Revisiting WickedSciences 2017: The Brick & Mortar Digital Transformation

In 2009, while at WickedSciences (now the company which is Decision Data Corporation) we wrote on a regular basis about retail trends and the upcoming world of what we now call ‘Digital Transformation’. As we roll off our work with American Apparel since its purchase by Gildan for $88 million in January of this year, we now see part of the tectonics which lead to these sinkholes in the retail world. Here’s a glimpse into how we saw this working out in the age of the ‘Real Estate Bubble’ of 2008.

In the aftermath of the age of consumerism, the artifact of the previous era still hanging on to life appears to be the popular common shopping mall. This morning, news was release the General Growth, a shopping mall facilitator and real estate dealer, has announced it has filed for Chapter 11 Bankruptcy protection. Where this might look like a financial catastrophe to most, this seems, at least to me, to be the beginning of the new era of cautious consumerism here in the States and tectonic drift in favor of the online retail space.

There are some very good reasons why retail space is difficult to sustain:

  1. Rent for even kiosk size space is based on very skewed numbers in favor of the lessor
  2. Theft (or “shrink”) is much more prevalent in a brick & mortar store
  3. Inefficiencies in human resources create losses and require abundant management resources to correct or rework
  4. Carrying costs associated with inventory can be paralyzing in downturns like we experienced September-December 2008.
  5. Interpersonal communication costs sales, customers, and skilled associates
  6. Branding messages in malls are largely ignored due to over-stimulation by commercial messages

So, in summary, the mall is dead. Large department stores with the diversity and backing to keep up with these issues, and traditionally have, will survive and continue to anchor the most popular malls. WickedSciences (now properly: Decision Data Corp) sees the primary impact of the shopping mall retailer closure affecting:

  • Elaborate fragrace retailers
  • Consumer electronics
  • Photography Shops (which are as technologically disadvantaged as North Korean missiles)
  • Jewelers (Watch and Sunglass Stores Included)
  • Sporting goods/Sporting Memorabilia
  • Media Stores (We’ve seen collapse of Borders)
  • Poorly managed anythings…

Some department stores are probably going to go through a second wave of conglomeration to ensure survival of the brands. (The first having been that which yielded the KMart/Sears merger and the acquisition and integration of regional stores like ‘Burdines’ into Macy’s) This will reduce suitable anchor stores for the greater part of North America to 60-70% of what its previous number was. In effect, this will force the properties groups which own these spaces to find other uses for them. Expect some creative responses. These will range from things like practical liquidation to the bizarre Circus type.

The point of this fear-mongering is to get the idea out there that the time for retail spaces in the US to find a means to deal with the list above or prepare for more choppy water. A solid critical assessment of the retail numbers needs to come to pass. If you’re not producing an ROI of 1.8or better….start packing things up now and get in on the early liquidation game to fend off external vendors or start an initiative to move slow inventory online to a promotions specialist.

The upside of all this, is that consumers get the benefit which is, ultimately, good for the macroeconomic picture.

Embrace the idea of the thinning of the herd….

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