The Paradox of Retail Industry's Growth & Contraction Cycles (Clone)

For almost thirty years, almost since the first wave of E-commerce began in the 1990’s, there has been constant stream of news that have heralded the closures of thousands and thousands of retail stores that would seem to have led to their complete extinction by now. In the industry, the term “Retail Apocalypse” (RA) was coined after one of those waves of big chain closures that started in 2010.

Yet…most of us can drive through local concentrated areas of retail developments and see nearly the same number of active storefronts that have always been there – and perhaps even more. And yes, we can recall many longtime names that have disappeared in that time, most of which we saw appear in the news where they would be announcing the closing of hundreds, or thousands, or ALL of their stores.

What’s surprising about all of this is the number of contradictory data elements that give a conflicted view of what the actual health of the retail industry is today. How do we make sense of these conflicting numbers from recent history?

What’s going on in Retail? This is the Paradox – growth in Sales, growth in employment, but a roller coaster of store closures and openings with the most recent full year resulting in a massive net loss of 1,350 stores. 

The Big Changes Driving The Retail Paradox

Normally, a growth in employment numbers along with a huge inventory of unfilled positions would indicate a Retail Boom. But what is really going on is a divergence between Retail REAL ESTATE and Retail ACTIVITY – both of which are being driven by the same thing.

What we are seeing is a convergence of some massive retail consolidation that has been a fixture for nearly thirty years with a renewed emphasis on efficiency gains and store productivity including store traffic (ST), same store sales (SSS), multiple sales rate (MSR), and more.

Here are five current factors that are driving this paradox that will clarify what is going on in the industry – and more importantly – what to expect in the near future:

1. Fewer Retailers with Larger, More Productive Stores – as consumer spending has stayed
2. strong (at least at the time of this writing), bigger retailers are excelling at capturing an even larger share of that spending than ever. The “usual suspects” like Amazon, Costco and Walmart have not only dominated in outright sales growth but have increased their store and eCommerce fleets to meet shoppers continued growing demand for both value and convenience (driven in part by the huge growth in new online shoppers during the pandemic).
3. Existing Stores Handling More Volume – those retailers who have survived the “Retail Apocalypse” are processing an ever-larger number of transactions, which also has driven growth in staffing even as their total store counts have decreased.
4. Service Model Enhancements and Innovations – “Survivor” Retailers have become motivated, nimble, and ready to invest in innovations and enhancements that improve the customer experience. For example, the addition of curbside pickup, same-day delivery, and making returns easy in person or via delivery to almost any location is part of a commitment to customer service – and a commitment to growing the FTEs per store in order make that commitment more than just a slogan.
5. Sector-Based Weakness - An annual net loss or net gain in total retail stores is too simplistic and masks the very specific differences in sectors. The last few years have seen major losses in office supply, discount stores and especially drugstores (which creates an entirely separate problem for the healthcare industry) while others like Grocery, Hobby or Sporting Goods, Nursery/Garden/Outdoor and Auto-related stores (incl Tires, Dealers, Parts and RVs/Boats/ATVs) have been growing at a rate of 6-12% per year.
6. Wage Competitiveness – Posted wage growth has been rapid in recent years, and while it has recently leveled off to a healthier, more sustainable pace, suggests that a robust competition for workers in the coming year (and especially the coming peak season), is going to continue in the lower-wage and in-person roles.

What to Expect From Your “Survivor” Retailers

The rest of this guide is going to explore in depth what the current leaders are doing to consolidate and extend their advantage to keep customers coming in and growing Same Store Sales (SSS).

The potential leader in innovation, Sam’s Club, is not one you hear about in the daily business news columns or from a hyperactive social media presence, but far ahead of almost any other larger chain, they are committed to eliminating ALL traditional checkout lanes and replace them with an AI-driven concept currently being tested in one of its Texas stores.

The other “Usual Suspects” like Home Depot, Lowe’s, Costco, Target, Walmart and others will be testing and deploying from a long list of innovations over the next five years, including:

• Scan & Pay Technology
• Multi-validation scanning systems
• AI-powered personalization
• AI camera gentries for automated exited verification
• Integration of smart cart partnerships for large items
• Widespread adoption of mobile-first checkout experiences

These are all technologies that the bigger retailers understand they will need to maintain profitability, and to sustain the traditional retail model that requires a physical store presence (Target’s play is 20+ more LARGE format stores along with massive remodels and updates to supply chains and technology costing up to $5 BILLION in 2025).

But what are the solutions that ANYONE can implement? And implement NOW? We will be including these innovations as well in our guide.