“I don’t want to grow up, I’m a Toys ”R” Us kid!” was the advert jingle of a generation. If you were a kid in the 80s or early 90s, you knew that jingle well. They were all Toys ”R” Us kids. Their children won’t be. The last “Toys ”R” Us kid” has already been born and the store is liquidating its assets as this is being written.
The brand will soon be relegated to the same fate of retailers who fell before it. Blockbuster Video, Sports Authority, and A&P grocery stores… all now Wikipedia entries in the dustbin of retail history. Sears is gasping for air. Like A&P, they once dominated an industry. Sears was the king of retail department stores in the mid-20th century, when A&P was still a grocery giant. How far it is that the mighty can fall.
Many more once-powerful retail players face an uncertain future. Even as the American economy shows some positive signs, brick-and-mortar retailers are bombing across the US.
Is this the end of retail as we know it? Yes. It is. Things will change but is this the end for retail altogether? Not even close. If retail were dying, Amazon wouldn’t be diving headlong into it.
What’s causing the retail die-off?
“Retail is dying/dead/facing apocalypse” stories are a dime a dozen; Wikipedia even has a page for “Retail Apocalypse.” There’s a number of factors contributing to the closure of stores; failing strategies, outdated business models, costly promotions, and technological disruption are all part of the equation. Everyone seems to offer a different answer for why once-iconic retail brands are failing.
New challengers like Amazon are putting the pressure on legacy retailers, certainly, but Walmart’s not exactly a new kid on the block. Nor is Kroger, yet they’re standing their ground. What are they doing differently than their competitors? They’re surviving by embracing technological innovation.
The threat of a tech-fueled, Amazon-led takeover of retail is real enough. It won’t be a zero-sum game where Amazon launches SkyNet and triggers Judgement day, but there will be casualties as the retail shakeup plays out. Whether or not a business survives Amazon’s challenge will depend on how a business chooses to react. There are many local and regional grocery stores that are fighting and winning in the retail revolution.
Put simply, the retail die-off isn’t caused by one infliction. “Millennials are killing my store” narratives are easy enough to pitch to editors, but they’re not getting to the bottom of things either. It’s not Amazon, technology, or even picky, cash-strapped Millennials. All of these factors are sending retailers market signals. The retailers that are dying are doing so because they’re ignoring these market signals for years.
Market signals matter.
Blockbuster could have been a transformative tech company. A big one.
Retailers can’t afford to ignore disruptions to their business models and they can be certain of one thing, those disruptions are going to keep coming at them for a long time to come.
Let’s take a look back at the home video industry for a (brutal) example of a retailer that utterly failed to adapt. Netflix originally came onto the scene as a DVD-by-mail rental service. It has 90s origins, but it really began its ascension in the early 2000s — their name already hinted that the company was built for more than parcel-powered entertainment. They were technology-minded and built to adapt.
Their retail-based competitor, Blockbuster, missed the chance to buy them for $50 million in those days. They scoffed at the young upstart and they ignored the need for web-based services for too long.
Blockbuster found themselves dangerously behind the ball when it came to streaming media and self-serve kiosks like Redbox. Netflix now dominates the video content market.
The result? There’s only a handful of Blockbusters left; a few stores still standing in Alaska… one more just closed in March. On the other hand, Netflix has expanded into major content production. They’re a major threat to traditional cable television and they are fast becoming a rival to legacy content houses in Hollywood. They operate in almost 200 countries and they’re worth more than $100 billion.
Not everyone is going to become the next Amazon or Netflix… but nobody wants to become the next Blockbuster.
Market signals matter.
The successful retailers of tomorrow
An aversion to taking business risks is one thing, an aversion to necessary investment however, is also risky business behavior. “This is the way we’ve always done it” might as well be a song the band plays on the deck of the Titanic.
In an alternate universe where Blockbuster’s executives paid attention to technology and took seriously the disruptions ahead, they didn’t just avoid destruction, they prospered to mythical heights. In this universe? Their last stores make for quirky content pieces on AVclub.com.
Retailers need to pay attention to market signals and adapt to the technology expectations of consumers.
Internet presence, ecommerce, and easy accessibility aren’t optional components. They’re vital.
Tina Mulqueen addresses this in Forbes. To paraphrase her conclusions, your stores must to be accessible on all channels, providing seamless experiences and immediate customer assistance, in real time. Stores have to embrace the digital realm fully and make sure they’re getting their marketing content in front of the right faces.
Retailers have to keep pennies from falling off the table, too.
In a game this competitive, those tight margins matter more than ever. Retailers need to be optimizing their inventory, cutting supply line costs, using data to measure product sales, and finding creative methods to boost their profit margins.
We’re all tech companies now.
You can’t swim against the current of our technological age and expect prosperity.
Whether you produce technology products or you sell bananas, beverages, or beef, you can’t swim against the current of our technological age and expect prosperity. Retailers need to beef up their technology stacks, they must acquire the necessary functionalities to stay on the cutting edge or forge partnerships with technology vendors who will provide them.
Crisis creates chaos but it also creates opportunity. Retail isn’t going to die, but it’s going to be a bumpy ride for many brick businesses. Others will thrive in response to the changes. How retailers choose to respond to the challenges ahead will determine who keeps (and grows) their enterprise.