What is Retail Apocalypse and Its Impact to the Retail Industry

Dias Marendra

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Retail Apocalypse

Still fresh in our minds how shocking it was when giant retailers such as Bloomingdale or Toys ‘R Us closing their stores and went up bankrupt. The news even became a trending topic on several social media for a while. Many people named this incident as the retail apocalypse.

But, how huge the impact on the retail industry in South East Asia? This article will discuss this phenomenon, from its definition and how it changes the industry onwards.

What is Retail Apocalypse?

When retail giant such as Bloomingdale and Toys ‘R Us went up bankrupt, a lot of people wondering what is happening? Some people suspect that this happens because the retail industry grows too fast. The growth rate of shopping malls was over twice the population’s growth. On the contrary, mall visits declined by 50% between 2010 to 2013, and the trend kept on going until this very day.

Other people point their finger on the unstoppable e-commerce growth. The shift in consumer habits towards online shopping is the impending doom for the brick-and-mortar store. There are already victims of retail apocalypse in the United States. Sears Holding, which previously had many branches in several states, now declared bankrupt. Bloomingdale also had the same fate. Recently, Toy’s ‘R Us was also declared bankrupt.

In southeast Asia, this phenomenon has been happening for several years, but very few realize that this is the retail apocalypse. It was started with several shops went bankrupt in some malls, such as Mangga Dua in Indonesia then spread widely to other shopping centers.

The public began to realize that there was something big moving behind the scenes when giant retailers were affected. There is something wrong with the retail industry, which has caused some multi-branch businesses collapsed and close their outlets eventually.

What causes the retail apocalypse

There are four reasons why the retail apocalypse happened in the United States. The same things also happened everywhere around the world and end up making a lot of retailers out of business. Here are the details:

e-commerce Rapid growth

A lot of people blamed e-commerce as the culprit of the retail apocalypse. E-commerce shifts people’s shopping habits to home shopping. Not only that, e-commerce is very competitive in terms of price and promotions.

The data said that e-commerce experienced an increase in sales up to 11% – 20% during the holidays compared to retail stores which only experienced an increase of 1.6%. There are even several department stores that experienced a decline in sales.

Oversupply of malls

The data states that the growth rate of malls in the United States is twice the growth rate of the population. Despite the construction of new malls, mall visits declined by half and kept on declining as time goes by.

Mall visits decline also exacerbated by the emergence of the “restaurant renaissance” phenomenon. Recently, mall visitors prefer to spend their money on restaurants in a mall, rather than buying shoes or new clothes.

The death of middle-class customers

For retail stores such as Macy’s and Sears, middle-class customers are their main target market. Sadly, they are unable to compete with larger chain stores that brave enough to sell at lower margins.

This makes middle-class people prefer spending their money on cheaper stores. Eventually, independent retailers lost their customers and closing their business.

Poor retail management

The final factor that caused the retail apocalypse is poor retail management. Bad inventory management out of stock merchandise. This makes customers prefer to shop online which has better stock availability.

The condition made worse by the poor shopping experience. When we shop at a retail store, it’s lacking a unique customer experience.

Survive in the retail industry

Not every brick and mortar store end up closing their business during retail apocalypse. There are also retail businesses such as IKEA or Walmart that can adapt and become survivors in the retail industry. Not only that those two retail businesses also managed to increase their sales in recent years.

The secret is; they adapt and stay competitive with the help of technology. For example, they use an inventory management system to improve items management in their warehouses and stores.

Some integrate their inventory management system with the Point of Sales (POS) system for a better shopping experience. Not also facilitates the payment process, POS also helps retail stores in managing running promotions.

Conclusion

Success in the retail business is not an easy matter to achieve lately. There are a lot of challenges that you must overcome just to survive in this line of business. Not only that you also have to quickly adapt amid competition against e-commerce.

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