BUT LIKE WHAT IS A STORE REALLY?

2017 was the year of retail’s existential reckoning

Obsession
Fashion
Obsession
Fashion

The stress had been building on American retailers for some time, but in 2017, it simply became too much to bear.

Before the year was half finished, it was on track for more store closures in the US than the great recession in 2008. Richard Hayne, CEO of Urban Outfitters, went so far as to liken the situation to the pop of the housing bubble that started the recession. The research firm Fung Global Retail & Technology predicts there will be more than 9,400 stores shuttered by the time this year is done.

Main streets and all but the high-end malls are looking dismal in what many have dubbed the “retail apocalypse.” Undeniably there was a culling among long-withering department stores, and any number of struggling brands with bloated store spaces and store counts across the country.

But that term probably exaggerates the reality, because elsewhere, there have been signs of life. At the end of 2016, Nike, Adidas, and Coach had all opened big new flagships. Warby Parker started 2017 with plans to open dozens of stores across the US, while the high-end makeup chains Sephora and Ulta Beauty continue thriving. In a particularly symbolic move, Everlane—whose CEO Michael Preysman once famously told the New York Times, “We are going to shut the company down before we go to physical retail”—opened its first brick-and-mortar store just this month to a steady stream of shoppers. (And don’t forget that e-commerce is retail, too, and it has seen healthy growth.)

Consumers are still spending on retail, but which stores they’re going to and what they’re spending on is fundamentally changing. The year wasn’t so much an apocalypse as a reckoning, and the common thread through these events has been brands big and small forced into pondering fundamental questions about the purpose of physical spaces. Why does a store need to exist? And what should a store actually do?

Before the internet, the answers were simpler. Stores were where customers bought things. Their other jobs included offering customers information and good service, and maybe having an atmosphere that made it enticing to enter and wander around. But selling goods was their main reason for being.

Today, even though most purchases still happen in physical stores, they don’t have to. E-commerce has shaken up that paradigm, finding an audience happy to buy goods digitally and have them shipped to their doorsteps. It’s not for nothing that e-commerce steamroller Amazon is now the largest clothing retailer in the US, according to McKinsey & Company and others, and could become the first company valued at $1 trillion.

But stores aren’t disappearing either, and they can still be valuable beyond metrics such as sales-per-square foot, as Steve Dennis argued in Forbes earlier this year: “Stores serve as an important—and often low cost—channel to acquire new customers. Stores serve as showrooms that drive customers online. Stores serve as fulfillment points for e-commerce operations. Stores are billboards for a retail brand,” he wrote. In a store, you can touch and interact with products—and brands—in ways you simply can’t online. That’s why Warby Parker and Everlane have found themselves in the brick-and-mortar business after all.

So if stores aren’t just there to sell as many products as possible, how do you make the best use of them? There isn’t a single answer, at least not at this stage, and 2017 saw retailers trying to leverage their physical spaces in a variety of ways as they puzzle out what a store should look like in the age of online shopping.

Nordstrom Local @ 8401 Melrose Place, Los Angeles, California 90069 (PRNewsfoto/Nordstrom, Inc.)
Not your normal Nordstrom. (PRNewsfoto/Nordstrom, Inc.)

Beleaguered department stores seemed especially eager to find ways to reinvigorate themselves. Neiman Marcus partnered with Rent the Runway to bring the latter’s clothing-rental muscle to select locations. Nordstrom opened a small store that doesn’t stock clothes, but will serve you an espresso, let you speak with a stylist, or offer you a manicure. If you want to buy a jacket or a pair of jeans you like, they’ll pull it from another store or order it for you and mail it to your home, much like Warby Parker.

Richard Baker, the governor, executive chairman, and interim CEO of HBC, Lord & Taylor’s parent company, offered a reason beyond just unburdening itself of unproductive space for Lord & Taylor’s decision to sell a large chunk of its historic New York flagship and other locations to WeWork. He likened it to having a food hall in the store, but with a built-in audience of millennials who have to pass all the wares at Lord & Taylor to get to their co-working spaces.

Over and over, the point is that a store has to do more than just sell stuff: It has to offer something a website can’t. The buzzword of the year has been “experiences.” Think the basketball court in Nike’s Soho store in New York, where you can test drive those sneakers you’re considering. Or the joy of trying on a dozen lipsticks at Sephora, and maybe having a beauty expert do your whole look. “Experiences won’t just sell products,” retail expert Doug Stephens writes in Business of Fashion (paywall). “Experiences will be the products.”

In fact, among the reasons for retail’s meltdown is shoppers spending more of their money on experiences and less on stuff. Many retailers are trying to find a way to offer both to some degree, to get shoppers in the building.

There are plenty of ideas about how the store of the future should integrate with the digital world, too. In April, Farfetch, the hugely successful (paywall) luxury e-commerce platform, unveiled its “store of the future.” It was more like a suite of technologies that its network of boutique partners could use in their own spaces, since Farfetch doesn’t have its own physical locations. Some of the ideas included RFID-enabled clothing racks that detect what a shopper is eyeing up in store and populate an online wishlist, and digital mirrors that show a customer their wish list and let them request the items in various sizes or colors. The vision tries to make online and offline two parts of the same whole.

As 2017 ends, the store closures aren’t done yet. J.Crew, for one, recently announced it would shut dozens of stores by the end of January. It’s evident that stores have to justify their existence more than ever. It’s not enough for physical spaces to be glorified stock rooms, and the experimentation with what a store should be will continue. We’ll see plenty more ideas in 2018, some of which will work, and a lot that won’t. That’s how evolution happens.


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