Retailers: While You Were Fighting Giants on the Internet, The Store Across The Street Just Ate Your Lunch

When Warren Buffett and Berkshire Hathaway sold off $900 million of Walmart stock, the world took notice. "The department store is online now," said the billionaire in May. Many agree. And some are even calling the death of retail in the U.S. — with ample evidence.

So far in 2017, 10 U.S. retailers have been pushed into bankruptcy, according to Standard & Poor's. Credit Suisse estimates that as many as 8,640 stores could close this year, with big-box stores like Best Buy and even Sears and Macy’s shuttering locations. Bank of America Merrill Lynch estimates that U.S. retail floorspace has been reduced by 10 percent since 2010, with department store sales down 18 percent. No matter where you look, troubling trends are evident in nearly every indicator of retail success. 

The culprit for this decline is almost always Amazon, or ecommerce generally. And while there’s no doubting the disruptive power of Amazon — or its current momentum — what the "Armageddon" or “Apocalypse” narrative gets wrong is that it’s too quick to attribute all of the changes in the retail landscape to Amazon alone. 



After all, retail is still mostly an offline business. Close to 90% of sales still take place offline, according to the U.S. Department of Commerce. That means that the headwinds facing traditional retail aren’t just coming from computers and mobile phones — but from across the street. Ground-level competition between brick-and-mortar retailers is still where much of the action takes place, and retailers ignore it at their own peril. 

Even Amazon can’t afford to ignore it. The retail behemoth’s recent purchase of Whole Foods and the opening of Amazon Go stores underscore the importance of brick-and-mortar competitiveness even in an era of surging ecommerce. It also indicates that the offline and online worlds are connected like never before, and that they ought to be thought of as two legs of a single customer experience, rather than as distinct channels altogether. Instead of a retail apocalypse, we are witnessing the convergence of online and offline commerce, and the growing pains associated with it. 

Some retailers have spotted the trend. Take Nordstrom for example. In October, the company was scheduled to open the first of its merchandise-free stores in West Hollywood. The 3,000-square-foot shops — much smaller than a typical 140,000-square-foot location — will offer immersive experiences. You can go there and work with stylists and tailors. You can get your nails done while you sip a glass of wine. 

And at Warby Parker and Sephora, customers don’t necessarily go there to buy — they go there to try. Apple too. You can buy things online, but these stores offers you tutorials, free WiFi, sometimes a drink or a cup of coffee. In other words, brick-and-mortar offers an experience. And as the online and offline worlds converge into a single customer experience, retailers need to focus on the technologies that can tie them together. 

This shift is concurrent with innovations in how the brick-and-mortar game is played. Here, too, we see the intervention of sophisticated data-driven tactics, albeit different ones than are used to win customers online. Mobile location data, in particular, is fueling this renaissance in how retailers model and adjust their strategies. Foot traffic patterns provide detailed insight that allow them to optimize their site locations, to understand their competitive landscape and — crucially — to help connect their online experience to offline conversions. 

The most relevant dichotomy in retail today isn’t so much “online vs. offline” as much as it is data-driven vs. analog. With mobile location data, offline is anything but analog. The narrative isn’t Amazon and online shopping against traditional retailers, but the data-driven retailer against the old way of doing business. That shift is happening both online and offline, and the retailers who dismiss offline channels as outmoded will quickly find themselves outmoded, too. 

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