The future of retail does not look optimistic. How will the changes affect your business and what you can do about it…
Retail Apocalypse is how a recent Forbes article describes the upcoming changes in the retail industry.
In reference to the United States, the article relates that “In the first half of 2017, retailers are failing in record numbers. 8,640 will close shop this year, according to a recent Credit Suisse report, which is 40% higher than at its 2008 peak when 6,200 were shuttered. Further, it predicts that 275 malls, 25% of the nation’s 1,200 total, will close within the next five short years.”
This does not mean that consumers are not shopping anymore, it just means they are shopping somewhere else…
…They are shopping online and they are shopping for different products and solutions with more focus on electronics, gadgets and games.
Luxury retail is still strong as high end customers usually shop for the experience and exclusive attention. They are not shopping for bargains. They are shopping for recognizable brand names that they associate with luxury and exclusivity. Money is not an object.
Take for example downtown Vancouver, in Canada. Robson street that was once the main focus of shopping has an increasing number of empty stores with the dreaded “FOR LEASE” signage. Recent store closures include The Gap and Joe Fresh. Whereas one street over on Alberni Street that is the center of some of the most luxurious stores in Vancouver, like Rolex, Prada, Burberry, Christian Dior, Van Cleef and Arpels, Tiffany and Hermes, is thriving as more luxury stores open and expand their retail presence.
But for the majority of shoppers who are more price conscious, shopping online makes more sense. Plus hanging out at the mall for fun is slowly being replaced with playing online games and chatting on social media with friends.
The Exchange of Business Wealth
We are faced with a transition period where there will be an exchange of business wealth. Traditional retail stores cannot afford the rent any more, or they cannot afford to get out of their current lease contract. With limited profits and cash flow, they cannot afford to order new inventory and pay staff, insurance and other business expenses that an online business owner does not have to worry about.
Even if they are doing well right now, the decrease in traffic to malls as more shops start closing down, will take every business in that mall down with it. This will affect restaurants and other services based businesses at the same location.
Thus the nickname: Retail Apocalypse.
Retail Apocalypse: The Good
While giant online stores like Amazon and Walmart are cashing in online and creating new technical and fulfillment related jobs, traditional small retail stores are getting the hit.
But there is a silver lining.
There is a new group of enterprising online business owners who are cashing in on that trend. They are opening small niche specific eCommerce stores and targeting an extremely niched down audience that giant online retail stores are simply not interested in.
For example there are stores that cater specifically to firefighter wives, grandpas who love to ride motorcycles, women who work in the construction industry etc… offering branded products and unique jewelry that their audience cannot find anywhere else.
Having a narrow niche, also allows them to use laser focused ads online to reach their desired audience at minimal costs.
Using systems like drop shipping and print on demand, the new online business owner does not have to invest in inventory, storage or a retail location. Instead they are selling the products at retail prices before they buy them at wholesale price allowing them to focus their efforts on internet marketing and sales. Once a sale takes place, they will buy that product through automated apps from a wholesale vendor and have it shipped directly to the customer without ever setting hands on it.
Affiliate marketers are also thriving as they now have more online stores they can promote and collect commissions on each sale they generate. Amazon was one of the first to adapt that referral marketing model and pay anywhere between 2% – 10% on each sale.
Now more online retailers are realizing that it is much more cost effective to pay affiliates to do the promotions than paying for advertising themselves. Some vendors offer higher commissions between 30-70% on specific categories, making it an attractive incentive for affiliate marketers. Service providers with membership business models are even offering lifetime residual sales commissions. As long as the customer continues paying their membership fees, the affiliate will continue cashing in on the commissions, month after month.
With referral marketing, vendors only pay when a sale takes place. Whereas with advertising, they have to pay no matter what the results are.
Next time you click on an online ad, chances are it was placed by an affiliate marketer and if you make a purchase that affiliate will get a commission on the sale.
The good news is that new business categories are opening up for those brave enough to dive into new waters.
Retail Apocalypse: The Bad
On the negative side, many businesses will have to shut down. Behind every retail business are numerous families that will lose their income. The business owners might have to file for bankruptcy and watch their business “their baby” die before their eyes. Employees who are living paycheck to paycheck will struggle to find other retail jobs as more people start competing for the same limited opportunities creating a downward spiral that might take us to the ugly…
Retail Apocalypse: The Ugly
On the ugly side, this retail migration online might create a ripple effect with other services based industries that were relying on traffic at malls and shopping centers. Businesses like restaurants, spas, or hairdressers that are located at empty malls will have to shut down or look for an alternate location where they have to attract new clients.
As more people lose their jobs, they will start spending less online and offline, affecting every business sector and a large chunk of the population.
What You Can Do About It
Knowing that this scenario is on the horizon, you can start now to mentally prepare yourself for the transition.
- Find out what online business skills are high in demand and generate more profits with the least amount of overhead and learn them FAST!
- If you have a services based business in a struggling mall, start looking for alternate locations now before everyone starts making a run for it. Leave before you are faced with no other option and learn to adapt and start fresh at a location with more traffic.
- Start transitioning part of your retail business online if that is an option and collect your current customers contact information. Give them an incentive so they willingly give you their email, address and phone number. This will allow you to reach them even if you change locations or decide to operate your business online.
- Add products to your current services business that you can sell online. For example, if you are a hairdresser, start selling some related products on an online store and condition your current customers to buy them there rather than wait till they come into the salon. This will create an additional source of income that can compensate for decreased mall traffic.
- Stay optimistic and look for the good in every situation. Having that positive attitude will allow you to spot more opportunities as the masses get consumed and paralyzed with fear.
The market always has room for enterprising and entrepreneurial minded people. Get ready and take advantage of the upcoming changes before you are forced to.