If you don’t innovate in retail, you will be left behind

With Target leaving Canada, Sony, Mexx and Future Shop closing up shop, and Loblaws and the Gap recently announcing the closure of a number of stores, it seems like the sky is falling in the retail sector.

But within these blunders are huge opportunities.

The only constant in retail is change.

If you want to remain relevant to the market and consumers, you have to consistently and continually innovate.

E-commerce has shook the foundation of retail (among many other sectors), and has pushed many retailers, especially those in the electronics, books, movies, music industries virtually out of business. That largely explains Future Shop’s demise. Another tremendous failure is credited to Blockbuster, which had an opportunity to buy Netflix for $50 million 15 years ago. Blockbuster didn’t and went bankrupt in 2010. Netflix is worth around $30 billion today. However, Netflix could face stiff competition from Ali Baba as the online giant intends to recreate an HBO and Netflix like service in China.

Middle-class retailers are also dying, which confirms why Mexx, Smart Set and Jacob are passing on and why the Gap is struggling. This isn’t hugely surprising given the widening wealth gap and income inequality many cities and countries have faced since the 1980s.

Retail is beginning to diverge into two main areas – the luxury sector and the discount and value sector.

Canada’s luxury market is growing rapidly, with almost half of all retail entrants in 2014 as luxury. On the other side of the spectrum, discount retail is also performing amicably. Dollarama for example is outperforming many other retailers and is poised for substantial growth in the future. H&M is another great example of a discount retailer that has performed very well in the Canadian market.

Below is a list of retail entrants to Canada since the 1990s.

RetailEntrants

Target’s failure is more of an anomaly. When you open 130 very large stores at once, things can go awry. Furthermore, absorbing the locations of a dying retailer (i.e., Zellers) and replacing it with a brand new store does not suddenly improve those locations. And lastly, the pricing at Target was not very competitive, as customers were able to find better deals at competitors like Wal-Mart.

Wal-Mart, Canadian Tire and Lowe’s have snatched up a number of Target sites, but the vast majority still remain vacant. The stores with the best locations were ones that were very quickly acquired by the big retailers. The real concern comes down to the stores in poor locations. Many have contemplated fragmenting (breaking up) the space to allow a number of retailers to occupy, given the difficulty in finding a suitable tenant who can absorb the large footprint of Target stores.
It is however not all doom and gloom for these unmarketable commercial centres. Many dying malls in the US for example are being transformed into completely new uses like colleges and universities, hospitals, call centres, offices and even homes.

In the midst of some retail failures, there is a silver lining. And it lies in innovation. Brick and mortar stores are not dead. Amazon, eBay, Google and Bonobos (all online retailers) have opened up physical stores. They are realizing that online shopping only accounts for one portion of the entire market, the rest of the market is outside on the streets.

The future is in omni-channel (or multi-channel) retailing- which simply means to target your shopper from many different angles; be it the internet, in-store, on your phone, on TV, social media, etc. Yes it’s about driving profits for retailers, but it’s also about improving the shopping experience, by making it more engaging and aligned to the customer.

Below is a list of some innovative ideas and retailers:

Eataly

Originally from Torino, Italy, Eataly is a supermarket that consists of different ‘food stations’ by item, with food experts (e.g. local food producers, chefs, etc.) assigned to each station. Eataly also offers cooking classes and has a restaurant as part of its grocery store.

Salvaged

A vegetarian restaurant from Edmonton which uses reclaimed, misshaped and bruised produce from grocery stores and other local producers to create tasty meals. Great use of edible food that is often thrown away.

Bilder & de Clercq

A Dutch food store organized into different stations that present meals and provide the exact amount of ingredients necessary to make those meals.

Frank & Oak

A Montreal based clothing retailer that mails clothing packages to its subscribers, allowing them to try on the items and return unwanted pieces free of charge. Frank & Oak recently opened a store on Queen West in Toronto, which also features a coffee bar and a barber shop.

KidZania

A Mexican chain of indoor amusement parks where children adopt “adult jobs” and earn currency in exchange for completing their tasks. The currency can be stored in a KidZania bank for later use or spent at a gift shop and on KidZania activities.

CVS

CVS and IBM have recently announced a partnership where they intend to analyze medical records and health data and indicators to predict people whose health is deteriorating. This idea can revolutionize the pharmacy and drugstore industry and change how customers and patients interact with pharmacists and doctors.

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