The Retail Bubble - How to Compete in an Era of Change
3 Min Read

The Retail Bubble - How to Compete in an Era of Change

Modern digital tactics to address the effects of the retail bubble bursting

In the wake of numerous companies declaring bankruptcy and large amounts of stores closing across the United States, both brand executives and news outlets are declaring that the retail bubble has burst.

However, retail companies everywhere should understand that this should not be seen as a time of widespread financial losses, but rather, a time of major industry-specific change. As a result, companies need to understand that the way of doing business has shifted away from traditional forms and toward a more modern, customer-centric approach that blurs the line between in-store and online commerce. Retailers should respond appropriately.

The first step toward rethinking your strategy in post-retail bubble burst is to understand why it happened, followed by adopting new techniques that have caused some brands to experience continued success while others do not.

Causes of the Retail Bubble Bursting

The bursting of the retail bubble is not the result of a single cause. Rather, this is due to several factors coming together at an inopportune time. These include:

  • Oversaturation of Physical Retail Space - Too much square footage taken up by retail stores across the country caused an imbalance in store representation versus number of customers. According to a CNN report, the amount of retail square feet per capita in the United States is more than six times that of Europe or Japan.
  • The Continued Move Toward Online Shopping - Even traditionally in-person shopping experiences like shopping for clothes are moving online even more. Customers are gravitating toward stores that enable cutting-edge online retail experiences and leaving those that do not.
  • Inadequate Direct-to-Consumer Sales - While companies have seen online shopping as a way to counterbalance a decrease in sales made in brick-and-mortar locations, many retailers are only partially replacing in-store sales with digital sales, leading to decreased revenue.
  • Increasing Rental Costs Outweigh Profits - Besides profits falling, rental costs continue to increase for real estate across the nation and the massive expansive of brick and mortar stores in recent years pushed retail space rent prices even higher, according to Richard Hayne, CEO of Urban Outfitters, Inc. The expense of simply having a physical location cuts into retail chains' earnings.

Understanding what has caused the retail bubble to burst is the first step toward formulating and enacting an effective plan. But what are the next steps to take in order to compete today in the retail industry?

Digital Tactics to Address the Bursting Retail Bubble

Not every business has been negatively affected by the recent bubble bursting, as Walmart, Costco, Best Buy, Children’s Place and Home Depot have all experienced growth throughout the year. Many of these companies have been able to use their online presence and technological innovations to improve sales and retain customers. The following digital transformation strategies can be used to address the causes of the bubble burst discussed earlier.

  • Incentivize Online Purchases - Walmart’s recent purchase of startup company Jet was used to encourage online orders by dynamically dropping prices and discounting shipping when customers ordered large amounts of items through their website. In doing so, the company was able to supplement their physical location with online shopping.
  • Enhance Brick and Mortar - While many retailers are closing stores due to the costs of running physical locations, in-person shopping still plays a major role in closing sales. As such, retailers would be well-advised to merge online capabilities with in-person shopping. Equip workers with mobile portals that allow them to see the purchase history and interests of customers they are helping, allow online purchases to be immediately available in person and give customers info via smartphones on the items they see.
  • Encourage Customer Loyalty - Today’s customers are more likely than ever to abandon brands for competitors after only a few poor experiences. As such, loyalty is difficult to achieve, but can occur by providing consistent, helpful experiences that reward customers for continued purchases and make them feel known by a company. Omnichannel experiences and employees who can quickly understand and meet the needs of customers, both online and in person, can enable such possibilities.
  • Streamline Operations - Retailers must decrease the cost of running businesses to meet shifts in profits, and while some may see closing stores and cutting jobs as the way, retailers must look at day-to-day operations, such as how headquarters-to-store communications and inventory management. Digitizing more processes can eliminate waste, redundancy and lost time, which will save money in both the short and long term.

The opportunity of digital transformation and the necessity of change caused by the retail bubble bursting can come together to push your business into a new phase. Consider where your brand can grow and what areas can be most positively affected by embracing new strategies.

Embracing Retail Digital Transformation

Coach, Inc. was able to shift their processes online through Liferay, which helped connect stores worldwide and eliminate wasted time and resources through their intranet, CoachWeb. Read how Coach digitally transformed and streamlined their operations in our case study.

Learn More About CoachWeb  
Originally published
August 30, 2017
 last updated
December 17, 2021
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