The so-called retail apocalypse was once thought to be oversold as the demise of brick-and-mortar retail failed to materialize. E-commerce giants like Amazon in North America and Europe, Alibaba and JD.com in China and a handful of startups like Lazada in other markets have seen enormous growth.
The effects of e-commerce are perhaps the most stark in China, where shipping is very cheap and often free. Amazon offers free two-day shipping to subscribers of its Prime service, which now costs $120 per year. While many consumers balked at the original $79 price tag (and later $99), it’s now become a popular service with the addition of digital content.
Physical stores are still an essential part of the shopping experience, but recent trends are showing just how devastating e-commerce has been for many retail outlets. One story from Bloomberg last November details the latest figures in the ongoing drama that is the American retail sector.
Over the last year, store closings have outstripped new store openings at a much higher rate compared with previous years. The first three quarters of 2017 saw the announcement of 3,000 store openings but 6,800 closings.
Retailers have largely staved off closings through debt thanks to historically low interest rates, but a better economy means rising rates. That means trouble for some retailers.
Bloomberg notes, though, that consumer confidence remains high in the U.S. This is largely due to an improving economy. Since consumers are switching many of their buying habits over to e-commerce sites, many of the stores that are closing won’t be missed. While mass closures could have a negative economic impact in the short run, there are positive things happening in the retail space.
The most obvious reason to not fear the demise of brick-and-mortar retail is that it’s not actually dying. The retail market is changing, that’s for sure. Some figures show the market is even growing. Business Insider notes, many budget stores are growing their physical presence. Department stores and other outlets that have traditionally relied on traffic to malls are the ones really hurting.
Retail stores also serve as a “showroom” for products. Companies like Best Buy that have built out their e-commerce strategy to align with the strategy for their physical stores are doing well. Best Buy now rents out space for companies to show off their latest and greatest gadgets. Getting into a store like this is still an important means of exposure, especially for tech startups. The “try before you buy” mentality still has a strong hold over consumers in some markets.
Retailers may soon get even more creative when it comes to selling goods. Those who want to know what that might look like can take a look at China. Though China is often seen as following the lead of the U.S. when it comes to innovation, retail and mobile payments have taken off in a way they haven’t in other places thanks to unique challenges Chinese consumers face.
Mobile payments advances came first, and the deep penetration of this technology in China is now enabling all kinds of unique retail innovations. One of the more recent innovations is social commerce. New apps allow consumers in China to get a discount on a product when they convince friends to buy the same product. This is made possible through the ubiquity of Alipay and WeChat Wallet, allowing Chinese consumers to quickly share a product with friends and pay immediately through social apps that most internet users already use.
New Retail is a hot topic in China right now. Social media marketer Ashley Dudarenok gave a talk on this topic at the spring Startup Launchpad Conference. The conference will go more in-depth on this topic in October with the theme “Future of Retail.”
A number of new and rapidly evolving technologies like mobile payments and blockchain are quickly changing commerce. Brick-and-mortar retail isn’t dead, and we still encourage startups to find distribution for their products to get them in stores for consumers to try out. There’s no better way to get someone to imagine themselves using a product.
The lines between e-commerce and old-fashioned commerce are blurring, though. It won’t be long before omnichannel retail is just known as retail because no one will be able to survive the retail space any other way.
As startups concentrate most of their energies early on making the greatest product they possibly can, they should also think about all the ways that product might be sold. There’s a lot more than there used to be and none of them are irrelevant.
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