The writing on the wall for retail has been there for so long, you would think it should have faded by now, being proven wrong by the ongoing existence of high street stores. But no matter how many highs and lows the industry has experienced since then, the overall trend continues to be a downward one, with no clear bottom in sight.
First came the rise of digital entertainment. As movies slowly went from the video store to the mailbox, to the red box, to on demand, to streaming, the need for brick-and-mortar retailers renting or selling physical copies of VHS tapes or DVDs gradually declined. As music went from records to tapes to CDs to downloads to streaming, music stores got smaller and smaller, eventually becoming virtually redundant. Then books went the way of Kindles and then phone apps, and the trend continues.
By the time we all realized it was inevitable that entertainment retailers were in trouble with the rise of technology, you would think it also would have been clear that other brick-and-mortar stores would follow suit. But we persisted in believing that people liked to gather at shopping centres, that clothes had to be tried on before being bought, and that shopping for produce was just too subjective to outsource.
Amazon pretty much disrupted all of those notions, and yet we continue to be surprised with each new development, like delivery-by-drone. They became the most valuable retailer in the US in 2015, surpassing Walmart. And earlier this year, Amazon was worth two and a half times what Walmart was worth! as noted in the Guardian.
Clearly, nothing is sacred in the world of retail. Almost anything can be found online, compared online, bought online, and delivered right to your door. This is the norm now, not the exception.
In the first 9 months of 2018 in the UK, a staggering 85,000 retail jobs were lost as tried-and-true fixtures like Toys R Us, Maplin, Debenhams, House of Fraser, Evans Cycles, and Mothercare closed up shop in certain locations.
HMV may be the first post-Christmas high street victim to face the music. It’s actually somewhat of a miracle that such an entertainment retailer has survived this long. The Hilco turnaround fund did what it could to save the legendary, 97-year-old music and video giant in 2013 in a £50 million buyout that eliminated debts and renegotiated costs according to The Telegraph.
But if prospects seemed slim for physical entertainment retailers in 2013, they’re downright invisible in 2018, as Netflix and other streaming services continue to snatch market share out from under their noses. DVD sales declining by 30% in 2018, and expecting a further 17% decline in 2019, is what prompted Hilco to declare HMV insolvent and bring in administrators from KPMG to renegotiate with suppliers yet again. The Telegraph has noted that with HMV accounting for 1/3 of physical music sales and ¼ of DVD and Blueray sales, its demise is a huge blow to the industry.
HMV may have been caught up in the perfect storm of surging digital entertainment and declining high street success overall. But it’s far from the only retailer to cause worry over its fate. Sports Direct, Bonmarche, and Primark all warned investors of bleak profit forecasts as we near the end of the year. Even online-only fashion retailer, Asos, had to discount everything by 20% just to gain some traction on Black Friday, indicating a worrisome outlook for consumer goods in general, and not just those from brick-and-mortar stores the Guardian reported.
For one thing, Brexit seems to be affecting the optimism of everyone, even during the Christmas season. Indirectly, this pessimism has decreased the demand for pounds, resulting in a decreased value for the pound relative to other currencies. So, any goods that retailers have to import from other countries and pay for with foreign currencies have now become more expensive. Retailers have also had to contend with increased costs from higher wages, apprenticeship levies and business rate increases, and the new GDPR data law. And obviously, consumers don’t want these increased costs to be passed on to them.
On an even more macro scale, consumers are spending less and less on actual stuff nowadays. Higher priority is placed on experiences like vacations and date nights than on clothes and toys. No longer can a retailer simply stock shelves and keep the lights on to get customers to buy their goods. Customers want to go wherever they will have fun.
In fact, customers are used to getting a lot of great experiences entirely for free; business models have changed such that the point of any gathering place, whether live or virtual, is to drive traffic. Think Pandora, Spotify, or even the local outdoor fair with vendor stands selling food and merchandise. The profits are made by selling space to advertisers, who in turn make money when their advertising results in, usually online, sales.
So, if you have something to sell, sell it online. If you have a physical space you want people to come to, make it free and fun, and sell to advertisers instead.