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 When we see all this focus on the back of the house instead of the front of the house, the result is predictable: outdated, uninspiring, and un-attentive retail stores.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.
Footwear giant opens first store in Saudi Arabia
DSW Inc. is making good on its promise to create a foothold in the Persian Gulf.
The footwear giant opened of its first warehouse store in the Kingdom of Saudi Arabia. The new 15,000-sq.-ft. store is located at the Mall of Dhahran.
"This new store design delivers the same capacity on half the space of our North American locations, giving our Saudi guests the same experience they would expect to receive in the USA, while positioning the warehouse as a potential fulfillment center for future digital initiatives,” said Simon Nankervis, chief commercial officer for DSW Inc.
This is company’s second DSW Designer Shoe Warehouse operating outside North America. The footwear giant opened its first location at the Muscat Grand Mall, in Oman, in June.
Both stores are among 40 new locations DSW plans to open across the Middle East with the help of its Dubai-based franchise partner, Apparel Group, over the next five years.
Experiential retailer in store closings
High-end bath, kitchen and appliance retailer Pirch is focusing on its California roots for future growth.
The company, famed for its "try before you buy" experiential showroom format, is closing up to six of its 10 locations in an overhaul that will see it focus primarily on its four California stores (Los Angeles, San Diego, Palm Springs and Orange County) and such customers as architects, builders and interior designers. Pirch's stores in Dallas, Chicago, and Atlanta are due to close Sept. 30, reported Bloomberg. Also closing on that date is its store in Austin, Texas, which opened in May.
“Pirch has made the strategic decision to refocus its footprint and pace of expansion,” stated a Perch company spokesperson. “Our California stores are performing well and profitable, and we remain focused on growth in this region. In other regions, Pirch is currently in discussions with landlords and has begun the process of closing certain locations that have not met our expectations."
Although numerous reports said Pirch is also closing its flagship in Manhattan's SoHo, the company spokesperson told Chain Store Age the location is performing well and has a strong customer following. Pirch is evaluating its plans for the SoHo location, with a decision expected in the next few weeks, according to the spokesperson.
Going forward, Pirch will emphasize its core business of serving the design resource community (architects, builders, interior designers, and the like). "These have been the most impactful customers and have driven the company’s success in Southern California," the company spokesperson said.
Pirch emphasized that all customer orders will be satisfied and shipped as planned from all stores. It also struck a positive note about its future.
"We remain confident that our unique business model will be successful on a more focused scale and we are committed to delivering on our founding mission of providing customers exciting new ways to shop for the home through our innovative multi-brand immersion experience," the company spokesperson stated.
Pirch offers a curated collection of premier appliance brands in an interactive environment that allows customers to "test drive" many of the items. Multiple vignettes are featured, showing cooktops, ovens, refrigerators and grills, as well as working showers, sinks and bathtubs. Many of the stores feature a working test kitchen where recipes are by a visiting chef or special events are held.
In July 2016, Pirch opened its largest location, a 32,000-sq.-ft. flagship in an historic, former ironworks building in Manhattan’s SoHo neighborhood. The store offered complimentary on-site cooking classes, and had two on-site live demo kitchens, one set up as an indoor kitchen and the other as an outdoor one.
In February, Pirch was named one of the 10 most innovative companies in retail, "for bringing the appliance store to life," in an annual ranking by Fast Company. And in June, it made Inc. Magazine's"25 Most Disruptive Companies of the Year" list.