The real reason big box retailers are closing stores and how you can capitalize on it.
After another disappointing December, more retailers announced last week that they would be closing more stores resulting in job losses for tens of thousands working class citizens. Analysts question if the closures can happen fast enough. The closures, while expected, are sending messages to Wall Street. Usually, the blanket statement of a simple reassessment of locations and their proximity to each other to maximize their (the retailers) reach suffices the inquiries. Other statements have cited declining sales and the movement of the buying markets. What they won’t say is that the traditional brick and mortar concept is declining in favor of convenient click and order concepts. Large organizations must stay years ahead of curves and trends simply because the size of the organizations make shifting strategies a long term process. They are neither spry nor nimble in regards to making organizational changes. Monitoring their actions, such as introducing new technologies (i.e. Self checkouts) and abandoning under performing locations are tell tale indicators that their research tells them that what they are currently doing is not sustainable in the years to come.
Most economic experts agree that there is a real shift happening in retail rather than simply a curve or trend. Customers are smarter, have more options, and are more price savvy than ever before. Due largely to technology, their expectations and habits have changed dramatically. In the palm of their hand, they can access real time information on every product they consider buying, from price to availability and even to specifications. They are empowered by the ability to compare, in real time, during the decision process. And, armed with more data than needed, the empowered shopper is making different decisions.
This empowerment is evident in the statistics for this past year. The Commerce Department released in January of this year that retail sales rose 4.4 percent year over year. However, sales at department stores FELL 7.2 percent during the same time. This marks the 23rd consecutive month of negative growth in this sector. In contrast, non-store retail sales ROSE 10.2 percent, practically carrying the burden of the brick and mortar sector. Month after month, executives must sit in board rooms of these large retail store companies and dissect the continuing decline in sales. In recent years, these retailers have attempted to create a shopping “experience” as evidenced by the retrofitting of entire department stores and the introduction of convenience services such as self check out and in store pick up. Their goal has always been and always will be to drive traffic to the location. The reason for this is the volume of the ancillary sales attributed to these store visits. “Would you like fries with that,” is more than an added bonus for these retailers, it is a life blood. Without these value add purchases, the loss leaders (that TV that is $99) is really a loss.
History has proven that an improved “experience” does create customer loyalty. Starbucks has proven that customers value the intangible “experience” and they will pay a premium for it. But the “experience” is a means to an end. The end being customer loyalty. A loyal consumer is gold and retailers know it. As such, they will continue to scramble to connect to a group of folks that are smarter and savvier than ever. However, that same group of folks are demanding that they no longer need their big boxes. And as much as it hurts, like a high school breakup, the retailers have made the realization that the relationship, in its current state, is over.
It was Henry Ford that said, “Failure is an opportunity to start again, this time more intelligently.” In essence, retailers are starting over. And they are doing it electronically. They carry with them knowledge and experience and the infrastructure to deliver. But, there is one thing that they still need to figure out. There is one thing above all others that will determine who will dominate the new landscape of online retailing. In his book Start With Why, Simon Sinek says “People don’t buy what you do, they buy why you do it.” The future leaders of consumer retail will absolutely have to be able to convey purpose to their customers. There is nothing sexy about selling everyday essentials online, especially when you can’t dress them up in marketing drenched end-caps that reach the ceiling. It is a daunting and, more importantly, expensive task.
In Judo, a fundamental skill is to use leverage and balance against your opponent. It allows a smaller, more centered person to throw a much larger person to the ground. In the business world, this fundamental skill can be used to “throw” a much larger opponent as well. In the world of Network Marketing, there lies the missing link to retail success-Loyalty. Network Marketing encompasses a community of folks that are extremely loyal to whatever brand or product is distributed within their organization. These loyal consumers and sellers are not bought through expensive marketing techniques of online retailers either. These communities are being bulit by word of mouth and leveraging the reach of global social networking. The rate of loyalty growth in these companies could be considered viral and traditional retailers should be evious. And concerned.
Afterall, it makes sense that this group of folks, the ones that are smart and savvy, have a reason to be loyal. The lure of getting a ‘piece of the pie’ could far out weigh anything an online retailer could offer. Deep discounts only go so far and no one has ever saved their way to wealth. But, this idea of an online compensated marketplace could very well create the millionaires of tomorrow. The concept, in itself, is scary for the traditional retailer whose why has always been stockholder profits at the end of the day. It is very difficult to attract shoppers to this why. By virtue of the model itself, Network Marketing answers the daunting Sinek quote by offering a very compelling ‘why’. These companies are generally run on a shoestring budget, allowing margins to be shared through the organization and they market to this fact. It is, for all intents and purposes, a B2B model. As Jack Ma, founder of Alibaba, has been quoted as saying recently, the future is not in new technology as much as it is in developing B2B. He believes it to be the next big shift.
As of the day of this writing, JC Penny just announced another 130–140 store closures along with 2 distribution centers. They will be offering early retirement packages for over 6,000 eligible associates. They want to focus more on online channels their CEO said in a statement.
As the shift continues thru 2017 and into the years to come, many Networking companies will be capitalizing. One such company is The Compensated Marketplace known as Bonvera. This organization in particular has found an approach that leverages the shift by opening the funnel wider than many others. While other Network Marketing organizations focus on niche products and services, such as vitamins, weight loss products, leadership, and financial services, The Compensated Marketplace offers everyday brand name products as well as a few niche items. This organization sells Tide, Windex, and thousands of other household essentials. Based upon this fact, Bonvera’s Compensated Marketplace is well poised to change the way retailing is done. It is plain to see that the way we retail has officially changed and a scent of opportunity is in the air. Can you smell it?
For more information on The Compensated Marketplace and Bonvera visit them on Facebook @BonveraUS and on Twitter @Bonvera_US.
