The start of 2016 has been a rough stretch for retail, if you’re judging by the headlines. In the wake of the holiday season, a number of retailers have announced mass store closings across the country.
Walmart Stores Inc. leads the pack: In January, announcing that 154 stores in the United States would be closed at the end of the month, resulting in a trimming of 10,000 jobs. That follows a number of other major brands, including Macy’s, Gap, Finish Line and Kmart, which have announced plans to close locations in the near future.
Then, about 30 retail chains, including Office Depot/Office Max by 2016 (400), Barnes & Noble through 2023 (223), Children’s Place through 2017 (200), Walgreens by 2017 (200), and Macy’s (36) announced a total of 2,282 store closings for 2016 and beyond, according to About Money. In the larger picture, however, the store closing estimates for 2016 underscore the idea that retailers know which locations no longer contribute to the success of the company before the holidays even arrive.
Arizona will be spared this 2016 go around and looking back at the 2015 Store Closings, it's easy to see that Arizona, California, Florida, Pennsylvania, and Ohio were among those hardest hit by a sizable number of U.S. retail chains closing a good number of brick-and-mortar locations.
Walmart’s own statements would seem to reflect that: In-store retail is dead. And. The company has acknowledged that its current selling model needs to be tweaked, and that the store closings will allow it to focus on its e-commerce sales, where the retailer remains in hot competition with Amazon to offer consumers the lowest prices possible.
SpendTrend Report revealed that more than a fifth (20.2%) of all holiday shopping is now occurring online, a segment that has seen steady growth in recent years. Using insights gleaned from transaction data from 1.3 million U.S. merchant locations, First Data also found that retail sales are up 3.3% for the full holiday season. The sales growth was a marginal increase over 2014’s year-over-year growth of 3.2%.
“On average shoppers were spending $74.68 on each purchase. The frequency of transactions, however, may have offset the lower ticket prices which resulted in overall healthy growth for the full season.”
“The marginal increase from 3.2% to 3.3% could be attributed to a fall in average ticket sizes – a decline of 0.2% year-over-year that occurred during most of the holiday season,” said Krish Mantripragada, Senior Vice President, Information & Analytics Solutions, First Data. “On average shoppers were spending $74.68 on each purchase. The frequency of transactions, however, may have offset the lower ticket prices which resulted in overall healthy growth for the full season.”
Online, shoppers were inclined to spend more than at the register with purchases averaging $125.72 per transaction compared to $69.64 at brick and mortar locations.
Despite these challenges, or perhaps spurred on by them, retailers continue to look for ways to increase sales and shore up the value of operating bricks-and-mortar stores.
In some cases, that means turning the physical store into an “e-commerce showroom” — an engaging shopping space that blends the tangible with the virtual. As Retail Dive points out, a recent report from IBM predicts that physical stores will eventually evolve into showcases for e-commerce stores, providing shoppers the same benefits of in-store shopping that online retail can’t offer — in particular, the “touch and feel” experience.
IBM believes shoppers will visit physical stores to examine and experience products first-hand, and try on clothing, before ordering online and having the products shipped directly to their homes.
Such a dynamic relationship between in-store and e-commerce would make sense, given how frequently shoppers currently use mobile devices and online information to inform their in-store shopping. But it also accounts for the benefits of in-store shopping that online retailers simply can’t provide, particularly the ability to touch, feel and try on products, and the pleasure of an immersive, engaging shopping experience.
Retail Dive also argues that the “emotional pull” of in-store shopping has more clout among shoppers than some industry observers like to believe. Major retailers may be closing stores, but it’s not always due to poor performance and a declining interest in in-store shopping. Instead, brick-and-mortar retail is simply facing the start of a grand transformation. While some stores will inevitably close in the process, expect an in-store experience that is merely reconfigured, not rendered obsolete.