Retail stores are making a bounce back that suggests the retail apocalypse is already over. That was really fast if the stores have by now deciphered the missing market strategy – in just a flash. Top of the reef retailers Best Buy, Walmart and Target proudly announced their second-quarter earnings for the year after hitting impressive records.
So, what’s the secret? Best Buy recorded a 6.2% year over year growth, Walmart had 4.5%, and Target at 6.5%. There are distinctive reasons alleged for the impressive earning calls. Walmart is flaunting apparel, seasonal categories and strong foot traffic plus gains in grocery as the major lifeline, while Target indicates food and beverage categories, essentials, foot traffic and strong sales in home. Best Buy is not denied to boost of favorable environment and retail customers’ experience referred to as something unique.
The impressive results could be far from being a savvy business strategy. What if it’s simply a traffic transition because some big retailers have left the market? The economy may also be contributing somehow.
The real situation in the retail market
Best Buy, Walmart and Target are all flaunting better system and guest experience, which is relatively insubstantial. Target is claiming to have raised competition in grocery delivery by acquiring Shipt, while Walmart and Target recently smarten up its fashion and home businesses.
These strategies are not new in the retail market. Acquisitions and overhauls are both old strategies. People didn’t start to buy more food because of some sort of new display gimmicks or the dawn of some furnishing sections that are Instagram-ready.
The reality lives in two major factors: soaring economy and market share released by some retail chains that are no longer in business.
On the economy, The US GDP for the second quarter recorded a positive move to 4.2% and the S&P index soared 35% within the past two years. These have drastically reduced the unemployment rate to a decade-low of 3.9%. In that case, more people are getting employed; hence, more monies are being spent at the moment, a temporary effect.
Considering the stores that are out of business, about 7,000 stores left the retail market in 2017 alone, not considering the closures so far in 2018. We can understand that the stores were no longer meeting up with required sales quota to remain afloat, but where do their customers shop now? Amazon is not responsible here; only 13% of total retail is online today, out of which Amazon controls 44%.
Best Buy won most of the customers patronizing Radio Shack and HH Greg when they both shut down most of their stores. Customers from JCPenney, Kmart, and Sears improved the market for Walmart and Target when the retailers closed a good number of their stores.
That withstanding, the big box retailers are only enjoying a temporary relief. It’s only a matter of time before the waiting phase flags the troubling market tempo again. So, what’s the lifeline here for the currently surviving big retailers? I could say that Amazon’s “Buy Now” button is currently second to none among most consumers. 44% win from all online shopping is a lot for one store to enjoy among thousands of competitors.
Two ways big box retailers could stay competitive
Automation: People have become more engaged with activities that they rarely have time to spend at the stores unlike it used to be. Without implementing easier means for buyers to spend less time when they visit your store or even have their goods with no visit, you won’t have a large market. You can imagine why Amazon is working hard to cut off checkout challenges with Amazon Go and checkout-assisted surveillance cameras. The introduction of AR experience in product selection is not a joke. Big retailers that can’t offer such automation to customers will fail to live beyond the graveyards of the past retailers.
Take advantage of new categories: Investing in new categories fiercely could yield results for big retailers. That could be difficult for Amazon to compete with considering how bulky its business has become already. Categories like digital pharmacy, apparel, and food, though the retail giant has already made moves into those categories with acquisitions. Amazon is planning to overhaul the pharmacy industry and cut down the cost of healthcare through its PillPack acquisition, a lot has been going on since it acquired Whole Foods. And while the race for market shares in these areas is still on, Amazon is planning to re-launch its apparel business. The major challenge facing online pharmacies is the regulations that won’t allow them to fulfill all prescription orders.
As current sales have given the retail stores some break from the troubling market, no one knows if they would use this opportunity to create a new path for success in the future or continue with the old strategies that won’t work.