These days we hear a lot about the demise of brick-and-mortar retail due in part to consumers’ move to online shopping; a slow economy and the fact that we have more brick-and-mortar stores than the population can support (‘over-stored’).

One of the reasons why we are over-stored is because many retailers in the 1990’s and early 2000’s thought the best way to grow sales was to open stores.  While there was some discussion about loyalty programs and improved marketing or messaging to the individual shopper, there were a small number of successful implementations likely due to consumer acceptance and the lack of effective tools available to retailers, including technology.

Building stores simply to grow sales is not a sustainable long-term strategy.  Maintaining store infrastructures are costly.  Too many stores in a given market will cannibalize sales as there is only so much consumer demand and thus will detract from same-store sales, a key retail performance indicator.  Now many retailers who expanded greatly in the 1990’s are now faced with over-sized install bases to support.  USA Today recently reported that several of these retailers are embarking on programs to reduce their store counts – companies referenced include Abercrombie & Fitch, Radio Shack, Toys R’Us, Staples.

Selective store closures are a tough but essential strategy for many of these retailers as they “right size” their chains to meet the changing needs of their customers and today’s economic realities.

We still need our brick-and-mortar stores, just not the huge numbers that we have today.

Stores are a vital component to omnichannel marketing.  They give the retailer the opportunity to display their full collection or vision to the consumer.  Further, positive interaction between store associates and consumers can personalize the shopping experience, increase the market basket, create excitement and strengthen customer loyalty.  Stores like Apple, Container Store and Trader Joe’s are great examples of how well-trained, knowledgeable and customer-centric sales associates can create positive interactions with shoppers.  In turn, their shoppers can become advocates of the retailer with long-term loyalties.

For the consumer, in-store shopping is a sensory experience.  There’s the touch-and-feel of products, getting exactly the product they want at the right size and color, the immediacy of an in-store purchase (not waiting for it to be delivered) and the ability to find other products that otherwise they may have overlooked if limited to strictly online buying.

One retailer that is challenging the notion that retail stores are dead is Restoration Hardware.  MarketWatch recently reported that the company’s CEO commented that they in fact “have proven just the opposite as they continue to develop new and more exciting concepts that will create an even more compelling and highly experiential environment for our consumers”.  Restoration Hardware transformed its business into a curator of luxury furnishings.  They closed some stores and opened five very successful, large format stores (20,000 square feet or greater) that serve as design galleries featuring furniture and furnishings in upscale living settings.  The article further notes the strategy has been effective as goods that are showcased in stores have experienced a 50% to 150% lift across all channels.

In my opinion, well executed brick-and-mortar retail can be intoxicating. The right location, the right merchandising, the right products at the right price with store associates that are motivated and care about their guests is a powerful elixir that can benefit most every retailer today.

Stay tuned for more reports on retailers transforming their businesses.

Sources:

MarketWatch:  Restoration Hardware CEO defies ‘conventional wisdom’ that retail stores are dead

http://blogs.marketwatch.com/behindthestorefront/2014/03/28/restoration-hardware-ceo-defies-conventional-wisdom-that-retail-stores-are-dead/

USA Today, Nine Retailers Closing the Most Stores http://www.usatoday.com/story/money/business/2014/03/12/retailers-store-closings/6333865/