Retailers are shuttering physical locations at a faster pace then during the Great Recession. And despite booming e-commerce business, retailers continue to find themselves in a state of flux as more wholesalers sell direct to consumers.
This story first appeared in the April 19, 2017 issue of WWD. Subscribe Today.
For brands, the danger is saturating the market with too many products.
In the overall retail market, Credit Suisse said in a research note that delved into the cause of the accelerated closures that it predicts more than 8,640 stores will shutter by the end of 2017 — outpacing the Great Recession numbers, which totaled 6,163 closures in 2008.
And while picky consumers who lack brand loyalty and demand personalized omnichannel experiences is driving these changes, wholesalers also have a role. Merchants are forced to bolster margins by lowering overhead — frequently resulting in product that’s overpriced. Meanwhile, wholesalers are not slowing the pace of production, according to industry sources.
At the same time, wholesalers and apparel brands are stepping up their direct-to-consumer efforts, which is impacting retailers — especially independent boutiques (who relied on brands as key to its formula of exclusivity and service). For wholesalers, the goal is to rebuild profits that were eroded by retail consolidation. Going direct to consumers via online marketplaces also gives them more control over the “destiny of their brands,” as many analysts have noted.
All of which misses an important aspect of consumer behavior: Shoppers still want to touch and feel fashion apparel and accessories before purchasing. And they want to engage in product discovery. Brands such as Warby Parker and Outdoor Voices, for example, are opening up brick-and-mortar locations after building flourishing online shops, reemphasizing the value consumers find in physical shopping experiences.
Even the most receptive shoppers — Gen-Z-ers — prefer to shop in-store. According to Accenture’s report “Gen-Z and Millennials: Leaving Older Shoppers and Many Retailers in their Digital Dust,” stores still have a role to play with Generation Z shoppers; they just approach the experience differently. Above all other demographics, these social-savvy shoppers prefer to engage with a brand via its multitude of platforms while in a physical store, prompting the opportunity for a self-service digital information source, the report said.
In the current hyper-digitized climate, equity analysts have noted the importance for wholesalers to manage inventory, sourcing and product workflows to meet market demands. It also requires tempering production. But technology and data can help.
“The rate of change in retail has accelerated in recent years given the rapid growth and adoption of digital commerce,” said analysts at Telsey Advisory Group in a report this week. “What used to be ‘amazing’ and cutting edge is now the ‘new expected’ — from search to product knowledge to delivery. Consumers today demand a seamless, speedy experience, which in most cases requires technology and outside-the-box thinking. Looking ahead, the customer may become more of a participant in the creation of their purchases as companies leverage data to develop products and experiences.”
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