Is Retail Apocalypse inevitable?

Is Retail Apocalypse inevitable?

Is Retail Apocalypse inevitable? Is Retail Apocalypse inevitable?
Business Development & Strategy Director
Valtech France
Pascal Malotti

October 16, 2018

Last June two leading toy retailers, La Grande Récré, in receivership, and Toys’R’Us, which announced the closure of all its stores in the US, became the most recent victims of the Retail Apocalypse. This expression, used by Americans to describe the negative effects of e-commerce on bricks-and-mortar stores, highlights a phenomenon thought to have caused the closure of over 3,000 stores in the US in 2017. Most blame for this is laid at the feet of the digital retail giants, Amazon first and foremost among them. However, things are not quite as simple as they may seem.

Amazon: a consumer satisfaction machine

The so-called ‘Anglo-Saxon’ countries have suffered particularly badly from the Retail Apocalypse, being more exposed to the raw market economy, with few social shock-absorbers. Before it, sales networks had already been badly dented by the 2008 crisis, dragging them into a spiral of permanent special offers that have continued to eat away at their margins. This state of affairs has been made worse still by the digital revolution and the rise and rise of e-commerce. At the same time, consumer behaviours have changed, creating new needs, and thus new types of supply. And to cap it all, the one remaining advantage of bricks-and-mortar stores, immediacy – in other words, the ability for consumers to satisfy their desires at once, simply by walking into a store – has recently been wiped out by Amazon Prime and its promise to deliver within two hours.

This is just one of the retail giant’s many innovations as it advances successfully on all fronts – and is now in the process of becoming completely omni-channel, having just announced the opening of 3,000 Amazon Go checkout-free stores in the US by 2021 – further bad tidings for traditional players in mass retail.

Of course, this feat is not down to chance. Amazon has succeeded in applying the core values of retail to a highly innovative, extremely disciplined, state-of-the-art rollout model, in which the consumer is consistently placed at the heart of the process. In doing so, it has become nothing less than a machine to satisfy e-shoppers, surrounding them with an ecosystem that makes their life easier. Its lead is such that no other player is in a position to give it any cause for concern at present. Any who do try catching up achieve little more than pale copies of the original.


The end of a model – and the start of a new era

For a while, it was believed that omni-channel presence, in particular the ‘phyigitalisation’ of sales outlets, could save bricks-and-mortar stores from this onslaught. However, it’s now clear that entire swathes of our economy are doomed to collapse within the next 5 to 10 years. Some are heralding the end of retailing for the middle classes, referring in particular to all the middle-market brands without a strong enough DNA or a strong accompanying community, and with very similar offerings. Admittedly, the Retail Apocalypse has been less dramatic in France than for its ‘Anglo-Saxon’ neighbours. This is due in part to the country’s social model, as well as to its geography. A key to Amazon’s success in the USA is that in such an outsize country, consumers have to get in their cars just to buy bread or a daily paper – something that is not the case in France, meaning that local shops still have appeal there.

Nevertheless, France cannot hope to emerge from this phenomenon unscathed. The younger generation has little interest in a legacy of consumer habits left over from the Second World War. If they want clothes, they start by going to Instagram, before moving on to online retailers, usually on their mobiles. Historic French department stores such as Printemps and Galeries Lafayette might as well be on another planet as far as they’re concerned. If they do go to a physical store, it will only be in search of something entirely unprecedented.


The keys to survival: integrated distribution and experiential shopping

To emerge victorious from this great upheaval, brands will have to adopt integrated distribution: in other words, control their products’ entire value chain, from design through to sales via manufacturing. Any stores they have will be experiential, focusing on checking in rather than on the checkout. Practically speaking, this means that consumers will go there for a particular experience, rather than necessarily to buy a product. That’s the model implemented by Apple Store, a pioneer in the genre, where people come to admire new releases or attend courses on iPhone photography, but may well not actually buy something. This shift addresses a business logic grounded in following clients over the long term.

US firms such as AllBirds and Outdoor Voices were birthed according to this principle. They combine an intense, highly experiential concept – respectively, shoes manufactured from natural materials and women’s sportswear – with a clear, digital vision. In France, the Décathlon brand has also embraced this model: today, its stores carry only its proprietary, own-brand products, now accompanied by experiences involving technology such as virtual reality.

To survive in this new world, brands therefore need strong DNA, control of the value chain, and a bespoke business model, in which digital technology and innovation will play key roles. If people flock to stores in the future, it will be for the experience rather than to buy stuff. Make no mistake, however: by then, the Retail Apocalypse will have left its mark.

Meet The Challenges Of Today's Digital Economy

Ready to take that first step and rise to your digital potential? Contact Valtech today.
Talk to us
Meet The Challenges Of Today's Digital Economy