End of the line for physical retail?

blackfridayThe enduring image of Black Friday in the U.S. in years past was lines of people queued up outside stores waiting to bag a bargain. Just like the Boxing Day Sales in Australia, generations of shoppers were collectively trained to dutifully press their noses against the glass of the front doors of major stores at a god awful hour, then trample each other in the quest to save a few bucks on stuff they didn’t need.

As recently as two years ago, this was still the practice in what is now the “Land of Trump”. Outside a Best Buy in suburban Seattle at 6am on Black Friday in 2014, I saw a long line of punters braving the bleak drizzle of the Pacific North West in the hope of scoring a cheap TV or Playstation.

This year however, it was different. I toured mid-town Manhattan on the day after Thanksgiving and the stores felt eerily quiet. Yes, there were people shopping, but there wasn’t the feverish pressure seen in store of days gone by. Shoppers stayed home and clicked online rather than camping out in front of retailers.

Industry numbers supported my observations. About 10 million more Americans shopped online than in stores over the Black Friday weekend. (Last year, the National Retail Federation reported that the numbers were even for both avenues of shopping. So the tipping point has been reached.) While Adobe reported that U.S. online sales from Thursday to Saturday rose 17.23 per cent, Shoppertrak said that traffic at major bricks-and-mortar stores and shopping malls declined 1 per cent for Thanksgiving Day and Black Friday. This may be a conservative estimate. Other sources over the weekend as a whole had traffic down between 2-4 per cent.

The incentives were not there for shoppers to visit physical stores. In fact, retailers actively courted shoppers online and did not discriminate between channels. From personal experience, I didn’t need to go to Banana Republic for the work shirts I like. The bargains came to me. Even though my nearest BR is only two subway stops away, it was two stops more than I needed to make. Why schlep to a store when you can get precisely the same deals on a screen? With free shipping, naturally.

Mobile powered the holiday shopping weekend more than ever before with 55 per cent of visits to online sites and 36 per cent of sales being on mobile.

While technology has been the driving force of the shift from bricks to clicks, Amazon in the U.S. has turbo-charged the change. (I don’t think that Australian retailers really know what will hit them when Bezos & Co arrive here in force.) About half of all American households are now Amazon Prime members – they pay U.S. $99 a year for a bundle of benefits, but most specifically for free two-day shipping. That locks shoppers into the Amazon ecosystem, and it has fundamentally altered the way that Americans shop. (Out of interest, one of Amazon’s most popular promotions in the week before Black Friday was a 20 per cent discount on Prime membership.)

When it comes around to what Amazon calls the “Turkey Five” – Thanksgiving Thursday through Cyber Monday – Amazon has a huge ready-made audience for their marketing efforts. And they benefit big-time. The Baltimore Sun newspaper quoted an Amazon spokesperson as predicting lifts of between 17 per cent and 27 per cent growth in fourth-quarter sales, kicked off by a robust start to the holiday selling season.

Despite the headline of this article, I am not predicting the demise of physical retail. But the nature of bricks-and-mortar, and its relationship with online is changing at a breakneck pace. And the vanishing queues on Black Friday this year are visible evidence of what is going on.

Jon Bird is managing director of global retail and shopper marketing agency network, Labstore and will be speaking at Inside Retail Live in March next year.

Comments

2 comments

  1. Avatar

    Eric posted on December 2, 2016

    This shift away from physical stores that you mention. Can I ask what retail sector this is mostly affecting? I would has it a guess that it's fashion and/or electronics. The customers I talk to on a daily basis tell me that they still prefer to make purchasing decisions after they've tried & touched the products they are interested in. In my business we've embraced online and offer a full e-commerce experience however the focus of our website is mainly education & driving customers into our physical store. reply

  2. Avatar

    Dave posted on December 3, 2016

    Wishful thinking hence the non-reflective title. Online sales is but a niche market however an online presence is key in persuading people into the stores. So its more about marketing..... reply

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