Retailing in the Age of Amazon: Fewer Stores Is the Key to Success…or is it More Stores?

Has there ever been a more challenging time to be in the brick and mortar retail business? Heck, is there even such a thing as a “brick and mortar” retail business anymore? Connectivity, mobility, the Cloud, and Amazon have all conspired to create unprecedented challenges for retailers in every category and geography.

While the problems we face are complex and numerous, the question of what to do with all our stores is perhaps the most strategically important question every retailer must address. It seems that almost everywhere I turn, I hear more and more retailers making the argument that “stores are really expensive! We must close underperforming stores!”

Thousands of Stores Being Shuttered in 2017

Recent news headlines emphasize the seriousness with which these arguments are being made. In just the past few weeks I have seen store closing (or canceled store opening) announcements from Macy’s, CVS and H&M, and they are certainly not the only ones.

Sears and K-Mart,  retailers that have struggled to find relevance with consumers for most of the past decade, have announced they will close another 150 stores in 2017, after closing almost 300 stores in the past two years.

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Office Depot, in a category severely challenged by Amazon, after already closing 400 stores in 2016, has announced plans to shutter another 300 locations by the end of next year.  One-time merger partner Staples has also suffered, having closed nearly 300 stores in the past three years as well.

But perhaps the moral to the story of struggling stores isn’t to close more stores. Perhaps instead we need to reimagine the role of the store.

Should We Be Thinking Twice Before We Shutter So Many Stores?

Because here’s the thing: many of the retailers that are closing so many stores are simultaneously turning their focus (and investments) toward their online businesses, often times taking direct aim at Amazon.

Here’s how Fox Business summarized  Staples’ announced strategy shortly before they announced their plans to close more stores:  “Staples is also focusing on offerings other than office supplies, such as electronics and furniture, and said in May it would step up deliveries to 80 percent of total North American sales within three years in an effort to compete with Amazon.”

RIS News shared H&M’s plans for growth despite canceling plans to open more stores in 2017 as follows: “H&M group is reversing on its ambitious store expansion strategy that would have increased the number of stores by 10 to 15 percent per year. This number will instead become a sales target that includes both stores and online sales, according to the apparel retailer’s full-year report.”

And the list goes on. Retailers in almost every category and of every size are closing stores to reduce costs while simultaneously investing in other strategies designed to help them do one thing: to fend off Amazon.

Rethinking the Role of the Store

This all-too-common decision to close stores in the fight for share with Amazon, in my mind, may be problematic. While underperforming stores as we currently think of them are indeed liabilities, if we think differently, and reimagine their role in the customer journey, then these same underperforming stores, while most certainly expensive, can also become the single greatest weapon we have to fight against Amazon.

What do I mean by thinking differently about the role of the store? First and foremost I believe we need to rethink what we expect of the store. Without question, if we simply evaluate each store against a sales plan, then making the decision to close underperformers becomes relatively easy.

Great(er) Expectations

However, if we change our expectations of the store, and begin measuring stores as experience centers, then perhaps our perception of their performance changes.

Perhaps if we instead expect our stores to function as information centers, as style centers, as fulfillment centers, as entertainment centers and even as community centers, then perhaps our perception of their competitive value changes, and perhaps we measure their contribution to our success through a different lens.

Perhaps, then, we should pause before simply creating another long list of cost-cutting closures. Maybe we should think twice before simply shuttering these multi-purpose weapons that represent the potential to become our single greatest competitive advantage over the likes of Amazon.

Editor’s Note:

We will be discussing this issue in depth as part of the Executive Track during Engage, our annual client conference, being held May 1-4 in Hollywood, Florida. If you are a senior retail executive and would like to join dozens of other senior executives in our Thriving in the Age of Amazon Executive Workshop, send me an email at dbruno@aptos.com.

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