Physical Retail: Definitely Different, Far From Dead
From recent headlines you might assume that sales in brick & mortar stores must be falling off a cliff. You’d be wrong. Yes, e-commerce is growing at a much faster rate, but revenues in physical stores remain positive (1-2% growth depending on the source). There is also a sense that online shopping is becoming the dominant way most people shop. In fact, even with a dramatic share shift, e-commerce still represents less than 10% of total retail sales and is expected to remain below 20% even 5 years from now. Moreover, if physical retail is dying somebody should tell well established (and quite profitable) retailers like Aldi, Apple, Costco, TJX, Dollar General, Dollar Tree, Nordstrom, H&M, Ulta and Sephora. Collectively they’ve announced plans to open about 3,000 stores. Newer brands–think, Bonobos, Casper, Warby Parker–that were once dubbed geniuses for their “digitally native” strategy are now opening dozens of physical stores as their online only plans proved limited and unprofitable. A little outfit from Seattle also has recently made a pretty big bet on physical retail. So the constant media references to a “retail apocalypse” may serve as great clickbait, but they lack both accuracy and nuance. I believe we’re all better served by not painting the industry with too broad a brush and spinning false narratives. Nevertheless, it is crystal clear that years of overbuilding, failure to innovate on the part of most traditional retailers, shifting customer preferences and market share grabs from transformative new models that aren’t held to a traditional profit standard (mostly the little outfit in Seattle) are creating fundamentally new dynamics. Physical retail is not going away, but digital disruption is transforming most sectors of retail profoundly. Here are a few important things to bear in mind. Read more at Forbes.
