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Future of Retail: The Apocalypse Has Been Cancelled.

It seems like the persistent narrative amongst the media across North America surrounding the retail industry has been nothing but doom and gloom lately. Many of them have pulled out all the stops on this viewpoint, even issuing the hyperbole that a retail apocalypse is inevitable.  One quick search on Google tells you “the retail apocalypse” is a popular theme, with over seven million responses and its own Wikipedia page.   At first glance, many of the metrics and key performance indicators that they point out do seem rather dismal.

retail apocolypse

However, when listening to expert and advisor Michael Le Blanc, Founder and Principal of M.E.LeBlanc & Company, at the recent SCI’s 2017 Vancouver Omni-Channel Retail Leadership Summit you dig a little deeper in to what’s happening in consumer behavior, changing demographics, and e-commerce trends, and start to hear a bit of a different story. In this article, we’ll take a look at some of these factors and explain why the outlook for retail in North America, especially in Canada, isn’t quite as dire as media reports lead you to believe.

Traditional Retail Giants Are Shaking

One of the most alarming trends that tend to be referred to in looking at the future of retail is what has happened to the traditional giants, particularly department stores, in the last decade. Major brands like Sears, JC Penney, Nordstrom, Kohl’s and even Macy’s have seen their market value drop significantly between 2006 and 2017. Given how established these retailers were in their respective markets, and the massive physical infrastructure and presence that they represent, this trend certainly does set off some alarm bells.

Retail numbers


However, LeBlanc demonstrates that what is being seen in the world of Canadian retail recently tells a bit of a different story: “The Retail Apocalypse is a very powerful media narrative; the reality is that retail is more than solid in North America.  But it is also the case that retail is massively transforming is ways that we both predicted, and are unanticipated.  This is what makes the industry so compelling to the media”.  During the four-month period between April and July of 2017, monthly retail sales have seen consistent growth year over year of 4 percent or more each month. The Retail Council of Canada produces a monthly retail economic report for their members, the Retail Conditions Report, that continues to highlight these trends. This report states that Canada’s growing economy has been spurred by an increase in consumer confidence, and that while overall store traffic remains down year over year, increases have also been seen in average purchase size and conversion rates.

What this report tells us is that while traditional retail giants are struggling to maintain relevance in a world of changing consumer habits, retail itself is growing and thriving in many other ways. While several established retail brands are closing stores and seeing declining traffic, newer retailers, including ecommerce only retailers and those using different business models are expanding.

Retail Is Growing in Different Ways

E-commerce retail sales continue to grow at double-digit rates in Canada.  Retail Council of Canada’s report highlights that only fractional percentage increases are being achieved quarterly when looking at the growth of e-commerce vs retail in sales totals.  In the U.S. approximately 10% of retail is online, and in Canada that number is estimated to be between 7-9%.   What is clear is that the pace of eCommerce growth is faster than the growth in overall retail, therefore what we are seeing is channel-shift rather than overall double-digit retail growth.

In terms of Bricks & Mortar retail, LeBlanc points out that one sector that stands out is the huge growth that is being seen in the ‘dollar store’ category across the US and in Canada. These low-cost high-volume retailers are becoming increasingly popular among consumers, and their widespread growth reflects their ability to succeed in nearly any population size or demographic makeup. This trend can be partially explained by the challenges faced economically by the middle-class, and their desire to spend less for the same or similar products.

While the existence of physical retail still dominates the current and future landscape, there are some common things that are fundamentally changing the retail experience. These influencing factors are being driven by a combination of consumer habits and technology adoption. Customers are now actively seeking out a more personalized and experiential retail environment, like those being pioneered by Apple and other cutting-edge brands.

Mobile device usage trends are also driving shifts in retail, as consumers simultaneously browse and shop on their mobile device and in physical retail locations. This overlap in competition between online and physical retail locations has never been as prevalent and aggressive as it is today, and this trend is sure to continue.

What Retailers Can Do to Move Forward

There are certainly lessons that can be learned from these trends. Clinging to outdated business models is no way to ensure longevity or growth, but now is not the time to close every location and move entirely to online. Consumers still flock to retail stores, but they’re being much more selective in where they go and who gets their business. Retailers need to focus on delivering increasing value in the form of a great customer experience, as well as recognize the ability for mobile technology to drive shopper behavior.

“It will be critical for retailers to deliver a great experience online that extends to their physical retail locations”, said Dave Mack, Vice President of omni-channel retail at SCI. “This means a well-designed online experience optimized to deliver a great user experience, as well as better customer service training for retail employees, and certainly more attention paid to the environment that their customers experience within their stores.”

Those companies that invest now in the trends that are shaping their future are the ones that will be around to see it.

If your company wants to effectively prepare for the future of retail, the experts at SCI can help. Our team of logistics professionals can help evaluate the needs of your retail operations and craft an integrated logistics solution that will deliver a better customer experience, lower costs, and improve efficiency.

Contact us today to speak to one of our experts and learn how SCI can help.

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