Is traditional retail on life support?

Adjust or become extinct

When I entered into the world of retailing in the late 1960s, Thanksgiving was a day of rest. It was the day when the visual merchandising gremlins transformed the store overnight into a Christmas wonderland.

Now the Christmas transition begins in October, when the tree decorations, cards and trimmings arrive on the selling floors.

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This year, there has been a great amount of discussion regarding whether local and national retailers will be open on Thanksgiving Day. A number of retailers, locally and nationally, have stated they will close on Thanksgiving, giving their employees the day off.

Traditionally, Black Friday signaled the start of the six-week period when department store profits went from negative to positive. In more recent years, traditional and specialty stores tried to jumpstart this period by opening their stores on Thanksgiving Day. Some were open for 24 hours.

As online retailers like Amazon continue to eat away at in-store sales, the pressure on traditional retailers builds to gain back lost sales to cover their overhead.

Many of these same traditional retailers traded in-store sales for online sales by promoting their websites using email and direct mail. Major retailers such as Macy’s, Dillard’s, Nordstrom, and even Bloomingdale’s have seen store sales drop and their online sales increase. The challenge is they have too many “brick and mortar” locations, eating away their profits. Some of these retailers have tried to recapture lost sales and build additional market share by opening up off-price stores, such as Nordstrom Rack, Sak’s Off 5th, the Bloomingdale’s outlet and even Kohl’s Off/Aisle.

The Thanksgiving debate is only the first indication that there is trouble in the retail marketplace. Two major retailers, Sears and Kmart, announced they will run out of cash by the end of the year. Macy’s Inc. has announced it intends to close 100 underperforming stores. Nordstrom is concentrating its efforts on its Rack stores, which feature discounted merchandise.

One traditional store is moving counter to this trend. Von Maur will open a new store in Brookfield in the near future, bringing a new player into the greater Milwaukee market. Its entry will further fragment the market share of the existing competition. Macy’s and Boston Store are dealing with the entry of Nordstrom into the Mayfair Mall. Now Boston Store, JCPenney and Sears need to deal with the entry of Von Maur into the Bluemound Road retail corridor.

The closing of Sports Authority stores across the nation demonstrates how even a large specialty retailer can be driven from the market by competition. I expect after the retail sales are tallied and reported in January 2017, there will be further reduction of retail square footage in the Milwaukee market.

Additionally, there is a national campaign by local merchant associations and by American Express to “shop small” this season. The pressure is on the traditional retailer to reinvent itself or become a victim of the next ice age. My generation grew up shopping with our parents at the traditional department store. Now, our children shop online for their fashion and home needs by computer, tablet or cell phone. As baby boomers move toward extinction, they are replaced by the millennial shoppers who fill their shopping baskets online. They also desire to associate with merchants who share their concerns regarding social issues (i.e., recycling, feeding the hungry and using environmentally-friendly packaging).

Just like the dinosaur, the traditional retailer needs to adjust to the changing needs of the consumer and its employees or become extinct.

-Cary Silverstein, MBA, is a writer, speaker and community volunteer who splits his time between Scottsdale, Arizona and Fox Point. He is the co-author of the book “Overcoming Your NegotiaPhobia,” and can be reached at (414) 403-2942.

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Cary Silverstein
He was a senior professor at DeVry's Keller Graduate School in Wisconsin. Cary has published articles in periodicals and on the Internet. He recently published first book with Dr. Larry Waldman, "Overcoming Your NegotiaPhobia". Cary holds MBAs from L I U’s Arthur T. Roth School of Business. Cary has a BA from CUNY, Queens College. He has certificates in Negotiation from Harvard’s PON and in Labor and Employment Law from Marquette University.