The Fall of Retail

I was recently in Macy’s, the department store founded in 1858, to purchase a birthday gift for a family member.  Macy’s is not a store frequent and I have watched over the years as the once bastion of American shopping has fallen on hard times.  The department store once provided a pleasant shopping experience where consumers could purchase a cornucopia of household wares and clothing from a friendly face.  Unfortunately, in less than 20 years the retail landscape has dramatically shifted to overgrowth, hubris, and most importantly a poor customer experience.   Times have changed not only for Macy’s, but the entire retail sector.

A recent Wall Street Journal article highlighted the plight of American retailers, sighting record pace for store closing due to overbuilding and the rise of online shopping.  Stores such as RadioShack, Rue 21, HH Gregg, Sports Authority and many more have entered bankruptcy or announced massive layoffs and store closings.  2017 is estimated to set a record in the number of closings for retailers across the country, accounting for more in this year than the previous four combined.

Retailers current situation is a result of their hyper focus on growth and this mindset has led to their own peril.  No longer was providing value and a unique experience to the customer important.   With reduced investment in the shopping experience and personnel, combined with an increased investment in online capabilities, share buybacks, etc. consumers have a reduced incentive to shop at physical stores.  My experience at Macy’s is a small snapshot to what consumers encounter daily, poorly displayed merchandise, out of stock products, almost nonexistent customer service, and drab and outdated stores.  Why would a consumer go into a store like this when they can sit on their couch and order to their heart’s content?  For more than a decade, executives at these retailers have put the victory of the company above the success of the customers.  Consumers continue to spend, but we are allocating our disposable income to companies that provide value and an enjoyable experience.

Retailers have also been involved in a race to the bottom in terms of price leading to dramatically lower brand and store loyalty.  I had a marketing professor in college tell me no smart person buys anything at Macy’s at full price.  He was highlighting the fact that there will always be some discount available and this was more than 10 years ago.  Numerous retailers have followed this pattern and regularly discount the entire store 30% to 40% off.  Product sales can no longer relied upon to drive margins and retailers have looked to cut corners with the reduced investment in their physical space and customer service.

The retail landscape will continue to shift away from brick and mortar and executives will regurgitate the same story of the reasons why they are forced to close or file bankruptcy, online shopping, shifting consumer behavior, and large debt burdens.  However, they will fail to highlight the fact that a large percentage of their situation is due failing to keep the consumer as the highest priority.