The retail apocalypse and shops of the future
We are what we buy, and we define ourselves as consumers – as well as citizens. What happens in shops says a lot about our society’. With this phrase Jaime Castelló, lecturer at the ESADE department of marketing management, launched his presentation entitled: 'The Retail Apocalypse' in which he makes a complete survey of this sector in America – and where: ‘for the first time in a non-recessionary period, many more shops are closing than opening’. This is ‘the end of the world order as we know it’. However, not every type of shop is affected: ‘for example, there will still be shops selling perishable items – such as grocers – and those offering a variety or experiences’. But the end has arrived for many other shops: ‘especially in the specialised clothing, textiles, and accessory sectors. And not only are individual shops closing – in 2017 there were massive bankruptcies of chains like Toys'R'Us or RadioShack, which were no longer profitable investments’, Castelló explained.
Trumpeting the end of the world
One of the main causes of this ‘retail apocalypse’ that struck down 8,600 American stores last year is the phenomenon that the ESADE lecturer has called the 'curse of the Red Queen’. This is based on the book Through the Looking-Glass by Lewis Carroll and refers to how competitors just try to survive when faced by disruption, rather than try to dominate the market. ‘Online shopping does not even represent 10% of retail activity in this country, and yet physical stores have entered the online market. Their aim is not to lead or gain competitive advantage, but simply to ensure that they survive. In this process, most physical retailers lose money on their online operations,’ explained Castelló.
This dramatic scenario has been driven by changes in consumer and socialisation habits. This can be seen in the growing number of Amazon customers and falling number of people who visit chain stores such as Costco. ‘Many people want to shop from home or work and are not always willing to travel. In addition, the impact of the closure of many American shopping centres or malls is obvious. These are places where ‘teenagers and young people in the 90s socialised and came into contact with brands – something they now do on Instagram or Facebook’.
Other causes, says Castelló, include the growth of leisurewear, a market in which classic sports brands such as Nike and Adidas are losing share to products made by the large distributors; or the growth of the experience economy (in which shops are converted to sell experiences rather than products). 'Young people now focus less on what they have – and more on what they experience', he said.
Automation and non-stores
Castelló says that the situation in America will not necessarily be replicated abroad: ‘this apocalypse is, in fact, a correction. Retailers in America occupy seven times more space than in Spain, six times more than the UK, nine times more than in Italy, and eleven times more than Germany’. However, the trend does indicate where the sector is going in the years ahead: ‘shops as we know them will disappear. This change will be experienced in the online and offline channels’, says the ESADE expert.
Shops in the future will become highly automated and personal contact will disappear: 'we already have the example of Amazon Go', says Castelló, 'and this type of shop will reach another level when self-driving cars arrive: namely, on the go retail will deliver to our homes the products we most often buy'. The stores where we relate with people will be unstores or non-shops, where we 'experience products and brands that we can later order from home’. At the same time as these two trends, the concierge economy is developing: 'where assistants help us choose'.
