It's time to put the term "Retailmageddon" in all its ungainly glory to rest. Rumors of the retail industry's death, as the saying goes, have been greatly exaggerated.
It is true that the past few years have seen record numbers of bricks-and-mortar store closings, particularly among mid-tier chains and smaller independents. And any number of iconic retail brands have shuttered permanently, from to Stein Mart to Gymboree to Toys 'R Us.
Still, closings are not going to infinity and beyond, and in fact, store openings are on a hyperspeed clip in 2021 while shoppers return to their favorite retailers as the COVID pandemic wanes.
Dollar and Discount Stores Proliferate
Off-price and dollar stores in particular are opening eye-popping numbers of new stores to serve the needs of consumers who find that they urgently need stuff (e.g. new clothes to fit their reshaped pandemic-idled bodies) but also feel the pandemic's economic pinch in their pocketbooks.
Dollar General alone plans to open 1,000+ new stores this year, plus launch two new formats: DG Fresh, and a concept called Popshelf, which looks to be positioned directly against the highly popular (and yes, also growing) Five Below.
So let's call off the apocalypse. Yet the transformation in retail is real, and permanent.
The Old Equation No Longer Balances
What is in fact dead, is boring, undifferentiated retail. It used to be that the formula for bricks & mortar retail success looked something like the following:
Merchandising + Location + Presentation/Service + Price/Deal = Sale
Let's label the above equation terms as "traditional retail elements," and also acknowledge that after the industry's turmoil of recent years, these are now necessary but insufficient conditions for success. That's because it is now most appropriate to think of a physical store as one experiential component in a multichannel relationship that a consumer makes with the brand.
If the overall brand is managed properly, the store becomes one spoke on the wheel of an integrated omnichannel digital-social-retail customer experience.
Are You Experienced?
If customer experience is the new key to success, what does that mean? Certainly more than goods for sale, even if nicely presented and backed with engaging customer service, because goods of all kinds are increasingly commoditized. If you are just buying a pair of Levi's jeans, a bag of dog food or even a new computer, you can order all those online with ease. So why even go into the store, especially to make repeat visits?
The answer is that there must be something there that you can't experience any other way, and that experience must be differentiated from competing stores.
The specific experience drawing you in could involve the "score" factor of snagging a hard-to-find item, such as a pair of limited edition Nike Dunks. Scarcity sells! Similarly, the bargain "discovery" factor of off-price stores like TJ Maxx creates a fun experience for many shoppers because you never know what you're going to find there, generating anticipation for that feeling of excitement when you score a great deal.
Dopamine hits are a powerful behavioral motivator.
The New Equation: Differentiation Delivers
Lots of other models for successful differentiation at retail exist too: High-Touch Service (Sephora), Learning and Discovery (Apple), Atmosphere and Enjoyment (your favorite local coffee shop), Interactive Engagement (Cabela's / Bass Pro), Customer Intimacy (Nordstrom Personal Stylists), and Omnichannel Integration (Target). Elements of these and other experience types can be combined together, such as in Nike's new Rise stores.
And that brings us to the new, transformed, equation for retail success:
Experience = Traditional Retail Elements + Unique Differentiators
In other words, requiem for retailmageddon, and time to gear up for growth. If you're running a retail store, when looking to attract your target shoppers, consider those key, unique points of customer experience differentiation that will get it done. What are yours?
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