Retailers Adapt to Secure Future Relevance
April 13, 2017,
By Allison Zisko
Target’s reimagined stores will include curved center aisles with merchandise displays.
The flurry of retail announcements over the past six weeks—ranging from store closures to acquisition rumors to major capital investments—may have industry observers desperate for a scorecard and crystal ball, but some analysts say all of the paring down and right-sizing is par for the course.
Nonetheless, despite all the retail strategizing, it is still unclear who, if anyone, is best suited for omnichannel retailing success. True omnichannel retailing, which seamlessly integrates every possible selling platform, including physical stores, remains a distant goal for most players, according to retail experts. To recap:
Target’s reimagined stores will include a dedicated order pickup counter
Meanwhile, Kevin Mansell, CEO of Kohl’s, which, like its retail brethren has experienced shrinking sales and store traffic, said he would rather make stores smaller (roughly 35,000 to 55,000 square feet) than close them. A $2 billion investment in new technologies enables the chain to do so, he told Fortune last month, by maintaining leaner and better planned inventories that require less space in stores, and by arming salespeople with handheld checkout devices that eliminate the need for big cash register spaces. Kohl’s will reduce the size of 200 more of its standard-sized stores this year, for a total of 500 small-format locations, Fortune reported.
Target’s reimagined stores will include a grab-and-go section
Macy’s rightfully assessed the marketplace in its store closures, O’Shea said, but it must continue to weigh the benefits of leaving stores open to maintain its identity and support its online business.
Steve Goldberg, president of The Grayson Company, a retail consulting firm, applauded J.C. Penney’s shift back to its customer base and return to categories where it once had strength and leadership, such as home furnishings. Ellison told CNBC, “I spent 12 years of my life running a business that looks a lot like the services space that we’re going into. And if you go back on the timeline, J.C. Penney actually served a lot of these products and services at one time in our history.”
“Every single company has to try new things. If you are just going to sit there and be an apparel company the entire time you’re not going to capture the new demographic, the new customers,” retail analyst Dana Telsey, CEO of Telsey Advisory Group, said in an interview on CNBC last month regarding J.C. Penney’s new initiative. “I see them [J.C. Penney] taking actions to enhance the operations, whether it’s closing stores, whether it’s investing in systems, whether it’s taking a look at the national brands and the private brands,” she said. “Staying the same doesn’t help you move forward. Making change does.”
Store closings are not new, according to analysts. “Over the course of time we see retailers come and go,” said Goldberg. Every retailer tends to have underperforming stores and it makes sense for them to go. “What we are reading in the headlines are adjustments, ” he added.
O’Shea said he understands the strategy of closing underperforming stores, but does not think across-the-board closures are the solution. Whenever a retailer closes a location, online sales in that zip code go down because retail identity is lost (a fact Kohl’s Mansell reiterated), and customers like to return online purchases to the physical store, he said.
Retailers are not failing as much as they are adapting, O’Shea said, and that does not happen overnight. Currently, “there is no such thing as omnichannel retailing—it implies an integrated model,” O’Shea told HFN. “Nobody is there yet.”
“Inventory levels will reduce as retailers become more adept at utilizing one supply chain to handle both online and brick-and-mortar sales; right now, no one is there,” O’Shea said. As efficiencies are generated, you will see SG&A [selling, general and administrative] expenses start to go down, he added.
Furthermore, there has to be a redeployment of services away from the sales floor to make best use of the physical store, O’Shea said. Online orders can be shipped from the store instead of a warehouse; in crowded retail markets where several stores exist, O’Shea recommends reducing the sales space in a few of them and using it as a storeroom or shipping hub.
Goldberg disagreed with that strategy. Most stores lack the infrastructure to make such a switch and it is not feasible to convert one floor of a department store into a distribution center, he said. Instead, retailers should be looking for ways to lure customers to the store and get them to stay. “When you have an appealing, multicategory experience—a restaurant, a cafe, a bakery–[customers] stay in the store longer.” Tommy Bahama, Ralph Lauren and Urban Outfitters have lately been successful in this area. “There’s no reason why any format can’t do that,” Goldberg said. “It’s an opportunity to reinvent. Stores always need to reinvent themselves.” Mall operators need to do the same, Goldberg added.
Other Articles By Author
Patti Carpenter Talks Color and its Importance in the Home
HFN's DIGITAL EDITION
COVER STORY: Sharpening the Focus on Millennials
Find out what makes Millennials tick when it comes to home decorating, shopping and at-home entertaining with HFN's annual consumer study. Turns out, Millennials favor the in-store shopping experience.
ALSO IN THIS ISSUE:
- Power of the People - Crowdfunding campaigns provide needed capital, feedback for home and housewares product launches.
- Omnichannel Retailing: Visual Search Takes Off - Learn how voice and visual search are revolutionizing product discovery.