Fatal Retail Missteps: Why Big-Box Retailers Are Dying
We’ve all seen the headlines: apparently, 2017 is the year of the retail meltdown. Many major retailers are suffering; and even more are shuttering.
The last few years have been particularly unkind to big-box brands. First, Target withdraws from Canada in 2015 after making major investments north of the border. Sears Canada is now hosting liquidation sales across the country as it prepares to close dozens of stores. And toy giant Toys ‘R Us recently announced it had filed for bankruptcy protection.
Some industry experts blame ecommerce giants like Amazon, which delivers millions of items right to customers’ doors and subsists on razor-thin profit margins. But that’s simply not the case: While Amazon may have expedited these retailers’ decline, it was their own mistakes that dealt the final fatal blow.
What lessons can we learn here? There are plenty of takeaways to glean from these case studies — so, let’s dive in.
Why Some Big-Box Retailers Are Dying
While every retailer is different — from their target customers to their products and their marketing strategy — there are some common parallels we can pull from these stories.
Not Investing in Growth
As is the case with many larger companies, pivoting a business is a challenge. And it’s often this failure to invest in change to keep up with new buying patterns and changing consumer tastes that has killed off many retailers.
Take Toys ‘R Us, for example. This “category killer” was once valued at $7.5 billion. The toy behemoth, along with its Baby ‘R Us subsidiary, boasted healthy profits for many years. But they changed very little during those profitable years. The customer experience, business model, and overall business strategy more-or-less stayed the same.
After owning the toy market for years, WalMart waged a price war — and won. And ecommerce began to slowly draw away their market share. And Toys ‘R Us did little to stop it (partially because of a heavy debt load).
As one Forbes article on the subject so eloquently puts it: “As Amazon’s growth affected all retailers, Toys R Us simply did not have the resources to fight the traditional discount and dollar brick-and-mortar retailers, and build a major on-line presence, and keep paying that debt.”
Not Knowing Your Customers
Retailers of every shape and size have to follow one golden business rule above all else: know your customer. That means understanding their shifting tastes and understanding how they prefer to shop.
This is one of the missteps that led to Target’s short run in Canada. While many Canucks lauded the discount retailer’s arrival north of the border, many were underwhelmed by its offerings when store doors opened.
For one, their consumers took note of the higher retail markup. Many shoppers complained that Target Canada failed to bring the same cost savings that their American counterparts enjoyed. And Target Canada shelves didn’t offer the same variety of merchandise, or favourite lines that American shoppers received.
As the Toronto Star stated in a recent article: “Target had also abandoned its unique in-house designer lines as a cost-saving measure. That blunder has weakened the parent company, and accounted for the surprisingly bland product offerings at Target’s short-lived Canadian stores.”
That lack of understanding helped fell the retail giant, and forced it to tuck tail and run right back across the 49th parallel.
Bland Customer Experience
When was the last time you visited a Sears? Can’t remember? I can’t either.
While Sears Canada used to be a household name when it came to auto repairs and appliance sales, the customer experience hasn’t changed significantly for decades. The very-vanilla interiors and hopelessly dull products didn’t set the chain apart from every other department store (many of which, like Macy’s and JC Penny, are also in dire financial straits).
The lack of differentiation can be a death sentence when there are many other well-differentiated storefronts and ecommerce stores out there to draw a customer’s wandering eyes.
How Retailers Can Stay Afloat
Although retail has had a rough year, it isn’t dying. Today’s shoppers still, by and large, prefer to shop in brick-and-mortar stores.
So, how can brands keep up and stay afloat? The answer is simple: adapt or die.
The future of retail is bright and full of exciting innovations. And these are some of the things we’re seeing that is helping brands stay relevant and maintain a healthy bottom line:
Your store should act as a billboard for your brand. When a customer steps across your threshold, they should have an immersive experience that’s unique to your brand.
Engage your customers in person — encourage them to see, touch, and feel your products. They may not take it home right away, and that’s a key factor to understand. With shopping trends like showrooming, shopping in store is often just one brand touchpoint a customer may engage. They may come in to try out your product, then choose to buy online later. So, employ a robust omni-channel strategy to engage your customers wherever they are.
Create Urgency With Flash Sales
Brands both big and small can create a sense of urgency to “buy now” with temporary or flash sales.
These limited-time opportunities offer retailers a chance to flex their brand power and forge long-lasting connections with temporary retail (like Kylie Jenner’s pop-up shop). Brands can also offer unique, in-demand products during flash sales to further incentivize hesitant customers to pull the trigger on their purchase.
Smaller, Low-Inventory Storefronts
In general, we are an “over-retailed” society. The U.S. boasts 7,567 square feet of shopping space for person, according to The Atlantic.
Rather than focusing on occupying a high square footage, more retailers are using smaller spaces. Boutiques and pop-up shops are exploding in popularity for both shoppers and brands alike, proving that less square footage doesn’t necessarily mean a less impactful experience.
Stores are also starting to carry less inventory. One example is ModCloth’s fit shops, which the clothing brand plans to roll out across the U.S. These storefronts essentially function as showrooms, where customers can pop in to touch, feel, and try on clothes and accessories — then have it shipped directly to their doorstep. No walking out with shopping bags. And with lower inventory and stock needs, ModCloth doesn’t need to shell out major bucks on storage space.
Moving Forward in a Shifting Industry
While the retail industry is moving beneath our feet, all is not lost. As demonstrated by these big-box examples, retail itself isn’t disappearing as a sales channel — in fact, many retailers are thriving and opening new stores.
Paying attention to these shifts is the first crucial step toward ensuring the survival of any retail brand. Stay innovative and plugged into your customer desires, and the rest will surely follow.