Shop.org ’17 – surprising retail data on storefront closings and consumer preferences

SUMMARY:

A panel by the National Retail Federation shook things up at Shop.org 2017, thanks to surprisingly upbeat retail data on consumer behavior and the state of the storefront.

NRF retail panel
NRF retail panel at Shop.org

I hit the ground at Shop.org 2017 determined to come up with fresh answers to retail conundrums. Why write another dystopian piece on how Amazon.com is raising the UX bar to impossible-to-compete levels, or disrupting everyone and everything with Whole Foods?

The pressing questions on my mind:

  • Has AI taken over “omni-channel” as the retail buzzhype du jour? (Short answer: yes)
  • If so, are there practical AI wins or just hot air balloons?
  • Is omni-channel the right goal – or a realistic one?
  • How is e-commerce – and consumer behavior – different globally? (see my piece on Chinese e-commerce)
  • Beyond AI, what tech trend has retail teeth? (Blockchain? Virtual Reality? Conversational UIs? Checkout-free shopping? “Personalized” email blasts from the land of nobody cares?)

Most importantly: who besides Amazon is winning – and how are they doing it? I can’t answer all those questions in a satisfying way in one blog post (check our full Shop.org coverage for deeper dives). But we should start with fresh data. Plenty of studies came out in conjunction with Shop.org, including a new quarterly report series from the National Retail Federation (NRF), the conference organizers.

Fresh data from IHL Group – “the death of retail is patently false”

During a roundtable deep dive on the consumer (replay here), surprising new data was shared by NRF and by the IHL Group, a retail analyst firm. Greg Buzek, President, IHL Group set a provocative tone with his firm’s recent findings that amongst a “core” group of retailers, store openings have gone up (see IHL Group’s free report, Debunking the Retail Apocalypse). The gist of IHL Group’s findings:

  • Retailers are opening 4,080 more stores in 2017 than they are closing, and plan to open over 5,500 more in 2018.

IHL Group came to those numbers by reviewing over 1,800 retail chains, each with more than fifty U.S. stores in 10 retail vertical segments. The IHL Group discovered that for every chain with a net closing of stores, 2.7 companies showed a net increase in store locations for 2017. As you might expect, Buzek is not a fan of the sloppy “retail apocalypse” media narrative:

The negative narrative that has been out there about the death of retail is patently false. The so-called ‘retail apocalypse’ makes for a great headline, but it’s simply not true. Over 4,000 more stores are opening than closing among big chains, and when smaller retailers are included, the net gain is well over 10,000 new stores. As well, through the first seven months of the year, retail sales are up $121.6 billion, an amount roughly equivalent to the total annual retail sales of The Netherlands.

IHL Group determined that a core of slumping brands are disproportionately closing stores:

  • Only 16 chains account for 48.5% of total number of stores closing. Five of these chains (Radio Shack, Payless ShoeSource, Rue21, Ascena Retail and Sears Holdings) represent 28.1% of the total stores closing.
  • 42% of retailers have a net increase in stores, only 15% have a net decrease, and 43% report no change.

So how did we end up with such a doomsday retail narrative? Buzek’s view:

What happened is some big name brands started announcing store closures, and all of a sudden the news started to pick up on this, and started talking about all the potential things that were happening. Second, our friends at Fund Global Data, who have been tracking store closings and store openings forever – their figures turned negative for the first time. So that made us say, “Let me understand a little bit more what they’re tracking and what they’re not tracking, because there was this disconnect that we were seeing.”

Buzek believes what gets tracked (and what doesn’t) explains some of the narrative tone:

What we found is they do a terrific job in apparel and department stores. They do a good job on the big box warehouse clubs and super centers and that sort of stuff… They really weren’t spending the time looking at these emerging categories that were going very, very fast, like the discounters, like the dollar stores and stuff. It’s just not their coverage area.

NRF – “counterintuitive” findings on consumer behavior

Buzek’s team found commonalities in big chains with the most store closings, including “overexpansion, private equity, and too much debt.” Meanwhile, for the debut of NRF’s Consumer View report, Katherine Cullen, NRF’s Director, Retail and Consumer Insights, shared some upbeat news from the consumer perspective. From their data – which is based on U.S. consumers, age 18 and up – in-store behavior hasn’t changed all that much.

We didn’t set out with this survey to solely focus on the store, but it just happened that the first insights got really helped tell the story of what’s actually happening with stores and consumers today. The first thing I’d just like to emphasize is that stores are not only still the dominant retail channel, they’re a very vibrant retail channel.

That’s a “counter-intuitive” finding:

What’s interesting is it’s also how consumers describe how they shop. That might even seem a little counterintuitive given the role of digital and the growth of e-commerce. The fact is that most consumers say that they’re doing most of their purchasing offline. They’re still going to the store, and not only are they still going to the store, but they actually haven’t changed their behavior dramatically.

Cullen’s view is informed by these NRF stats:

  • 78 percent of consumers say they’re shopping in stores either about the same, or more than they were a year ago – “which is a fairly large number.
  • The number of consumers who say that they’re increasing their store visits outweighs those who say they are decreasing in-store visits.

Cullen was quick to emphasize that the role of the store is definitely changing – and that change has big implications for retailers. In the past, the store was the focal point of the purchasing process. That’s changed:

What we’re seeing in today’s environment is that a lot of those research type activities that tend to happen earlier in that customer path to purchase are shifting online and onto mobile.

A different NRF study confirmed that more than 80 percent of consumers research online prior to store visits:

What that means is that when customers are coming to the store, they’re further along in their decision-making process. They’re coming into the door armed with information; they know their options; they often know where they can find the best price… Regardless of the initial impetus, the point is they’re coming in with the intent to purchase, and that’s very much what we found in the study. (emphasis mine).

My take

My experience at Shop.org wasn’t as upbeat as these studies. I still view retail as a winners and losers market, with plenty of fighting to avoid the darker outcome. I tend to give the advantage, besides Amazon and maybe Walmart, to smaller outfits that can pick and choose their storefront strategy – without the burden of thousands of storefronts in dire need of modernization.

But it’s not all about smart niche plays. My colleague Stuart Lauchlan recently wrote a favorable review of NIKE – a brand pushing for digital flexibility in how it reaches consumers.

Retailers are still exposed through their attempts at personalization when too many back offices can’t support anything near a frictionless experience (see my piece on overcoming omni-channel blues for NetSuite’s take on solving that). That said, personalization tech is getting better – and we know where the data disconnects are. Fixing them is the rub.

Prior to Shop.org, just about every PR pitch I received was smothered in “revolutionizing retail with AI” Nutella. But on the ground, I saw more practical examples. If you rip the absurd “AI” umbrella off, and look instead at smarter use of data, better predictive technologies, better conversion rates, automating clunky processes, energizing a shopping experience with preference data, or applying machine learning to fraud prevention, then I heard plenty of realistic/impressive use cases.

Perhaps topics like how Carhartt turns visitors into customers with user-generated content are not as sexy as the retail singularity – but such opportunities abound. I’ll document them further in upcoming pieces.

End note: bonus replay.

NRF replay – a roundtable deep dive on the consumer

Image credit - Photo of NRF retail panel by Jon Reed.

Disclosure - Disclosure - NRF provided me with press access to Shop.org 2017. Diginomica is a Shop.org media partner. NetSuite is a diginomica premier partner.

    1. Each Retailer has Troves of Customer Sensory Preference Intelligence. My company Prefeye technology, mines individual customer fit, look and feel preference intelligence either from customer purchase or a patented customer self curation shopping tool. Our expert system processes product sensory attribute into individualized preference based product recommendations, email and ads… We have live demo’s using product feeds from large retailers. Prefeye, an expert system was designed and built based on my years in global apparel design and retailing, working with and for many of the best retailers, including Nordstrom.Reference

      1. Jon Reed says:

        I doubt a marketing pitch like this will be of much interest to readers but yes, many companies are struggling with how best to use their “treasure trove” of data. As I’ve written many times true personalization is not as easy as solution providers would like to make it out to be. Too much crucial data in disconnected places.

        – Jon

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