Rising from the Ashes Large number of stores and shopping malls are closing and Amazon and online shopping are taking sales from brick-and-mortar stores, but the media stories of a so-called “retail apocalypse” are inaccurate. October 2017 retail sales increased 0.2%, which was much larger than expected and early reports indicate many of the troubled retailers had very good to excellent Black Friday 2017 results. It’s important that you understand how retail is evolving, so you can act as a guide and advisor to the smaller, local retailers who will also be affected, and to help them find new opportunities.

Attracted to Apocalyptic Headlines, Part 1 Despite the reports of thousands of store closings during 2017, just two of 10 major retail sectors experienced net negative store growth: department stores, -400, and specialty softgoods, -3,133. Retail property developers, including the shopping mall industry, took advantage of low interest rates and plentiful money to expand at a feverish pace since the 1970s, and especially since the end of the last recession. They seemed to be unaware (or disregarded) the shrinking of the middle class since 1971, resulting in the overbuilding of malls and store locations.

Attracted to Apocalyptic Headlines, Part 2 More consumers are attracted to fast-fashion stores, such as Zara, H&M, TJ Maxx and Ross Stores, that are able to bring new products to their shelves faster than traditional department stores. In hindsight, it’s now clear that traditional brick-and- mortar retailers were slow to react to the online shopping phenomenon. Even so, the growth of e-commerce during 2017 is just 28% of all retail growth and Amazon’s impact on brick-and-mortar stores, especially department and fashion stores, is less than 5%.

Let’s Focus on the Upside, Part 1 Approximately 4,080 more stores will open than close during 2017, and 5,500 are forecast to open during 2018. The media and consumers are typically more conscious of the closing of large-chain locations, such as Sears, Macy’s and JCPenney, than stores with smaller footprints, such as dollar stores and convenience stores. According to Goldman Sachs analysis, 76% of 50 retail companies exceeded their earnings estimates for Q2 2017. Of 15 retail sectors, 9 had increased revenues through July 2017, compared to 6 with decreased revenues.

Let’s Focus on the Upside, Part 2 Most macroeconomic categories are very positive: unemployment, 4.1%; consumer and small business owner confidence high; and a significant increase in housing starts for October 2017. More Millennials are starting to form households and buy homes. According to the National Association of Realtors, Millennials are the largest generation of all homebuyers, accounting for 34% during 2017. Although research suggests Millennials are more frugal spenders than their parents and grandparents, forming families and buying a home have a way of causing similar spending patterns for furniture, appliances, building supplies, remodeling, etc.

Online Shopping Isn’t Disappearing According to the latest data from the US Census Bureau, total e-commerce sales during Q3 2017 was $115.35 billion, or 9.1%, of all retail sales, which totaled $1.269 trillion. More importantly, however, e-commerce sales increased more than 3 times from Q2 2017 to Q3 2017 than all retail sales, or 3.6% and 1.1%, respectively. From Q3 2016 to Q3 2017, e-commerce sales increased 15.5%, compared to 4.3% for all retail sales, or almost 400% more.

More Consumers Buying Direct from Manufacturers’ Websites According to a mid-year 2017 survey of 1,000 adults, an increasing number of consumers are making purchases directly from a brand manufacturer’s Website than a retailer with multiple brands. Of the adults surveyed, 54% said the primary expectation driving this trend is “more comprehensive information and guides about the product and category being sold.” Social media advertising, at 51%, is the #1 prompter of these visits to a brand manufacturer’s Website, but TV/radio was #4, at 35%, once again indicating how important it is for retailers to use both social media and broadcast media.

Ideas to Guide Your Clients Through the “Apocalypse” Fill the void – As major retailers either file for bankruptcy or close a significant number of locations, there may be many opportunities for small, local retailers to offer some of the products and services that are no longer available. Create an experience – Multiple research sources indicate that offering customers an experience can beat the convenience of online shopping. Unique products – Suggest an occasional display of unique products that could be locally sourced, such as handicrafts, or exotic imported products related or unrelated to their regular inventory.

More Ideas to Guide Your Clients Through the “Apocalypse” Digital presence – According to an October 2017, Wells Fargo/Gallup poll, just 44% of small businesses said they had an “active social media strategy.” Ill-prepared for future technology – Failing to use social media marketing is problematic for today, but also puts small, local retailers at an added disadvantage as artificial intelligence and robotics are introduced. Employees as company marketers – Even if a store only has 5 employees (and some part- time), they have the potential to reach thousands of potential customers as a retailer’s trusted voices in an active social media strategy.