President and CEO at National Retail Federation
Watch out for retail “fake news” … “For the last few months, the media has insisted that retail jobs are vanishing, retailers are melting down and bricks-and-mortar stores are doomed due to the rise of ecommerce."
Four areas that stand out as proof of retail’s vitality:
- Retailers are increasing sales by embracing both storefronts and ecommerce.
Retail sales grew 3.6% in 2016, out performing overall GDP growth, and NRF forecasts even stronger growth in 2017. These stats represent a healthy, expanding industry, which is successfully finding and leveraging drivers for sustained success.
Over 90% of transactions are still in-store; more importantly, ecommerce is a part of retail! As shown by Amazon’s acquisition of Whole Foods or Walmart’s purchase of Jet.com and Bonobos, retailers recognize that they need both online channels and physical stores to grow and succeed. Eight of the 10 largest ecommerce sites are owned by what people traditionally think of as bricks-and-mortar retailers.
- Retail remains America’s #1 private-sector employer.
Retail directly employs more than 13 million American workers and supports 42 million jobs overall. Retail companies have posted more than 730,000 new jobs.
- Stores are opening and small businesses are thriving.
As the industry evolves, new retail businesses and stores are constantly opening. Though stores will close in 2017, they represent a tiny fraction of the millions of retail establishments in the United States. Beyond national chains, small businesses continue to shape our industry — 98% of retailers have fewer than 100 employees.
- Bricks-and-mortar locations are on the rise.
Developers built 87 million square feet of new retail space in 2016, which matches long-term trends: Since 2013, construction spending on retail structures has increased by 40%. The expansion is unleashing competition within the industry as retailers invest in newer, better and more strategic locations.
These strengths reflect the long-term trajectory of our industry, which includes more innovation, stronger sales, more competition and improved consumer choice every day. Retail has always been a pillar of the American economy, and our industry’s impact is set to expand, not disappear.
NRF VP, RESEARCH DEVELOPMENT AND INDUSTRY ANALYSIS
RETAIL’S REINVENTION STORY IS JUST GETTING STARTED Published June 14, 2017
Reports of the industry’s death are greatly exaggerated. NRF’s vice president of research looks at the numbers to see what’s really going on.
Stores are still in vogue. Many online retailers recognize the value of a physical presence — businesses like Amazon, Warby Parker, Bonobos and Blue Nile are experimenting with bricks-and-mortar locations. All retailers, whether purely online or purely bricks-and -mortar, must adapt to how customers prefer to shop in a digital world.
E-commerce is not killing retail — it is ALL retail
Competition has increased as access to the consumer has evolved, driven by advancements in technology. In a recent NRF survey, 48 percent of merchants said they had increased their technology budgets in 2016 compared with the previous year. Retailers are having to adapt and invest more capital into creating multichannel customer experiences, and these investments are bearing fruit.
Online sales currently make up less than 10 % of total retail sales. While online is growing rapidly, it’s only a small part of a much larger whole. People still shop in stores for reasons ranging from convenience to preference. In a recent study NRF conducted with IBM on Gen Z, we found that 98 percent of these young, digitally active consumers shop in stores. E-commerce is simply another channel to the consumer; it isn’t killing retail — it’s just changing it.
Five Signs That Stores (Not E-Commerce) Are the Future of Retail
Published, JUN 27, 2017
- All but One of The Top Ten U.S. Retailers Are Physical Chains
Save for Amazon, the top 10 U.S. retailers are old-school, brick-and-mortar stores, according to the Top 100 Retailers list from STORES magazine, a National Retail Federation publication.
In ranking order, they are Wal-Mart Stores, Kroger Co., Costco, The Home Depot, CVS, Walgreens, Amazon.com, Target, Lowe’s and Albertson’s.
Among the top 10, all but Target generated sales growth in 2017. And it’s worth noting that 55-year-old Wal-Mart, the nation’s biggest retailer, grew 8% last year.
- Stores Are More Profitable Than E-Commerce
While most of the top 10 retailers boast e-commerce arms, stores are still the meat and potatoes of their business.
Bricks generate higher conversion rates —the percent of store/site visitors who make a purchase — than clicks.
And as a general proposition, a store purchase is more profitable than an e-commerce order, as factors like shipping and handling charges, and the costs associated with increased returns, eat into margins.
Alix Partners tracked five years of financial performance for 20 publicly traded retailers. For the group, online sales grew from 10.5% of total sales in 2012 to 15.5% in 2016—but margins steadily declined, by 150 basis points to 9.0% in the year, according to the retail consultancy. Indeed, retailers’ store fleets are subsidizing their online businesses.
- Amazon Purchased Whole Foods
When the nation’s biggest e-commerce retailer buys one of the nation’s biggest brick-and-mortar chains, attention must be paid. Its purchase of the 460-store, $15 billion Whole Foods chain marks a brick-and-mortar commitment.
- Millennials and Generation Z Prefer Real-Life Stores
Millennials and Generation Z came of age amid the rise of Amazon, Facebook, and Instagram.
While many of these younger consumers are opting to spend their free time online rather than watching television, for one, both groups actually prefer in-store to digital shopping.
Most global millennials (70%) prefer brick-and-mortar retail stores, according to CBRE.
And in the U.S., over 77% of Gen Z, consumers born after the mid-1990s through the early 2000s, said brick-and-mortar stores are their preferred shopping channel, according to Accenture research.
These groups are the future of retail.
Millennials have displaced baby boomers as the nation’s biggest buying group. There are an estimated 80 million millennials in the U.S., and each year they spend approximately $600 billion, according to Accenture. Meanwhile, Generation Z is set to reach 2.6 billion by 2020, with $44 billion in buying power, according to a study by IBM and the National Retail Federation.
- Online Retailers Are Being Eaten by Legacy Retailers
Traditional retailers are swallowing up online-only merchants. We saw the pattern emerge among the once-hot flash-sale sites, which offered big discounts on designer merchandise in limited quantities during 24-to 36-hour sale events.
Now Wal-Mart is leading a pure play acquisition binge, buying born-in-the-web retailers Jet.com, vintage apparel merchant Modcloth and most recently, Bonobos, the menswear e-tailer.
Brick merchants are buying click merchants because online-only is not a viable retail model, according to “The Death of Pureplay Retail,” a report from digital think tank L2. For one, “walk in traffic doesn’t exist online,” while stores can generate organic traffic. And expansion builds brand equity, the report says.
That’s why online players from Amazon to eyeglass merchant Warby Parker have been scrambling to open stores. They’ve “been quick to recognize the value of a brick-and-mortar presence."
Co Founder, ShopperTrak
"Today, retail has a tremendous amount of issues. Trying to understand the changes that are happening with the consumer. The consumer is rapidly evolving into a dual income, busy, and with children. There were times they used to spend in shopping centers and now they're spending it elsewhere. The problem that retail has, is how do they reach this consumer? We have discovered that while we've been doing in-store marketing for years and years, now in-store is the best place for us to reach this consumer. Shelfbucks has come together in partnership with both the CPG's, the retailer, and the corrugated manufacturing companies to build a "three legged stool" around attempting to engage this consumer at the point where they are most interest in spending money. That's while they are in the store."
Retail is expanding because of e-commerce and its education of consumers to new products.
As retailers adapt, the need for technology has to adapt as well.
Are you ready for the evolution of retail?
Improve customer choice and experience?
Expanded technology departments?
New business opportunities?
Are you ready to adapt?