The downward spiral of department stores as we know them has been happening for years. In a 2019 Forbes article, Chris Walton, CEO and founder of Omni Talk, one of the fastest-growing blogs in retail, and Third Haus, a retail technology lab, wrote:
“Prior to the 1990s, physical stores were the only game in town. But then along came digital with the advent of Amazon, eBay and others, later supercharged by the mobile phone, and digital said to the world that it could offer inspiration, immediate gratification, and convenience as well as, if not better than, physical stores.”
In other words, the 90’s fashion trends may be back, but the decade's consumer behaviors have been out of style for many years.
A record 9,500 retail stores went out of business in 2019, which seems massive — but as many as 25,000 could shut down permanently in 2020, mostly in malls, indicates the latest estimate from Coresight Research. The influx of closures in 2020 is due to the irrevocable impact of nationwide stay-at-home orders and social distancing guidelines due to Coronavirus.
In April, when an estimated 3 billion people were adhering to shelter-in-place orders due to the pandemic, businesses and consumers were given little choice but to use online services. Forward thinking companies pumped money into their digital operations to improve their services and rework their customer experience. Others were unable to deliver and are now suffering the consequences.
UBS (United Bank of Switzerland) Executive Director, Jay Sole, recently wrote, “To deliver steady long-term growth, we believe brands can no longer rely on malls or department stores to drive traffic. Brands have to generate their own audiences and become destinations.”
For reference, here are some examples of brands that UBS rates for their ability to generate sales on their own are Nike, Levi Strauss & Co., Skechers Inc., and American Eagle Outfitters.
“We think the ‘Go It Alone’ moment has arrived,” UBS said. “This means brands should plan for a future that does not rely on department stores or malls to help generate traffic or drive growth. The ideal business model will be one where a brand can profitably sell directly to consumers either online or in-store.”
Now that we have laid out all of the reasons why change is imperative, let’s learn about what those changes look like and how to achieve them.
Shift to a Direct-to-Consumer Model
Direct-to-consumer (DTC) is defined as the promotion and sale of products directly from the creator or manufacturer to new customers without third-party retailers, wholesalers, or other middlemen. This shift would require that brands rely on themselves to build brand awareness and provide a positive brand experience both online and instore instead of relying on third party retailers.
Forbes reports, “While other retailers furlough staff, defer investments and declare bankruptcy, agile DTC and digitally native brands respond by fast-tracking customer engagement initiatives already underway prior to the pandemic. As a result, only 22% of DTC brands surveyed by Totem Media reported sales declines, far fewer than the 80% of larger, traditional retailers that suffered sales dips since the onset of the global health crisis.”
Authenticity, personalization, and digital footprint of the brand are key considerations for retail consulting firms working with brands transitioning to a DTC model.
Focus on Authenticity
In a recent article, Harvard Business Review advises, “Authenticity in marketing has always been a best practice, but it becomes even more crucial in this time of social unrest and COVID-19. Campaigns about current events and social issues leave companies vulnerable to a different and deeper level of scrutiny.”
For example, Amazon released a commercial that thanked its “heroic” employees and spoke to the company’s dedication to keeping them healthy and safe. The ad appeared to be genuine, but it became clear that wasn’t the case when Amazon employees began to go on strike due to concerns over unsafe working conditions.
This calls for total transparency and collaboration from internal teams to ensure that you are practicing what you preach. If you think Millennial and Gen Z consumers aren’t vetting brand’s authenticity before pledging their allegiance, you are mistaken.
Provide Personalization and Focus on Customer Journey
Mary Beth Laughton, CEO of Athleta, told Fast Company in a recent interview:
“Retail was already changing, and COVID is just accelerating it. Stores will continue to play a critical role, but that role will change since most transactions will happen on a mobile phone or through social media. Retailers are going to have to think of that full journey a customer will have through their mobile device. I think about it as likely starting on a social post or some other marketing touchpoint, and then maybe she gets a geo-targeted mobile push message from us when she’s outside of the store, and that gets her in the store. And then she uses her mobile app to shop and navigate, check out past purchases, so she knows what size to look at.”
Laughton goes on to say,
“She looks at product recommendations that we’ve personalized for her. She can access loyalty points. Maybe she even reaches out to her friends and community when she’s in a dressing room to get their opinion. Then for checkout, something like contactless payment will become really important.”
Create or Evolve Digital Footprint
For a lot of brands prior to 2020, blending the physical and digital shopping landscape was a nice to have. Now, it’s go digital or go home.
In an article in Forbes, Chris Baker, founder of Totem Media notes, “DTCs have also demonstrated the willingness to ‘double down’ on key digital channels during times of stress. A good example of this can be found with DTCs that increased Facebook spending during the depths of the pandemic, while many traditional brands were pulling back from digital spend.”
The article goes on to report that, "The vast majority (85%) of respondents said they will invest further in Facebook during the second half of 2020. Other digital channels such as Instagram, Amazon and TikTok also rank high for new spending among direct-to-consumer brands polled."
If your brand is transitioning to a DTC model, you may not have the team infrastructure, research, or expertise to execute alone. In order to generate your own audience and become destinations within a storefront, you will need trusted partners who have experience in creating memorable in store and online experiences that attract and maintain the attention of your consumers. InStore Design Display is no stranger to helping brands create compelling and engaging in store experiences. IDD’s process, people, and century long track record of success are just a few of the tools we use to bring brands to life in the physical space in ways that are feasible and effective. 