By Marc Gingras, Foko Retail
Industry analysts have prophesied a
forthcoming “retail apocalypse” in recent years, and with good reason — since
2017, formerly infallible retailers like Foot Locker, Best Buy, Bon-Ton, Sears and Macy’s have either filed for bankruptcy protection or shut down stores.
If you’re still looking for proof that we’re
living in one of the most transformational times in retail since the 2008
financial crisis, look no further than the recent demise of Toys “R” Us.
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Ripples have been felt throughout the retail
industry since news of the company’s bankruptcy broke in mid-March after the
toy giant struggled to refinance $400 million of its $5 billion debt. Their
closure marks the third-largest retail bankruptcy in U.S. history, and not only
does it affect toymakers and investors, but the economy as well. (Recent
reports suggest that as many as 31,000 of the company’s former employees are
now out of work in the U.S.)
Years of serious debt accumulation is to blame
ultimately, but there were many other factors that lead to their death.
Here are five areas retailers and brands
should improve upon if they want to avoid a similar fate.
Think
Outside the Big Box
Take a look at a map of all the big box stores closing in 2018
and the first thing you’ll notice is their locations: suburban shopping
destinations filled with similarly massive stores.
As Bloomberg recently reported, the U.S. was
already over-stored long before the e-Commerce boom thanks to commercial real
estate investments on the outskirts of cities big and small.
Recent studies suggest 60% of the
world’s population will likely live in large cities by 2030, and that
transition is already well underway. That means shoppers are going to have less
physical space, and less money to fill it with.
If retailers want to stand out from their
suburban contemporaries, they’re going to have to follow Target and IKEA’s
footsteps and create smaller, more curated showrooms in urban locations. After
all, that’s where their customers will be in twelve years time (if they’re not
there already.)
Optimize
Your Omnichannel
It’s understandable that some traditional
retailers are nervous about upping their online presence — after all, how is it
possible to compete with companies like Amazon without a substantial investment
or proper infrastructure?
Toys “R” Us finally attempted to revamp their
web store in May 2016 following years of court battles over a failed
co-partnership with—you guessed it—Amazon, who had been beating them at their
own game online for years. But it was too little too late. (As eShopWorld previously pointed out, the
retailer had a lack of free shipping options, and some of Toys “R” Us’ items were
selling on Amazon for $3 cheaper or less as recently as 2017.)
Still, by allocating a bit of your budget to
e-Commerce solutions you’re further embedding your brand in the customer
consciousness, and that’s important when more and more shoppers are doing
independent research on products before stepping foot in stores, and wanting
access to goods anytime, anywhere. (Also, contrary to popular belief, Millennials prefer going to brick-and-mortar locations,
and by 2030 they’ll comprise 35% of all spending — invest in all avenues or
your stores, physical or otherwise, will suffer.)
Make
Shopping an Experience Worth Remembering
As I discussed in a previous blog post, major retailers need to re-think
the in-store experience to keep customers coming back (or discovering their
stores in the first place). Toys“R”Us had been attempting to regain consumers
by offering Nerf target practice, Pokémon trading card events and birthday
parties, but it was too little too late.
Companies can get in on the game by offering
events that educate and entertain consumers (preferably both) that use existing
products as the focal point.
Empower
Your Store Associates
In recent years, one of the complaints, when
it came to Toys “R” Us, was its appearance: sparsely stocked shelves, and a lack
of employees to look after them.
According to court filings, that’s because the
business was more concerned with improving their in-store experience and
growing their e-Commerce division. As previously mentioned, both are essential
parts of many successful retail strategies, but at the end of the day, it’s
important to remember that your store employees are the frontline of your brand
— invest in their training and the whole business benefits.
Get to
Know Generation Z
Wayne Gretzky famously said: “Skate to where
the puck is going, not where it is.”
In retail, that means getting a firm grasp on
the shopping habits of Generation Z, who contribute approximately $830 billion
to U.S. retail sales annually (a number that is only expected to grow as they
age).
A recent survey found that they’re spending
more on food, beauty and video games than apparel. Retailers and brands, take
note: diversify or die.
Marc
Gingras is the CEO of Foko Retail, a platform that delivers the art and
science of retail execution. He is an entrepreneur and angel investor, and sold
his last venture, Tungle.me, to Blackberry. Gingras holds an MBA from INSEAD, a
MASc in Management Sciences from the University of Waterloo and a BASc in
Mechanical Engineering.
