While all signs point to this year's Black Friday/Cyber Monday being one for the record books, the industry is far from resting easy at the end of a year expected to see more than 8,600 store closings -- the worst retail showing in history.
According to analysts, there is a seismic shift disrupting retail, with factors such as the emerging dominance of ecommerce in general (and Amazon specifically), changing forever how consumers shop. According to Fast Company, Amazon dominates e-commerce and has gobbled up 5% of total U.S. retail sales. Some expect that the company will own half the online market within the next five years, a period during which, Credit Suisse predicts, a quarter of all malls will close.
The shakeup will hit “traditional” brick-and-mortar retail especially hard. While native digital ecommerce players and direct-to-consumer brands have the benefit of being born in this contemporary disrupted retail age, hidebound retailers like department stores have to adapt, and do so very quickly.
Despite Wall Street’s pessimism, industry leaders sound downright bullish on the future of traditional retail, per Fast Company. Why else, they argue, would Amazon spend $13.4 billion to buy Whole Foods? Sure, the competition is fiercer than ever, and icons such as Sears and JCPenney are dying. But they believe that the narrative has been oversimplified. “Amazon alone isn’t holding the knife,” says NYU Stern professor of marketing Scott Galloway, who studies the retail industry. Cultural tastes have changed. Malls grew too quickly, at twice the rate of the population, from 1970 to 2015. Many retailers succumbed to quarterly earnings pressures, invested in share buybacks rather than their stores, became saddled with private-equity debt, or failed to keep pace with digital trends. What we’re seeing now, industry executives say, is a rational, albeit painful, course correction. One study from retail-research firm IHL Group found that a mere 16 chains, including RadioShack and Payless, account for nearly half of all store closings, and that there will be a net increase of more than 4,000 stores in 2017 and 5,500-plus in 2018.
“Retail is under huge pressure, but the death of stores is greatly exaggerated,” says Galloway, who believes that while Amazon will continue to disrupt the market, an increasing number of competitors will discover new ways to respond. “In the age of Amazon, retailers must leverage assets that [Bezos] doesn’t have: When Amazon zigs, retailers must zag.”
And we’re seeing that zag take a number of innovative forms. Brands seeking to be relevant and provide something that shoppers can’t get online are looking at pop-up innovations with experimental flavors of their retail experience, and any number of new iterations of experiential marketing.
The brands we work with see huge benefit from going where the audience is: if millennials are spending all their time on their phones, marketers should be there too. But, the diminishing returns of online advertising (due to fraud, ad blocking and the like), mean that successful retailers are reaching people how and where they want to discover and interact with brands, on platforms like Instagram and Pinterest. As the efficacy sunsets for paid media to help get brands discovered, it’s dawning on traditional and challenger brands alike that earned media programs can be very effective.
Marketers that seek to own the future of retail are learning to optimize their visual content for social media -- engaging their audiences on the discover-to-buy pathway. Black Friday and Cyber Monday come just once a year, but the brands we work with will apply these lessons to their marketing year round.