Physical to Digital: What the Traditional Retail Industry is Learning from Ecommerce

Smadar Landau | May 20, 2017

J.C. Penney’s recent announcement that the massive chain will be cutting 5,000 retail jobs and closing 138 brick-and-mortar stores is a window into the ongoing crisis in the physical retail industry. On the surface, the waves of physical store closings appear to be approaching in massive proportions, as J.C. Penney joins other major retail chains that have also announced store closings for 2017, including Radio Shack, which is closing 552 stores; Payless Shoes, which is closing 400-500 stores; and Office Depot, which is closing 100 stores.

A variety of factors are at play for this downturn, which, coupled with ecommerce, create a problem for brick-and-mortar stores. Two of the complementing factors are the seemingly inevitable rise of the Internet and the convenience and growing power of mobile technology. The ecommerce-driven globalization of the marketplace has created an almost perfect storm, with the focus shifting to the consumer and their preferred method of shopping platforms. There is a tremendous need for the retailer, and for commerce, to find their customers on the mobile device of their choosing, even if that means they won’t find them in the actual store.

As the Baby Boomer generation migrates into retirement, the spending power of millennials has taken center stage, with their tendency to favor access over ownership and personal experience as a priority. While growth in retail has generally been measured by store square footage, online retail has zero physical requirements. Any marketplace that revolves around supply and demand knows that today’s physical retailers have way more supply than demand.

In addition to the growing digital world, which is a key player in the diminishing of physical stores, geography also plays a part in this downturn. Urban markets are of course the main victims, mainly due to social elements, such as the migration of millennials to cities. As a result, large retail chains are closing non-city stores because the demand is no longer there and the expenses outweigh the income.

The lack of market flexibility allowing major public chains to react quickly in an ever-changing and evolving marketplace is another problem for traditional retailers. Short-term goals taking priority over effective long-term company strategies are having a detrimental impact. The need to satisfy shareholders and Wall Street quarterly short-term growth demands has placed an unrealistic emphasis on retail discounting.

As the physical store continues to migrate online, consumers are accessing the shopping experience via mobile devices. Even when consumers are actually shopping in a brick-and-mortar store, they are increasingly willing to turn to their smartphones to compare prices, get further product information, and find out if a competing store nearby has a better offer. In addition, not to be satisfied with any sort of dominant status quo, online retailers continue to increase the pressure on brick-and-mortar retail with such attractive offers as free shipping or same-day/next-day delivery.

However, traditional retail is continuing to attempt to push back, and is learning from the digital and ecommerce shopping space. By cutting store locations, major retail chains are trying to focus resources on a smaller number of stores, in addition to focusing on efficiency and flexibility in the marketplace. Also, one of their main weapons may be the stores themselves. Hoping to effectively combine both the online and high street realms, many physical stores are now allowing consumers to order products online and pickup from their physical stores.

Traditional retail’s most effective weapon is more than likely offering the shopper a fantastic in-person experience. As many as 80 percent of shoppers who utilize physical stores cite “instant gratification” as a reason to shop in an actual store. If retailers can combine that with offering a unique shopper experience when visiting a store, despite the online trend towards augmented and virtual reality, they may continue to hold on to a key element in the ongoing war between online and brick-and-mortar retail.


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