RETAIL APOCALYPSE
RETAIL APOCALYPSE
Tom Pompomaronis looked at the retail landscape and how it is shifting and may have literally exclaimed “Retail apocalypse” He was probably correct. Over the past year notable household brands were closing their doors to customers at what seemed an alarming rate. Is brick and mortar becoming obsolete? All the trends point us down the channel.
There were enough signs that give credence to such apocalyptic thoughts. In America right now 51% of millennial prefer online shopping and they use voice assistants and the rise and rise of E-commerce. According to Abha Bhattaral in her in article in The Washington Post she cited a study by UBS which estimated that as much as 75,000 stores that sell products ranging from clothing, electronics and furniture will close by 2026 when online shopping is expected to make up 25% of retail sales.
Some of the notable names like Kmart and Sears have shut down a lot of stores whilst Payless has filed for Chapter 11 Bankruptcy. Some analysts have estimated that 15,000 stores are doomed in US alone last year and a lot more going in 2020.
Still yet in the wake of the retail apocalypse we saw new real estate companies developing new concept Shopping malls. What is really going on? Are retail chains doomed?
However, Tia Wertz writing in Forbes in November 2018 set out 5 trends that will define retail in 2019:
- The rise in brand as culture and the way brands communicate with their customers. Internal cultures mixing with external identities
- Shipping faster. Amazon dropped free shipping from 5.5 days to 2 days using Amazon Prime program
- Rise in experiential retail – A mixture of both offline and online
Nike recently introduced subscription for children tennis shoes and we have Alibaba offering free shipping
- The rise of subscription Ecommerce
- Multichannel is the new normal- Despite the alarming closure of brick and mortar stores they still play a key role in the sales process. Last Black Friday sales saw Amazon gross $900b in sales but Wal-Mart was still able to rake in a whopping $300b
She argued that with the diverse shopping experience independent retailers must maintain active presence in all of these platforms and it calls for deep integration across all channels including website market place, social media and brick and mortar. These trends are driven by a combination of an evolving technological landscape and the shifting preferences of consumers as demographics start to skew younger.
To understand the future of retail we have to look towards China. China is said to be the biggest retail market in the world with consumer goods retail sales in 2018 of $1.4b. They also lead in Ecommerce setting a record in 2017 when sales on a singles day peaked at $25b beating Black Friday and Cyber Monday by a whopping $11.6b according Jasmine McDermott writing in Rocket Space.
However, with the feverish spread of the Coronavirus we may have to wait a bit longer to gauge the effect on consumer spending and on the entire China’s industrial ecosystem. Perhaps we may safely say that once China gets the flu the rest of us feel the chill too.
TRENDS TO WATCH
Here are some trends to watch:
- Video content is king
- Customer centricity ( Retailtainment + Entertainmerce)
- More e-commerce companies will emerge
Retailtainment refers to experiential marketing whilst Entertainmerce refers to the Union of E-commerce and entertainment.
Yinka Awosanya writing in Techpoint Africa pointed out that most e-commerce platforms in Nigeria are still struggling despite the huge investments flowing into the sector. Indeed most existing E-commerce franchise was not profitable and is not expected to be profitable in the short to medium term.
Some of the challenges he noted were:
- Pay on delivery(POD)
- Huge advert spend and promotions especially for the ones using celebrity influencers
Jason Njoku frowned at the amount of advert spend by most start-ups in the E-commerce space when there is no corresponding value. Seth Godin calls it noise. They might as well boil the entire ocean all at once.
Consistent with most businesses is the fact that Trust, Customer centricity and value for money is by far the overarching ingredients that lead to success in E-commerce. There are associated costs of keeping huge inventory, logistics costs and warehousing but in the face of the former their impact is not as significant.
Mckinsley in their report estimates that E-Commerce spending in Nigeria will top $12billion by the end of 2019. This growth is aided by the youth population, expanding consumer power and increased smart phone penetration. Revenue from E-commerce is projected to reach $75billion per annum in 2025.
Nigeria is ranked 7th highest internet using country in the world in social media with 16m active on Facebook. This is fuelled by mobile penetration and drop in data cost.
The growth of E-commerce in Nigeria and indeed the whole world will be very significant but whether that will lead to Retail Apocalypse this year or the next cannot be ascertained in this ever-changing economy. The change in consumer behavior is still a study in progress and the use of AI and machine learning in the retail space will surely change our shopping habit but humans for now will need that interaction have the online and offline mode.
Nadew
