Holiday 2015 signaled stores’ changing role | RetailNext

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Holiday 2015 signaled stores’ changing role

Alexei Agratchev
Alexei Agratchev

In the retail of yesteryear, the fundamental underpinning economics of stores were predicated on robust performances over the Holidays – a business and financial model that is no longer sustainable with today’s new shopping behaviors.

Over the next couple of months, there will be continued repercussions and fallout on this past Holiday shopping season, with some select retailers celebrating, even more licking their wounds, and some … well, some will undoubtedly fade into the sunset and disappear. However, no debrief of the Holiday shopping season will be complete without one almost universal truth being exposed: Retailers have to rethink the role of the store.

In today’s multichannel retail reality, there’s no question brick-and-mortar stores can be great differentiators and a source of sustainable competitive advantage. As proof points, one only has to look at the steady stream of traditionally online retailers – Bonobos, Rent the Runway, Warby Parker, Bucketfeet and many others – who have successfully opened and currently operate physical store locations, where they succeed with reinvented shopper experiences.

New entries into stores are approaching physical retail with different mindsets and business models, and traditional brick-and-mortar retailers are running out of time to refine and evolve their own thinking. It’s not competitive success, but rather competitive survival, that’s at stake if the role of the store doesn’t change and change quickly.

For years – forever, really – retailers planned on huge windfalls from traditional retail seasons. Of course, Holiday, from Thanksgiving through New Year’s Day, is the single biggest retail season, but others include Valentine’s Day, Mother’s Day, “Dad and Grads” and Back-to-School. The economic models that stores were built on – and on which retail businesses depended upon – were rooted in those key periods of profitable performance.

Those big peaks in volume are still there, but for most, the increasingly elusive profits are most assuredly lying elsewhere, particularly as shopping seasons are being “strectched” by shoppers, starting earlier and ending later each successive year. Undoubtedly, brick-and-mortar stores will continue to become a smaller and smaller part of the overall Holiday seasonal spend with each and every passing Holiday season, and the result will be a fundamental shift in the economics and financial valuation models of retailers.

With their new shopping journeys and behaviors, shoppers have redefined retail in so many ways, and Holiday season is no exception. Holiday shopping is now almost entirely deal-, convenience- and novelty-driven, and at the same time, stores face numerous competitive challenges, including:

For retailers, it all too often adds up to woeful financial performance.

That’s not to say stores aren’t important during the Holidays – nothing is further from the truth. While under old business models stores might be financially irrelevant during Holiday, rethinking the role of the store during Holiday uncovers opportunities, including:

Retailers have to fundamentally shift the economic models of stores and how they plan out their retail year. Stores are hugely important to the shopper experience – even during Holiday – but they can’t be counted on to deliver Holiday profits like they could in previous decades.

What many retailers are now required to do is to re-examine the entire year and better coordinate promotional calendars with how today’s shoppers shop. Massive holiday discounts are tactics indicative of a “race to the bottom,” and retailers’ Income Statements can no longer absorb the losses.

In addition to dated economic models, retailers must break away from legacy infrastructures and systems to compete even with just their own online growth. Stores MUST provide delightful experiences, and the role of the store has to align and integrate seamlessly with customers’ preferred shopping patterns.

Simply, the purposeful rethinking of the role of the store allows retailers to better meet shoppers’ needs, and that singular objective delivers differentiation and competitive advantage in the new era of retail.

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