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The retail apocalypse isn’t looming: it's here and escalating in successive waves. A global pandemic was sadly the nail in the coffin for many brick and mortar stores that were already struggling to survive.
The acceleration caused by COVID-19 has led to an uptick in ecommerce launches and has many experts predicting that the future of retail is in eCommerce.
But pivoting to a digital business model is not without its challenges. Heck, starting and building any kind of business at all is hard!
That's why we've put together this guide to help businesses navigate the shift from brick and mortar to ecommerce. Read on to get answers to important questions, starting with “what is the retail apocalypse?” and ending with “what is the future of the retail industry?”.
Whether you buy or sell, the landscape is changing, and smart businesses will implement tools to change with it.
The retail apocalypse describes the consistent and growing power of ecommerce and the demise of physical stores.
The retail apocalypse was a term coined to describe the “beginning of the end” for traditional, brick and mortar commerce.
It started around 2010 with a wave of store closures that only continued to gain steam. Many economists suggest that it was a direct result of the Great Recession (2007-2009) because the financial losses across multiple sectors during that season spelled the end of many retailers, or at least large segments of their physical presence.
While the recession undoubtedly contributed to the retail apocalypse, it was not the only culprit.
A 2017 Business Insider article dubbed it “the Amazon effect,” citing estimates that as much as 50% of retail industry growth was attributed to the ecommerce behemoth. Some of the collateral damage from Amazon's incredible rise included the full-scale closure of stores like Toys R US and The Limited.
But, more on individual stores in a minute.
Buyers are no longer showing up and shelling out for customer service or brightly-lit shelves. Instead, they're content to stay home, scroll and buy with a tap.
And that has significant social and economic consequences.
If nineties movies taught us anything, it was that life happens at the mall. And, in the nineties, malls were in their heyday. From atriums, skyrocketed ceilings, plush armchairs and food courts, one Harvard scholar explains how shopping centers became the new town square. For a time, they were untouchable in terms of revenue, because they were a key gathering place for communities.
Here’s some data that sheds light on the evolution of malls in the United States:
Malls filled a familiar and reliable role in people’s social lives.
But it didn’t last.
Some of the oldest and most reputable brands in the United States have been felled by the retail apocalypse. Some have filed bankruptcy, while others have survived only by shifting to or amplifying their ecommerce business.
Here is a short list of store closures and bankruptcies that are the result of the ongoing retail apocalypse:
In 2020 alone, nearly 14,000 stores have closed, and that number is expected to rise to 25,000 by the year’s end.
The retail apocalypse is the result of broad cultural shifts along with factors such as debt, overhead costs and dropping customer numbers, and not the product of a single event or action.
And the problems were only compounded by the COVID-19 pandemic.
With most states under stay-at-home or shelter-in-place orders for the better part of three months after the onset of COVID-19, stores shuttered, some for good. There simply was no opportunity for buyers to head to the store to pick up a non-emergency or non-essential item.
This fast-tracked the closure of numerous clothing retailers and restaurants. In fact, the U.S. Census Bureau reported an 89.3% drop in revenue (YOY) for clothing retailers.
You have a lot of people shopping online that maybe normally wouldn't. Make sure they feel safe buying from you. - Eric Siu, CEO at ClickFlow
On May 31, 2020, Statista asked consumers whether they have deliberately purchased essential products online because of the pandemic. The responses were telling:
When even essential purchases such as groceries and medications can happen online, new retail habits quickly become established. And new habits mean, in many cases, that there’s no going back to the way things were.
ARK reported that "The coronavirus pandemic accelerated the adoption of e-commerce in the US from 11.3% of retail sales at the end of 2019 to 16.1% in the second quarter of 2020, the largest quarterly jump in history."*
* Source: “US Census Bureau Monthly Annual Retail Trade.” 24 May 2012, www.census.gov/retail/index.html.
Much in the same way that many companies are extending work from home into a permanent option, buyers are simply seeing the benefit of “new norms” when it comes to shopping online.
The Journal of Service Management published an article calling this, “consumption displacement.” In other words, consumption has shifted because of a change in the availability of goods and services.
As the point of consumption changed (i.e., from a physical store to an ecommerce platform), buyers quickly adjusted and now, it appears that many of these new consumer behavioral patterns will become permanent.
ARK estimates that "US e-commerce will grow from $820 billion in 2019 to $2.7 trillion in 2025, pushing non-e-commerce retail down from $4.6 trillion to $3.9 trillion, a level last seen in the late 90s, as shown in the graph below."
US Retail Breakout
The reality is, buyers today are comfortable purchasing everything from hand sanitizer to groceries online.
At the same time, the retail industry is moving quickly to respond, simply because it must.
While we can grieve the loss of gathering places like the shopping mall, there’s no denying the ease of shopping online.
This shift of consumer behavior is just one of the many causes of the retail apocalypse.
The sudden closure of thousands of stores in the U.S. may be chalked up to COVID-19, but it’s evident that the retail apocalypse started long before this. Looking into its origins can help merchants create best-practice policies for their ecommerce business models and avoid past mistakes.
Here are some past and potential pitfalls to avoid.
The dot com era ushered in a number of massive changes in consumer behavior.
Everything buyers could want or need was available online. And then, it was available literally in their hands. With the advent of smartphones and now, wearable devices, the ability for buyers to purchase something with a simple tap has become too easy to resist.
The last holdout was trust, which the internet quickly earned with solutions like encryption and cyber attack resistant software. Now, buyers are so unconcerned about paying for something online, we literally upload our credit cards to scan onto compatible screens.
Consumer behavior is cause number one, simply because the retail apocalypse was only made possible by a widespread pivot to buying things online.
Ecommerce has made it easy for buyers to price-compare, read reviews, order something and have it show up a day later. With the exception of fine jewelry or cars, very few people want or need the experience of shopping in person (and brands like Carvana are quickly trying to correct that).
The point is that there is almost no industry untouched by the ecommerce revolution. Any retailer that is going to compete not only needs to be on board, but already enacting innovative digital solutions for new customers.
Ecommerce is number two on our list of causal factors for the retail apocalypse because there is almost no good or service that buyers cannot purchase online, posing an existential threat to brick and mortar alternatives.
Traditionally, brand identity, for many retailers, was about customer service and store experiences. This was drilled into employees, plastered into core values, and shouted from the rooftops.
If “who we are” is a friendly smile and an escort to the right aisle, how can we “be” that online?
This quandary has been resolved in the digital realm with varying degrees of success.
Some retailers have successfully adapted to create digital customer experiences that are commensurate with the offline experience. These are typically the brands that invested in ecommerce platforms from the start, creating an easy-to-navigate, graphic-friendly and community-oriented way for shoppers to buy online.
Others, though, failed to get the memo and begrudgingly launched hard-to-navigate, clunky sites with poor user experience and high bounce rates.
Amongst retailers, there was a mix of proactive and reactive responses to the retail apocalypse. Some dug their heels in and attempted to grow their physical footprint, while others abandoned brick and mortar in favor of quickly growing their digital footprint.
The latter are overwhelmingly amongst the survivors.
Survival (or life versus bankruptcy) of individual retailers was not the only effect of the retail apocalypse.
The effects of the retail apocalypse aren’t just felt by bankrupt retailers or inconvenienced buyers.
While some view the shift as a change for the better, many buyers view the carnage with dismay and have resisted the turn to digital shopping.
Here is an overview of the impacts this has had.
The American economy depends on retail, and the economy at large and our personal livelihoods are intertwined. It's a virtuous circle.
The nation’s economy is responsible for jobs, which obviously support families. These families, in turn, spend money at retailers (in some states, retail expenditures represent as much as 70% of a household budget).
The cycle has been intact for generations, but the retail apocalypse is steadily eliminating a huge sector of both employers and employment, which negatively impacts millions of American families.
In 2019, 4,633,100 retail jobs were held in the United States. Between 2019 and 2029, the U.S. Bureau of Labor Statistics cites a projected loss of nearly 20,000 jobs in retail.
The retail apocalypse is not only hitting Americans hard in the area of employment. It is also having a massive impact on business revenue.
An ARK report stated "some companies will transition successfully to an e-commerce model, but we expect more bankruptcies will happen during the next 5-10 years as not every business will survive or cut retail assets quickly enough.
Ecommerce has shifted the way businesses operate and people shop. This hasn’t just been a 1:1 replacement, where people used to shop in stores and now they shop online. It’s much more complex than that, and some of the money that used to flow into paychecks or cash registers has a different bottom line or is going in a completely different direction.
Less money and more recipients of profit have the potential to transform the economy.
Businesses recognize that the retail apocalypse is real.
People are online to buy. If companies don’t meet them there with a digital smile, they will inevitably lose business and eventually, go bankrupt or close.
For that reason, now more than ever, whether they had a plan in place or not, businesses are scurrying to establish a foothold in the digital marketplace.
Accurate merchandising information is crucial. Over-describe things like dimensions and quality of craftsmanship to really give a customer a sense of what they are buying without holding it. - Andy Tzortzinis, Director of Marketing at SOCSoter
Here are some disaster avoidance tactics from CB Insights that are working:
Nobody sets out to be the cautionary tale. The future depends on a business’s agility and strategic decisions in response to the retail apocalypse.
Ecommerce sales show no signs of plateauing and businesses are experiencing triple-digit percentage growth rates. In 2014, ecommerce made about $1.3 trillion; in 2021, it is projected to make $4.9 trillion.
To keep up, every company will have to take ecommerce seriously.
To plan for growth in ecommerce, businesses need to lean in and look ahead. Here are some paradigm-shifting realities that should be implemented as any business scales or sustains its ecommerce platforms:
All businesses will have to adapt to the reality that ecommerce is here to stay. So, what does that mean for the retail industry as a whole?
Some experts are saying that the retail apocalypse is really a “retail renaissance.” And, in some ways, it could be.
Just like Gen-Zers are sporting mom jeans and listening to record players, nostalgia and retro love will always play a role. It may be that malls become like museums, featuring fond throwbacks from the 2000s.
More likely, there will be a continued focus on ecommerce with a handful of successful brick and mortar retailers that survive the exodus.
There are a few reasons that brick and mortar isn’t dead.
One is that there will always be things that people can’t buy online or don’t want to buy online.
Here are the segments of retail that we predict will still have a place in a building:
Even if there are some holdouts, and the ones listed above are merely representative— innovators are finding ways to successfully sell most things online. And an investment is required for this process.
Branding and platform are the two key components of upgrading your retail business so you can sell online.
As you invest in your ecommerce business, there are some essential steps to making it work.
The sales platform for your ecommerce company has to work, and work well. This means you'll need to make investments in your digital user experience, interoperability and malvertising protection, amongst other things. No one can afford for an ecommerce platform to be hard to use, hard to manage or easy to hack.
Here are a couple of things to keep in mind:
Every interaction you have online with your buyers is an important point of digital engagement.
Making sure those engagements are secure and positive will be key to your success in the digital realm.
It stands to reason that many retailers may feel some level of despair about the retail apocalypse.
And yet, it could be a new beginning. There are numerous innovations that are both reshaping physical retail and integrating ecommerce into an in-person shopping experience.
The difference between the most predictable and stable businesses is being able to operationalize product marketing and innovation. - Lance Muranaga, VP Revenue at Abacus Agency
The future may look like a hybrid approach that has something for everyone. Here are some illustrations of creative opportunists who are rethinking the shopping experience:
These futuristic iterations aren’t for everyone, but every business can begin somewhere. Some experts suggest beginning with 20% of your items being offered online.
The bottom line: there are always ways to start and then scale your foray into the world of ecommerce.
Despite Apple and Amazon doubling down on their investments in in-store sales, ecommerce is the general path down which most retailers are headed.
Having been driven off home base, there is now a massive opportunity to replant in a new environment, but businesses will have to be creative if they are going to thrive there.
Adaptation is essential for survival.
Carving out a niche, finding new consumers, offering something unique: these are all basic to the philosophy that will bring success in the world of ecommerce, along with well-executed technology, online support services, and protected online shopping environments.
Creating brand loyalty, removing staggering price competition, and building real customer relationships through a digital world will be the hallmarks of those who thrive in the current environment.
Strong brand and clear differentiation allow you to charge more, and stop playing the commodity game. - Peep Laja, CEO at CXL Institute
Ensuring your margins stay as healthy as possible keeps your business up and running, allowing you to build better relationships with customers, create better products, and thrive.
cleanCART is the most effective solution to block coupon extensions, protect your margins and improve ecommerce attribution reporting.