I recently read that the earth is on the cusp of its sixth mass extinction. The first five were cataclysmic geological and/or extraterrestrial events that decimated all life on the planet. The sixth, they say, will be different in that it will be brought about by us. I read this while sitting outside of a shopping mall, or more specifically, an empty husk that had formerly been one of the big box retailers. I couldn’t help but notice the vacant parking lot, overgrown landscaping and general disrepair of the physical location.
For the next 45 minutes, I sat on the bench and pondered the question, is traditional retail on the verge of its first mass extinction? Faced with a problem of this complexity, I turned to my phone and proceeded to “Bing” the answer. My search resulted in numerous articles with extremely varied opinions regarding the general condition of retail, ranging from stone cold dead to healthy, but in need of a redirection.
To make any predictions of the future health and welfare of retail one must examine the most crucial indicators. What is the total of online sales? What percentage of total retail sales are online? Finally and perhaps most importantly, what are the retail trends for online versus traditional brick and mortar retail? Within moments I had the answers to my questions. Online sales will reach more than $385 billion in 2017 and will account for somewhere in the vicinity of 10% of all retail sales. What’s more telling is that online sales have enjoyed, and are expected to continue, a compound annual growth rate of approximately 10%.
What does this mean for brick and mortar? According to a Credit Suisse recently released research report, 2017 could very well be the worst year in recorded history with an anticipated 8,600 brick and mortar stores closing their doors. On a daily basis, we are hearing about additional retailers releasing disappointing sales figures, closing stores and questioning their ability to continue their existence.
Is it all doom and gloom for retail? Can retail as we know it recover? The short answer is ‘no’, but maybe that’s not entirely a bad thing. If we look back at the historical mass extinction events, it is possible that absent these calamities, dinosaurs would still rule the world. Instead mammals including ourselves have adapted, improved, and improvised and as a result, have spread to every inch of the earth and indeed beyond. Commercial real estate as a whole had become lazy. The developer dinosaurs were lazy, they created vanilla boxes and anchored them with mainstay concepts that they knew could pay rent. Then they lumbered over to their next big box, repeated the process again and made vast sums of money! The retail dinosaurs helped to perpetuate this system because it wasn’t broken, so why fix it? More importantly, they were provided abundant feeding grounds by the developer dinosaurs. The broker and agent dinosaurs (myself included), just kept going back to the same feeding grounds and catching the scraps that fell from the larger dinosaurs in the form of their commission checks. Something had to shake up this system and it just so happened to be an asteroid in the form of Amazon!
So what, if any, is the good news? Can there be a light at the end of this tunnel? If one were to draw the same comparison, one could argue that this retail Armageddon will not only create a survival of the fittest environment but will force even the fit to reevaluate their methods to create a vastly improved retail experience. How does one develop traditional brick and mortar shopping and provide an environment that in its totality is at least equivalent to the online shopping experience? A simple mathematic equation which I won’t bore you with will show that traditional retail cannot compete with online sales from a pricing perspective. Arguably, online shopping cannot compete with brick and mortar from an experiential evaluation. How many times have you walked into a store and bought a candle just because the bright colors caught your eyes and the aroma was utterly luxurious? Or walked through Whole Foods or Costco, smelled something divine only to sample one of the delicious-looking food offerings and walk out with that very same product?
What do the aforementioned scenarios have in common? They are all situations where multisensory stimuli have created an experience that would not be possible online! The question then becomes, what increase in price would you be willing to pay to not only see but hear, touch, taste, and smell something before you purchased it? While I’m certainly not in possession of any empirical evidence that would give a definitive answer to this, I thought that perhaps the general consumer would not only be willing to pay a premium for a traditional brick and mortar experience but would continue to do so on a regular basis provided that unique sensory stimuli were present and perhaps a memory was created.
45 minutes later, I jumped in my car and took a quick trip to Venice Beach. I had a client there who was not only surviving but thriving in the retail apocalypse, and I wanted to observe his business in light of my latest ponderings. When you walk into Nick Fouquet’s hat store you instantly get the ‘mad hatter’ analogy. Hats of all colors, textures, and designs are almost impossibly displayed in an array of strategic randomness. Customers lounge around between cases trying on hats while Nick mingles amongst them, adding a tilt to a customer’s cap here or bending a beaver-felt brim there. Nick’s patrons walk in the door with an idea of what they want, but you almost get a feeling that the hat under Nick’s trained eye chooses its owner. The experience here is truly unique and you will leave this humble California bungalow with a clear understanding of why people are waiting for six months and spending up to $2,000 for a hat. It would be impossible to replicate this experience online and any patron who has participated in this marriage of hat and head will remember it for the rest of their lives. If you’re ever in the Venice Beach area, treat yourself to a moment of unforgettable madness with the hatter himself, Mr. Nick Fouquet.
A friendly wave and a warm smile later, I left Nick’s shop and started driving up the coast. While I haven’t figured out how to save the retail world, I had at least confirmed my suspicion that providing consumers with an experiential event of a sensory nature was a large piece of the puzzle, and if a memory can be made it’s all the better. This has inspired me to follow up with a more detailed series of articles identifying people who have thriving businesses in today’s retail landscape, interviewing them and relaying my findings to you all. Keep an eye out for my subsequent pieces in a series I will call “Retail Royalty”.