of America’s expanding middle class.
Our relationship to stores mirrored that of our relationship to public space. From Woolworths to Sears, retail stores provided a kind of social fabric for postwar communities. They infused middle-class Americans with an aspirational ethos. Iconic brands were immortalized by Hollywood in movies like Breakfast at Tiffany’s or the FAO Schwarz step-piano dance scene from Big.
Yet as consumerism evolved, catalogues proliferated, technology depersonalized the shopping experience, and demand for dedicated spaces to shop began to sag. By 2019, the closure of boxy chain stores had reached an all-time high. That same year, Amazon netted over $280 billion in profits.
The irony is that until last year’s pandemic, Amazon was often blamed for killing off the retail store. The original value proposition of Amazon was to remove friction — by making shopping painless, affordable, and fast. But by delivering speed, scale, and efficiency, Amazon removed the intimacy of the retail experience. It became purely transactional — much like how McDonald’s, by franchising, killed off the kitschy magic of the 50s-era burger joint.
The question is whether Amazon and other retailers can bridge the world of manufacturing with the world of service and storytelling? Put another way, can they bring back the lost sense of place and enchantment of the retail shopping experience? Or will Amazon’s brick-and-mortar stores come to resemble a strip-mall version of the depersonalized boxes that clutter our front doorsteps?
Like many online retailers, Amazon specializes in streamlining global supply chains, not in regaling consumers with a backstory of its products or their origins. The skills to seduce and inspire shoppers and help them develop a point of view on what to buy, to recreate that sense of personal style and creativity, are vastly different from those required to build an online empire like Amazon’s.
So much of online retail, while convenient, demolishes the process of discovery and decision-making. It warps not only how we relate to space but also the products we buy and the physical world at large. This shift has also sparked a backlash against “acquiring stuff” — explaining the catechism of Marie Kondo’s decluttering ethos — but also a nostalgia for the pre-Amazon intimacy of retail shopping.
The question is which direction will brick-and-mortar retail go. Will big retailers look to revive the shopping experience of yesteryear, at once intimate and seductive? Or will they treat shopping as simply a transactional experience, one that minimizes friction yet maximizes efficiency?
ReD Associates’ latest data suggests that middle-class shoppers long for more meaningful relationships with the goods they purchase and the brands behind them, even if it means more friction or even — gasp! — higher prices. This goes in spades for scarcer Veblen goods. Shoppers say they prefer the intimacy of farmer’s markets to the anonymity of faceless chains.
Perhaps tis the season when brick-and-mortar retailers seduce shoppers again?
Sandra Cariglio and Eliot Salandy Brown are partners at ReD Associates.
