Retail redemption or demise?

Jess Kaplan, Opinions Editor

It has been a catastrophic few years for retail: in 2017, nine major retail companies declared bankruptcy. Approximately 6,700 stores have closed in the past year, including major shutdowns from Macy’s, J.C. Penney, RadioShack, and Sears. Many malls are now empty. Retail has reached its demise.

What is most peculiar about this demise of retail, is that the economic conditions are very suitable for retail growth: GDP rates has been increasing for eight consecutive years and unemployment is at a new low. Instead, a number of cultural trends are the leading factors of retail’s collapse.

The simplest explanation is the exponential rise of e-commerce, Amazon in particular. Amazon revenue peaked at $177.9 billion in 2017, a 31 percent increase from 2016. With free shipping, convenience, and a simple website, Amazon offers an unmatched digital shopping experience. This instant gratification has led to a devout Amazon Prime fan base. In fact, more than half of all U.S. households are now Amazon Prime subscribers.

Yet Amazon is not the full story. Online retail startups, like Reformation, Warby Parker, and Casper, all offer similar convenient user experiences to Amazon that retail stores lack. Moreover, spending on clothing has declined by 20 percent in the last century as the millennial generation has shifted their spending from material goods to experiences, such as dining and traveling. Economist Barbara Byrne Denham claims this cultural change is largely fueled by social media—teens today prefer to fill their Instagram with unique experiences rather than trips to the mall.

Despite the overall fall of retail, it is presumptuous to declare the death of retail. In fact, there are a few stores that have found success. Superstores like Walmart, Best Buy, and The Home Depot that promote reasonable prices, a variety of brands, and efficient service have all been able to maintain steady profits and growth rates. Luxury brands and specialty retailers are also in the midst of a resurgence as the physical experience of shopping in these stores still eclipses online shopping. Target has also embraced this brand success by opening smaller stores with higher quality products aimed for urban millennials. Dollar General is also re-targeting its customer base in rural America by opening 900 new stores in regions where there are few places to shop. In contrast, stores that fail to differentiate themselves have suffered the most: they have mediocre prices, lack-luster displays, and no special services.

While it is brash to declare the death of retail, the future of retail hinges on their ability to evolve their business model to fit a newly digital world. Retail will need to market themselves to younger shoppers and narrow their customer base. The transition will be precarious, but it is possible.

(Visited 103 times, 1 visits today)