Accomplished digital retail professional Nicola Clement speculates on the key themes and trends in physical retail.
So this week it has been revealed that US retailer Bed, Bath & Beyond will be ceasing its physical store operations to focus solely on its online channels. Perhaps Bed Bath & Beyond have left it a little too late to have any other option, but physical retail is definitely not dead.
This is an interesting and complex conversation, and it’s hard to make sweeping statements that cover all retailer types and markets, but there are a few key themes and trends I am seeing:
– More and more customers are returning to physical shopping, but their expectations are higher and their attention spans shorter
– Online retail sales have slowed significantly in response to this, and brands are now starting to report year-on-year revenue declines (Kogan -17.3%, Myer -9.3%, JB Hi-Fi -34.8% plus this week Catch reported a loss of $108m and its gross transaction value (GTV) dropped 26.8%)
– Those with stores however are reporting positive total sales growth (Myer +24.8%, JB Hi-Fi +8.6%)
– Through the covid lockdowns, pureplay online retailers were hit hardest due to supply chain and delivery issues. Multi-channel brands with physical footprints who could offer click and collect, and had stock in stores to fulfil orders, reaped the rewards.
– This has also been seen in the market share data and comparative year-on-year online sales growth. Many of these changes in shopping behaviour have remained and the pureplays are hurting
– Pureplays are also hurting the most from increased costs with delivery which is impacting profitability. Click and collect, and ship from store are great options available to multi-channel retailers to help offset those shipping costs.
– Direct-to-consumer is thriving, especially those who are creating interesting physical experiences to bring the brand to life (see Gymshark in UK). However, those who are more aggregators and/or sell other brands are having to compete more and more on price and discounting, again hitting the P&L.
– A number of companies have been too short-term focused driving traffic and revenue through paid media, instead of investing in CRM, loyalty, SEO, brand and owned channels, which are much more cost-effective marketing channels and improve profitability
So the key takeaways from the start of 2023 for mine are:
1. Physical retail is not dead
2. Sales are a vanity metric, profit is king
3. Review your P&L and look for opportunities to optimise now
4. Don’t wait until it’s too late and your choices are limited
The other key thing to remember is that Australia did not feel the impact of the GFC like other countries. Many of the people we have leading businesses and ecommerce here have only ever known the good times. You can’t expect to do what you’ve always done and weather the coming downturn.
Think differently, be proactive – don’t just hope for the best and think your business will be the exception.
Nicola Clement is one of the most accomplished digital retail professionals in Australia, having held senior roles with Jetstar, Just Group, Forever New, Kathmandu and most recently General Manager Omni Experience for Myer.