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Is Retail Dying?

Image by Christian Ferrari – christian-ferrari.blogspot.com

Best Buy announced that it will be closing 50 stores as a cost cutting measure. While that doesn’t sound so bad, here are some notable store closings in 2011 & 2012:

There are plenty more to mention, but you get the idea. Right now, we are using cute terms such as “cost cutting measures” but what I’m wondering is if we are seeing the death of the retail industry as we know it.

There is no question that consumer preferences are changing, but how much will our preferences change, and how will that shape the physical world we live in?

Technological Advancement

It’s pretty simple to see how technology is advancing. With music services such as Amazon MP3, iTunes, and Spotify, the way we get music is completely different from how it was 5 or 10 years ago.

It is already clear that the video game console manufacturers are positioning themselves to get rid of physical video games and switching to a download & subscription model very similar to the music industry’s.

eBooks and the internet have wrecked the retail model for book sales. More books are either being purchased in digital form, or simply being ordered online.

Online Shopping Prices & Convenience

Consumers love the instant price comparisons and convenience of ordering online from home, and they don’t have to drive anywhere. To be honest, there are only 3 main reasons preventing some from purchasing online:

  • The ability to see and try out the product before purchasing.
  • Shipping costs.
  • Having the product same day.

Other than that, I cannot think of a generally accepted reason that someone wouldn’t prefer to purchase online.

Consumption Habits

The key to all of this is that consumers habits are changing. I believe the business model that has changed the most in the last 5 years has been the movie rental business. First came Netflix, then came Red box. Currently, everyone is trying to jump into the Red Box model (Blockbuster Included), but I can already tell you that the Red Box model was just a step towards the streaming rental model.

I imagine you’ll see all of those convenient boxes disappear in a few years once a competitor comes up with an excellent streaming model. As an aside, I think Blockbuster wasted their time jumping into the kiosk model, they should have just focused on developing a good streaming model. I don’t like their kiosks (or their horrible price).

Resilient Retail Models

There are a few retail models that should shelter this transition pretty well, and many of those are going to be stores that sell products that can’t be reliably transferred in a proper amount of time. Those models would include restaurants, grocery stores (although Amazon is trying to start a grocery service) and any other model that sells perishable goods with an extremely short shelf-life. I’ve found few people who are impressed with ordering flowers online.

Businesses that fit in those models should be safe until the next big invention comes along (replicators or teleportation devices anyone?).

What are your thoughts on all of this? Do you think retail is dying? Let us know in the comments!

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