Retail Isn't Dying

The Sumerian civilization arose in ancient Mesopotamia, leaving the first records of store openings. This no doubt created panic among the local market stall owners who believed their old fashioned business model was doomed.

Six thousand years later, your local supermarket manager has had to react to popular Farmers’ Markets that have popped up nearby by stocking more organic local produce. Walmart, largely blamed for using its scale to decimate nearby mom-and-pop stores,  now has to compete with the more efficient Amazon, a company using the same mail order business model which began with companies such as Sears, who are themselves now struggling due to their reliance on out-of-fashion malls.

Sears and Macy's used to be the anchor mall tenants, with store rents priced the highest closest to their entrances. Then came the Apple store, and suddenly every mall retailer wanted to be adjacent to the minimalist single brand space, not an aging department store. Factory outlet malls became so popular that high-end brands didn't have enough unsold regular goods to stock them. Brands started stocking them with purposefully designed products that were marked down from a “store” price, even though they had never been for sale in an actual shop. And as customers flocked to 99-cent stores after the recession hit, they started selling things to those shoppers for way more than a dollar.

The point of outlining this sampler of changes is to show that every type and size of retailer has always had to respond to changes to technology, society and the economy. If we understand that change is 6000 years old, we should also realize that mail order, stock market crashes, out-of-town stores and the Internet did not, and will not, mean that “retail is dead.” There are a thousand consultants, designers and analysts out there who have their opinions about “what needs to change.”

After conditioning shoppers for 50 years to choose convenient, impersonal malls and cheap supermarkets instead of your local high street mom-and-pop store, why be surprised when those customers move on when an even more convenient and cheaper way of shopping is offered to them?  The fact is, every trend is part of a pendulum swing, and I see that pendulum starting to swing back in favor of physical retail.

While small stores cannot buy their stock as cheaply and their staffs often receive better wages than Amazon pays their workers, it seems that the biggest financial stress (rent) is an area which is likely to improve. Large retailers entering Chapter 11 in order to cancel leases and negotiate lower rents send a wider signal to landlords who are asking too much for their spaces. Cities are losing tax revenue and can see the visual blight and financial knock-on effect of so many shuttered stores. New York City is introducing a requirement whereby landlords will have to register their empty storefronts, which is a first step in surveying the scale of the problem so that something can be done to reverse the decline.

On the large scale, there are proposals in the U.K. to give councils the power to reopen shops in premises left vacant for more than a year or to be given to start-up businesses and community projects. On the smaller scale, the phrase “pop-up” has long since become an accepted part of the retail world, with websites listing thousands of available empty stores for entrepreneurs wanting to try out an idea for a day, right through to brands such as LVMH trying out a new concept. Wallplay (New York) use the income from brand pop-ups to fund free spaces for art galleries in the 30 storefronts they manage. Even Amazon has opened a real store, though their “Go” concept evidently disagrees with Wallplay's motto that “in a digital world we need real-life connection.”

Entrepreneurs fuel new store openings but they only do so if the sector is not too financially risky and seen as hip. In the ’80s and ’90s, opening a bar was the coolest thing to do, then food became all the rage so it became the thing to open restaurants. Mark Ecko, and then Supreme, showed that anyone could become a millionaire by opening a T-shirt store, and retail was suddenly the way to make it big. As the recession bit, the spending stopped and stores closed. Entrepreneurs and corporate investors got spooked and it seemed the easier money was to be made opening coffee shops and art galleries, or investing in unicorn start-ups and buying cryptocurrencies. Uber's tanking share price and Facebook's hauling over the coals for data abuse, election interference and their version of Bitcoin, are all proof that an end to the adulation of “disruptive” e-businesses is already upon us.

So the market sectors that replaced retail have come and gone. We still use Uber, but when we are dropped off at the artisanal (thanks Starbucks) coffee shop it may be next to a pop-up store or Etsy-type artists and flea space. The street, now painted with pretty murals, may be closed for a Farmers’ Market. A live band may be playing a free concert or an outdoor movie playing.

These are all signs to me that retail is changing for the better because your local “mom-and-pop” street is finally coming back to life as a place for the community to enjoy.

Big brands are learning too, take L Brands. While Uber and Tesla burn through billions of dollars trying hard to dominate their sector, L Brands sold $12 billion worth of bras, panties and soap in the last year and already dominates its market. But everything was falling apart because they were not only caught up in Wall Street's bashing of the retail sector, they had become out of step with society. No company could ever have predicted a #metoo movement that would render their brand inappropriate, and the initial reaction was to carry on regardless, hoping it would pass. A year later and Victoria's Secret has now canceled its hugely popular fashion show, hired various size and transgender models and CEO Wexler not only left the Republican Party in response to political divisiveness, he has donated millions to groups promoting bipartisanship and civility.

Limited's share price has remained historically low, but again, observing how an 81-year old-billionaire is adapting and changing in response to his young customers’ concerns shows to me that the past arrogance of big retailers is being replaced with a willingness to listen and evolve.

Like a billion other people, I enjoy using Gmail, Instagram and Netflix, but still find Alexa creepy and most phone apps irrelevant. Despite having seen robots appear in Lowe’s and self-checkout in supermarkets or in Amazon Go, I still prefer a human interaction. Most digital “immersion” and “experiential” installations in stores seem come across to me as desperate gimmicks. Stores should not try and digitally compete with Internet shopping because they will lose every time.

The clumsy or inappropriate use of new marketing ideas or technology is nothing new but as everything from Green Shield Stamps to Facebook shows us, customers eventually lose interest of even the biggest new ideas. To see which direction things are headed, simply observe the kind of language which starts to appear: Pop-up, experiential, artisanal, authentic, community, organic, wellness, responsible, local, ethical and responsible. They’re all words that are leading us back to bricks-and-mortar retail basics.

Six thousand years ago, when the first customer walked into the first shop, I can bet they were greeted with a smile and “How can I help?” from a salesman who could tell if the customer was either coming in just to get out of the rain, or because he actually wanted to buy something. By using his eyes, he could deduce if the customer was rich or poor, and probably by his clothes or accent, where he came from. We could call this an ancient facial recognition system. The customer would ask for a product and the salesman will have shown him the options, giving his opinion on the different qualities and prices of each, tasting them or trying them on for size and explaining how it was made, then making the customer feel that the final purchase was the wisest. We could call this an ancient artisanal, authentic, “experiential” transaction. The customer would then explain to his friends how he wisely bought a great quality item at a good price from a knowledgeable and friendly person in a cool new selling concept called a “store.” We could call this an ancient Yelp review.

It is estimated there were maybe 100 million people on the planet when the first customer walked into the first store, and now there are more than seven billion. Despite all those potential new customers, retailers seem to have forgotten how to treat each shopper as a human, not a piece of data. Data is perfect for online shopping but for everything else, we just need to listen to traditional shopkeepers.

I was honored to have been invited to give the keynote closing talk at the International Retail Design Conference (IRDC) last year in Seattle. I explained how my Inutilious Retailer free store was all about going back to traditional retail values and being a part of the community, not apart from it.

I have been asked back, and at IRDC 2019 in Boston, I will bring on stage four local retailers whose stores have been open for a combined 370-plus years. These shopkeepers will explain how and why they survived, not only through the last recession but also the Great Depression and even the Civil War. They opened their stores before the Internet, before malls, before department stores and before mail order, yet they’re still a success.

They have something that technology doesn't – wisdom. Listening to them talk won't be a retail history lesson, it's a retail future lesson.

* Be sure to check out Adrian's closing keynote session, A History of Boston Retail: How to Stay Relevant for Nearly 400 Years, at IRDC 2019 in Boston, Sept. 30-Oct. 2.