Brad: Uninterrupted | Retail WTF
Recently I read about a massive change in retail. A huge amount of major retail chains are simply closing. What’s more, the economic and cultural shift this will cause for our cities and towns seems to be going unnoticed.
These stats are huge.
FYI — the store closures announced this year will carry through 2021, seeing potentially 713 stores close.
But since the subprime loans crisis of 2007–2010 there has been a major worldwide shift away from national chain stores. The pandemic has been the final nail in the coffin.
WTF now
What does this mean for us who grew up using retail as therapy, when a Saturday morning was all about heading towards a retail destination. In the time I have been in the advertising industry, this shift has happened at a lightning fast pace.
From 1997 to 2007, creating a commercial to sell consumer goods was relatively easy. All I had to do is come up with a theme, create a punchy ad for Radio and TV, and a full page ad for newspaper. It was magical. Crowds of happy people turned up, in fact, there’d be lines of people waiting for their chance to get a bargain. Long live scarcity marketing.
In those days we even had a ‘Saturday Morning’ jingle which played every Friday Night, all about shopping at your favourite spot. Of course, as advertisers, we determined what your favourite spot was, and it worked week in week out.
I worked on campaigns from the opening of a carwash to the launch of a super sized retail store. Again the formula was simple, we created, and they came. Our clients loved us and the customers loved coming. Then the subprime crisis happened. Credit dried up, people started to worry and the whole ‘we promote, you buy’ system started to change as everyone started talking about e-commerce and the web.
Since 2010, retail has hung on, hoping and wishing the glory days of retail would return, when it didn’t matter when, a sale or event always worked. 2010 marked a time in which we didn’t have a clue, but marked the doomsday clock as 1 minute to midnight for all of these giants of commerce.
There have been glimmers of that retail magic returning, with car sales in Australia exploding through the roof when SUVs became THE family car — that shift fuelled local sales, because you can’t really buy a car online, well, not at the time. But, since this time, car sales in Australia have also started to fall and the cost of doing business has become higher for car dealerships as consumers can now shop around and get the best deal wherever they happen to be in Australia.
Since 2017–2018 retailers have increasingly lost more of their market share to online retailers, to the point where large retailers are now losing millions of dollars every year keeping their bricks and mortar stores open. They’re trying to keep the dream alive, but the consumer shift towards online retail was inevitable. Chain stores can no longer afford the huge rents as the budgeting forecast for rent is usually tied to turnover.
If turnover is dropping, and stores can no longer afford to keep a physical location, this bounces the impact back onto commercial property landlords, who could face a possible 50% drop in their rental income. I can’t see a chance for survival of these stores going forward as owners and commercial landlords both have needs that cannot be met.
It’s a fourfold whammy. People without work or a career, businesses without income, commercial landlords without tenants and towns without the vibrancy of the old retail model. People love to see bustling shops, cranes in the sky and general movement of people to feel confident about the future. When you start seeing empty shops it feels apocalyptic — like a town or city descending into chaos, that (economically) we’re all doomed.
The pandemic and what now
COVID-19 has reset the curve for retailing. It was already happening organically, each year it was getting faster with the move away from 90s style of shopping. Since March 2020 the change has been frenetic with the old model simply swept away. It’s a memory now, goodbye to the days of shopping till you dropped. We’ve got the pandemic and lockdowns to thank. Not being able to see each other, or go to public places, has ensured that shopping online is now the new normal.
Debenhams in the UK is the first pin to fall in such a large way to transition from grand old stores to a warehouse driven model. Debenhams, a 122 year old instuition in the United Kingdom employing 25,000 people, was founded in 1778 as a single store in London and grew to 178.
This closing down of Debenhams’ physical stores gives us a preview of the huge changes that are coming. The smaller fries, however, might not have the luxury of being bought out for $100 million AUD by a big online retailer — they may just disappear from the streets.
What will happen to our towns and cities?
City centres have always been bustling hubs of activity, but their focus has always been on the office workers, the shoppers and those looking for entertainment. Everything in one place, convenience at its core. We moved away from village style living in the industrial era. We brought everything we needed into one central area. Having everything together makes public transport make sense, it adds value to property purely based on popularity of location. But as a lot of these things are becoming less place dependent, we might start to wonder what the cities of the future will look like.
This is where the move to online retailing has shifted the paradigm, land in a city is not as valuable, working in that large office block is not needed and business isn’t based around how many locations. This is not quite a reality yet, but this will happen. The internet has changed things forever and continues to do so — this will become our reality, we have seen it happen over the time of COVID. And like anything, once something has changed in such a large way rarely does it ever go back.
Even in the days of writing this blog, ASOS, a large online retailer has bought up three iconic UK brands — Topshop, Topman and Miss Selfridge in the UK. ASOS has said they want to become the major online retailer for 20 somethings. And again, 19,000 people are out of work, also main shopping streets across the UK, Australia and other countries are now without major commercial tenants.
What Next?
That’s the big question.
My thoughts — we will no longer need to be living in cities as a requirement for a career, as more services will become available easily via the web. We will no longer need to travel for work to other cities for meetings, or commute long distances.
Our big business hubs will become a reminder of days gone by, a bit like dinosaurs. Infrastructure will become lighter, buildings more multi purpose. We’ll move away from the Victorian age of industrialism. With interconnectivity removing the hustle and bustle, our times to come together will be more meaningful.
The bricks and mortar experience will evolve into just that — an experience. A hybrid way that moves beyond just a transaction. We can make any choice we like now, work from home, shop whenever we like and live anywhere we want.
Jobs won’t necessarily disappear, but they will change. Sales and traditional retail is no longer the model that works, but it doesn’t mean that people have stopped shopping or wanting to be convinced of the perfect buy, tailored to them. If anything, the slow fade of the hard sell and the physical retail model is just a transition into a more meaningful, collaborative experience for all.
Change can be hard to accept, we all know that, but it’s never the end of the world. While the transitions may be confronting, we should be excited about what’s coming. You’ve never had more freedom to make your job work for you, you’ve never had more access to all the things you’ve ever dreamed of. The internet is your oyster.
