Anchor stores were once the lifeblood of the shopping mall, drawing both customers and other tenants. But retail and the malls have changed, and consumers are more likely to shop the smaller retailers in the mall than stop in at the big department stores.
The retail industry is bracing itself for a massive collapse. Over 200 malls are on the verge of a nervous breakdown – thanks to SEARS.
To regain the sales per square foot it had in 2006, adjusted for inflation, Sears would need to close 300, or 43%, of its Sears stores to regain the sales per square foot it had in 2006, according to analyst Green Street.
Unfortunately, the US is still oversaturated with stores, at 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia — the next two countries with the highest retail space per capita, according to another analyst report.
How did it come to this?
According to Columbia University retail studies professor Mark Cohen:
“The department store emporiums, filled with endless wonderment and tremendous assortments, were supplanted by the growth of the retail shopping mall, which put these stores as anchors but surrounded them with specialty stores. The department stores got tremendous value from being in the malls, but lost their franchise. Then the downtowns got decimated, so they lost their shoppers. Then the big-box players could move an enormous amount of volume. It’s not that the department stores had no chance. But they didn’t attempt to re-engineer themselves. By the time the internet came on, all but Nordstrom were late to the party and are still catching up. Meanwhile, there’s Amazon, a virtual marketplace that’s kind of like an infinite shopping mall, where you can get with one click anything you want to buy.”
Clearly, the road ahead for retail is extremely hazardous. Is there a silver lining?
Meet Generation Z
Just as retailers begin to gain clarity on what makes Millennials tick, a new generation is emerging that widens the digital divide even further.
Meet Gen Z: categorized as consumers age 20 and younger.
When it comes to digital shopping, they build on the attitudes and expectations first identified among Millennials. Accenture’s global research (nearly 10,000 respondents in 13 countries) reveals that within this new cohort, video-rich YouTube represents the go-to online choice for shopping, although many also turn to other social media beyond traditional online mainstays, such as Instagram and Snapchat. The differences and evolving similarities between Millennials and Gen Zs will have a profound impact on retailers worldwide, as companies attempt to reach the two most digital generations yet.
Gen Z is emerging as a global consumer force. Retailers need to understand the ways these shoppers will differ from (and mirror) the Millennials, and whether the differences represent opportunities or challenges.
Don’t abandon stores. The store needs to be an experience that is an extension of the brand. Reimagine them to create a digitally connected, interactive and hyper-personalized physical shopping experience. Consider the ability of the sales associate to enhance the experience. The challenge for retailers is to move away from selling products and toward creating experiences and telling stories—finding innovative ways to participate.
Focus on “cool” social media. Videos and pictures are becoming more important than text for younger shoppers. Social media plays a central role in their lives and the expectation of constantly changing stories is becoming the norm. Yet young people are quick to move to the latest channel, so being nimble is key for retailers.
Woo with experiences and speed. Experiences should be something that Gen Zs will want to share. Consider partnering with 3rd party companies to enhance the customer experience. Coupling experience with speedy fulfillment will go a long way toward meeting this generation’s expectations.
Overload on feedback. Gen Zs value feedback from their family and friends, suggesting that retailers no longer own the review process. Brands should also look at collecting shopper product testimonial videos – an authentic approach that adds tremendous credibility. Social listening capabilities will be critical.
Get closer to the customer. Gen Z shoppers are open to new shopping models. This is a real opportunity for retailers to secure new customer data. And gleaning insights successfully can increase the lifetime value of each customer.
Much like Millennials, Gen Zs are using technology available to them in their quest to purchase the perfect product in the perfect way, however, there are significant differences based on geography and culture.
Shoppers in China prefer to shop online and leverage social media to shop significantly more than the global average, but they’re also far more interested in the ability to engage with an online sales associate.
In Europe, there remain significant differences. For example, when asking shoppers whether they are willing to buy things via social media. Compared to the global average: shoppers in Sweden are almost twice as willing to buy. Yet in Germany, less than half.
But even among English-speaking countries, there is a stark difference. For example, Australians are very interested in renting fashion items, yet this doesn’t sound appealing to Canadians. And in the United States, shoppers still have a strong preference for in-store shopping.
While currently less affluent than other generations, Gen Zs are nonetheless impulsive shoppers. Compared to older Millennials, nearly 60% more say they made a purchase just because they wanted to buy something or because they randomly saw an item they liked. While they might shed this impulsiveness as they mature, it could also become a key attribute when they gain more discretionary spending power. Additionally, reflecting their digital experiences with other purchases such as airline tickets and restaurant or hotel bookings, when they see something they like, they want to buy it immediately, and retailers must find ways to accommodate them.
Retailers and developers are going to have to re-imagine the shopping experience (think Disney) to create a destination-based strategy to drive traffic.
McKinsey’s Sangeeth Ram explores five consumer trends that will shape this future:
Entertainment. Re-image public spaces as a canvas for entertainment; Work with educators to create new learning opportunities via “edutainment”; Redesign entertainment hubs, such as movie theaters, theme parks, and gaming parlors as interactive experiences with virtual-reality content and immersive experiences where the customer becomes part of the story.
Food and Drinks. Use technology, such as self-ordering, and provide healthier eating options to redefine traditional fast-food outlets and casual dining; Create new “experiential dining” options; Leverage “food as theater.”
Retail. Create retail centers, that are also learning zones; Experiment with niche retail concepts such as revolving storefronts, pop-up stores, dedicated space for “glocal” brands, and offline showrooms of online players; Convert anchor retail spaces into co-working areas. Allocate reconfigurable spaces in mall corridors and piazzas to host pop-up stores.
Transportation. Technology enabled parking – here comes the autonomous car!
Technology. Create a seamless chain between online and on-site shopping, including “social shopping” and e-checkouts.
Rethink Jobs to Be Done
Harte Hanks and Strategyn have co-developed a strategic advisory service based on the premise that just as consumers “hire” products to do specific jobs, they also hire retailers to help them execute the “buying job” as they proceed along their buyer’s journey. To test the efficacy of this new service, Harte Hanks and Strategyn focused on looking for strategic opportunities to help struggling brick and mortar businesses fight back against the relentless pressure from online competition.
This application of the co-developed methodology looked at customers of leading brick and mortar retailers — Macy’s, Kohl’s, Bed Bath & Beyond, Costco, Home Depot, Best Buy, GNC, Pottery Barn—as well as Amazon.
The results were eye-opening.
On the surface, buyers were very satisfied with their brick and mortar retail experience, but further analysis using outcome-based segmentation uncovered several unmet buyer journey needs.
These unmet needs reveal where and how brick and mortar retailers can effectively compete against online retailers.
The research identified 15 steps in the buyer journey, which buyers evaluate with 134 specific outcomes. Rather than simply ask customers about their needs, the methodology uncovered every aspect of the job customers hired retailers, both bricks and mortar and on-line, to perform during the buyer-journey.
The research is characterized by the following fundamental marketing questions:
What customer-journey-job does (or will) the customer hire the retailer to perform?
What are the steps for completing this job?
What outcomes does the customer seek to achieve at each step along the way?
The application uncovered three specific areas of natural advantage for brick and mortar companies.
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Madison Bloom is the nom de plume of a branding executive based in San Francisco.