The post-holiday headlines paint a sobering picture of America’s shopping landscape, with retailers like Macy’s, Sears and the Limited closing stores. (J.C. Penney is reportedly doing the same.) But don't blame e-commerce or a weak economy, says Brendan Witcher, Forrester’s retail expert and analyst: “We just had one of the strongest years in retail sales in history.” He tells Marketing Daily why physical retailers are still people’s favorite place to shop.
Q. Major retailers are cutting back. Wal-Mart is laying people off, a number of chains are shuttering stores. Neiman Marcus is scrapping its IPO plans. You don't see these as negative indicators?
A. No. Consumer confidence is the highest it's been in over a decade, and leading retailers with solid go-to-market strategies are reporting both growth and expansion.
This year, we’ll do about $3.4 trillion in retail in the U.S., and of that, only about $400 billion—about 9%—is online selling. So retail is extremely healthy. It’s just that certain brands are struggling to connect with consumers.
Q. Many would argue that the rise of online shopping, and the deal-finding that goes with it, is a threat, especially Amazon.
A. About 90% of consumers still want to shop in store, and their primary reason is that they want to touch and feel products. They want to get out of the house. They like to shop with friends. That’s why Amazon is looking to add physical stores—it understands that’s where the big money is. The vast majority of shoppers are still converting in the store environment.
Q. But as retailers shut down stores, it’s clear that some of those brands view stores as a weakness.
A. And what’s so interesting about that is stores are an asset—it’s the one thing Amazon and other pure-play companies lack. Having stores nearby drives online sales, because people know they can easily return something if they don't like it. Closing stores hurts online sales.
This holiday, for example, Walmart hinged its marketing on ordering online for store pickup. Amazon can’t do that, even though it is building so many warehouses. Walmart is leveraging an asset Amazon just doesn’t have. When retailers close physical stores, they lose that opportunity, making their websites less relevant.
Q. So why are so many of these well-established retailers, particularly big-name department stores, struggling?
A. It’s because they continue to believe the products they carry are important. It just isn't true. You can buy a Mr. Coffee machine or a blue t-shirt in hundreds of places. The problem is that if I were to drop you, blindfolded, into many of these larger stores and then turn you loose, you would have no idea where you are—they aren’t differentiated in any way.
The retailers that are winning deliver on value but provide unique customer experiences. Amazon knows this, too. That’s why the emphasis has shifted from its products—it has everything—to the experience of shopping with Amazon Prime.
Q. What are some examples?
A. Sephora. It’s still challenging the status quo, and the store experience is riddled with digital solutions. That’s the future of retail. Today’s overstimulated consumers don't find shopping exciting. Creating a differentiated environment that doesn’t make it feel like a chore is what works. Ulta is another one. It lives and breathes its customers’ needs. Uniqlo is another that really stands out as different and special.
Q. Do specialty stores have an inherent advantage?
A. Yes. There was a time when that wasn’t true, but to today’s consumers, if you do everything, you do nothing.
Q. What are some other reasons bigger retail names are struggling?
A. Marketing. They think marketing means emailing 15% off coupons to the masses. Less than 7% of consumers say the messages they get from retailers are relevant to them, which is abysmal, especially when so many stores believe they’re doing personalized email marketing.