The numbers are staggering. According to estimates reported in The Dallas Morning News, Radio Shack is et to shutter 552 brick-and-mortar storefronts; Rue 21 and Payless shoes: 400 each; clothing chains Gymboree/
Janie & Jack, The Limited, and Men’s Wearhouse/Jos. A.
Bank, 250 per retail group.
Department stores are not immune either. Sears and
Kmart are shutting down 160 outlets; J.C. Penney, 138; and
Macy’s 100. In total, some 5,377 retail stores are set to close
this year alone. The trend is the latest manifestation of consumers’ desire to shop online, which has seen the majority of
retail sales growth in recent years. Though e-commerce only
represents 8. 5 percent of total retail sales as of first-quarter
2017 (according to the U.S. Census Bureau) its steady growth
and impact is literally changing the country’s landscape.
To comprehend e-commerce growth, it helps to examine
its strengths. Online shopping gives consumers two enormous
benefits compared to physical shopping: countless choice vs.
limited inventory; and the ability to compare prices effortlessly, as opposed to wasting significant time, money, and
inconvenience driving around to find the best price. Yet, for
all that, some 72 percent of buyers surveyed by Time Trade indicated they “…like to touch and feel products before I buy”
according to the company’s 2017 State of Retail.
Nonetheless, the efficiencies created by everything from
private delivery services, drones, pick-up lockers, and their
own retail locations are ways that e-tailers are overcoming the
desire for instant gratification. Combine that speedy shipping
with generous return policies, and cheap or free shipping, and
the trade-offs favor online sellers, and may explain why the
percentage of buyers who prefer to touch and feel a product
has dropped 13 points (from 85 percent) in just two years according to the same source.
Such closures and shifts in buying behavior are creating
an unprecedented consolidation of power among a handful of
retailers who are surviving or thriving based upon a combination of online and offline sales. Amazon, the biggest online
retailer, accounts for more than half of online sales. Walmart,
which spent $3.5 billion to acquire online seller Jet.com, saw
its domestic internet sales increase by 63 percent in the latest
quarter. As Walmart increases its online offerings, Amazon is
experimenting with physical storefronts in categories ranging
from books to groceries.
Beyond the dominance of these two giants looms the
membership model, as exemplified by Costco and Sam’s Club
— a concept Amazon has co-opted with its Prime member-
ship. According to The Motley Fool, Amazon has doubled its
global Prime members (who pay $99 annually or $10.99 a
month) to about 80 million during the course of two years.
That’s a windfall of more than $7 billion that Amazon can
use to launch new businesses, create membership value, subsi-
dize margins, and undercut competitors.
Many specialty categories have been reduced to one major
player; think sporting goods, for example, where Dick’s is the
last chain standing, or consumer electronics, where BestBuy
is the remaining category king. Then there is the matter of
white-label goods. As dominant retailers continue to earn
consumers’ trust and loyalty, more and more mainline brands
are ceding shelf space to such products. Costco’s Kirkland
brand, for example, is now emblazoned on everything from
dog kibble to booze, coffee beans, and gasoline.
Amid this massive change, what is a direct marketer to do?
1. Realize that brand is more important than ever. Creat-
ing brand and product differentiation by educating the
consumer and driving demand through all channels,
is mission critical. Why? Because it is the best defense
against being commoditized and having margins erode.
2. Remember: you’re a direct marketer! You have the
opportunity to sell directly to the consumer and protect
your pricing model. You can get creative with different
offer configurations at brick-and-mortar retail so that
your products cannot be price shopped on a direct
3. Knock yourself off. Use your infrastructure to create
alternative brands — perhaps
even white label — to fortify
your market share. After all,
someone is going to create
competition for you if you are
successful. Why can’t that be
Perhaps the best news of all is
that the human instinct to hunt
and gather is not going away. The
manner in which consumers choose
to buy will diversify and — with that
behavior — new opportunities will
arise, whether it’s bricks or clicks.
Marketers must be ready for the
change to avoid doing what these
storefronts are being forced to do:
turn out the lights for good. ;
Do Retail Store Closures Create
an Opening for Direct Marketers?
By Peter Koeppel