Developer: Stop trying to be Amazon and start being inspiring
Uncertainty has always been a part of the retail industry, but today it is reaching unprecedented levels. Far too many retailers have let that online monster that’s under the bed get into their heads and influence their strategic decision and resource allocation. But is that monster really vicious?
Using the latest data from the U.S. Census Bureau and the North American Industry Classification System, the International Council of Shopping Centers recently noted that online retail accounted for just 8.3% of total retail sales in 2014. If you remove mail-order sales and the online transactions of brick-and-mortar retailers, it is likely that pure-play Internet sales were actually closer to 3.3%.
Though the number continues to inch upward, the rate of increase has actually slowed in recent years. Several detailed industry studies (including a 2016 ICSC report on online retail) suggest that public perception is out of sync with marketplace realities. Apply these numbers in our heartland USA home of Columbus, Ohio, and you will find that the annual sales of our region’s three Costco stores equal Amazon’s sales in the same MSA.
So if we agree that the Internet is not a three-headed monster, the question then becomes: Why are so many stores underperforming or closing? Could it be that the situation is less about online retail and more about the fear of online competition and the impact that that fear has on good decision making?
So many retailers are trying to “out-Amazon” Amazon, but is that the smart play? They are offering free shipping, reorganizing their supply chains, and making massive investments in technology. The harsh fact is that there are only so many resources to go around, and if a retailer is deploying a disproportionate amount of cash and creative energy to electronic sales, it stands to reason that its brick and mortar stores will suffer the consequences. When we see all this focus on the back of the house instead of the front of the house, the result is predictable: outdated, uninspiring, and un-attentive retail stores.
Take department stores, for example. Traditional department store sales dropped from $96 billion annually in 2006 to $72 billion in 2015. But is the Internet to blame for that? If you go to Europe, you find European department store brands thriving. The venerable Selfridge’s is setting sales records, and while Bonmarché has had a challenging 2016, the brand is consistently one of the most creative and successful when it comes to presenting vibrant and engaging shopping environments. For anyone who has spent time in London, Paris, or Shanghai, it is painfully obvious that most U.S. retailers are significantly behind the curve when it comes to merchandising, creativity, and innovation.
Why is it, then, that some retailers are doing exciting, inventive, and creative things, while others are not? Part of the answer does go back to online retail. Take Amazon, for example. While Amazon is the online gorilla, it has some very real pricing limitations on its online model. The online giant continues to subsidize delivery and logistics, and has yet to prove definitively that an online-only, free-delivery model can be profitable (the majority of Amazon’s profits come from its cloud Web services).
Macy’s online sales are significantly more (as a percentage of annual sales) than Dillard’s, for example. But Dillard’s charges for shipping, Macy’s is free. Guess which of the two online strategies are actually profitable? Retailers need to stop trying to be Amazon and focus on being their best selves. The classic example of this was when Barnes & Noble attempted to go head-to-head with Kindle and iPad with their Nook e-reader, a decision that turned out disastrous.
Meanwhile, brands like Victoria’s Secret, Vineyard Vines and Swarovski have done an outstanding job of merchandising and creating and maintaining a great in-store experience and appealing retail atmosphere. It’s no coincidence that those brands are thriving.
In-line retailers who want to be relevant need to know who they are today and what they want to be tomorrow. They need to focus on doing what they do well, and continually get better. They need to dedicate the time and resources necessary to make, and keep, their stores great. They need to be inspired and inspiring. And, they should not dwell in the past – but look to the future, and recognize that brick-and-mortar retail can remain not just relevant, but the true center of our retail industry.
Yaromir Steiner is the founder and CEO of Columbus, Ohio-based Steiner + Associates, which has developed more than 7.4 million sq. ft. of mixed-use space across the country. Steiner is a partner in Easton Town Center in Columbus along with The Georgetown Company and L Brands.
Using the latest data from the U.S. Census Bureau and the North American Industry Classification System, the International Council of Shopping Centers recently noted that online retail accounted for just 8.3% of total retail sales in 2014. If you remove mail-order sales and the online transactions of brick-and-mortar retailers, it is likely that pure-play Internet sales were actually closer to 3.3%.
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| Yaromir Steiner |
Though the number continues to inch upward, the rate of increase has actually slowed in recent years. Several detailed industry studies (including a 2016 ICSC report on online retail) suggest that public perception is out of sync with marketplace realities. Apply these numbers in our heartland USA home of Columbus, Ohio, and you will find that the annual sales of our region’s three Costco stores equal Amazon’s sales in the same MSA.
So if we agree that the Internet is not a three-headed monster, the question then becomes: Why are so many stores underperforming or closing? Could it be that the situation is less about online retail and more about the fear of online competition and the impact that that fear has on good decision making?
So many retailers are trying to “out-Amazon” Amazon, but is that the smart play? They are offering free shipping, reorganizing their supply chains, and making massive investments in technology. The harsh fact is that there are only so many resources to go around, and if a retailer is deploying a disproportionate amount of cash and creative energy to electronic sales, it stands to reason that its brick and mortar stores will suffer the consequences. When we see all this focus on the back of the house instead of the front of the house, the result is predictable: outdated, uninspiring, and un-attentive retail stores.
Take department stores, for example. Traditional department store sales dropped from $96 billion annually in 2006 to $72 billion in 2015. But is the Internet to blame for that? If you go to Europe, you find European department store brands thriving. The venerable Selfridge’s is setting sales records, and while Bonmarché has had a challenging 2016, the brand is consistently one of the most creative and successful when it comes to presenting vibrant and engaging shopping environments. For anyone who has spent time in London, Paris, or Shanghai, it is painfully obvious that most U.S. retailers are significantly behind the curve when it comes to merchandising, creativity, and innovation.
Why is it, then, that some retailers are doing exciting, inventive, and creative things, while others are not? Part of the answer does go back to online retail. Take Amazon, for example. While Amazon is the online gorilla, it has some very real pricing limitations on its online model. The online giant continues to subsidize delivery and logistics, and has yet to prove definitively that an online-only, free-delivery model can be profitable (the majority of Amazon’s profits come from its cloud Web services).
Macy’s online sales are significantly more (as a percentage of annual sales) than Dillard’s, for example. But Dillard’s charges for shipping, Macy’s is free. Guess which of the two online strategies are actually profitable? Retailers need to stop trying to be Amazon and focus on being their best selves. The classic example of this was when Barnes & Noble attempted to go head-to-head with Kindle and iPad with their Nook e-reader, a decision that turned out disastrous.
Meanwhile, brands like Victoria’s Secret, Vineyard Vines and Swarovski have done an outstanding job of merchandising and creating and maintaining a great in-store experience and appealing retail atmosphere. It’s no coincidence that those brands are thriving.
In-line retailers who want to be relevant need to know who they are today and what they want to be tomorrow. They need to focus on doing what they do well, and continually get better. They need to dedicate the time and resources necessary to make, and keep, their stores great. They need to be inspired and inspiring. And, they should not dwell in the past – but look to the future, and recognize that brick-and-mortar retail can remain not just relevant, but the true center of our retail industry.
Yaromir Steiner is the founder and CEO of Columbus, Ohio-based Steiner + Associates, which has developed more than 7.4 million sq. ft. of mixed-use space across the country. Steiner is a partner in Easton Town Center in Columbus along with The Georgetown Company and L Brands.