As ecommerce is becoming widespread (…we’re in the post Amazon-era, aren’t we…?), traditional Retailers are losing their exclusive role of distribution-points for goods.
That’s why the old, traditional store business model is not sustainable anymore: retail revenues and profits move elsewhere, while costs and investments don’t.
By the way, where do retail revenues and profits move to, exactly?
Fundamentally they relocate to:
- pure e-retailers (e.g. Amazon) – these are brand new players, starting from scratch (…recently some of them are opening traditional stores – peculiar, isn’t it?)
- Manufacturers that now sell direct to Consumers through their ecommerce websites – these are players new to the retail arena, applying the “disintermediation” paradigm
- traditional Retailers’ ecommerce websites – these are known players that apply the “channel multiplication” paradigm
…that’s why “comp” store sales (“comp” = comparable) are often disappointing (they’re flat or declining) and physical stores suffer eroding margins and slipping market-share.
This is a Big Change: wondering what initially triggered it?
The cause of the Big Change – without doubt – was the recent economic downturn combined with the explosion of digital technologies; these two elements radically impacted Consumers’ behavior everywhere… …and once Consumers’ behavior changes, also the buying-and-selling equation changes.
I think it’s clear why (traditional) Retailers cannot play according to the old rules any more.
Let’s not be fooled
It is no coincidence that everywhere you read: “…traditional retail is experiencing slow/anemic/stagnant growth, significant decline, lackluster results, disappointing sales, drop in store traffic, poor numbers, […insert additional gloomy terms and sad faces here…]”.
Please don’t be fooled by clichés… …this is a general, but not very accurate description of the retail situation; for instance, traditional brick-and-mortar players like Dollar General and T.J. Maxx (in the US) are success stories; similarly, many luxury Retailers are literally thriving all over the world…
The real – and more accurate – story is: many traditional Retailers are in (deep) trouble, while few others are going (very) well: average numbers suck, nevertheless there are many significant, fortunate “local maximums”; in point of fact, “local maximums” are more often than not localized on the opposite sides of the market: off-price retailers vs. upscale retailers.
…the middle? That’s not an enviable position.
Make a choice, either:
- OPTION#1 – fight openly on price and convenience
- OPTION#2 – go up-market and surprise Shoppers with such an exceptional shopping-experience that they can’t help spending their money
I’m all for OPTION#2 and, as a matter of fact, I am strongly convinced that our physical stores are perfect to wow (WOW!) our Shoppers.
…yes, I’m talking about creating an exceptional in-store shopping-experience.
Andy Cavallini – http://retaildom.com