Something is going on. A fundamental shift is happening in the way people shop. Retail brands that have survived the Global Financial Crisis are going bankrupt – 9 so far this year in the USA. The numbers are stark – it’s not caused by a lack of growth, it’s not caused by Ecommerce – well not all of it – and it’s a lesson that GCC retailers need to learn fast.
A great article by The Atlantic reveals some interesting trends.
Ecommerce is here. Stop ignoring the obvious.
Recently, Amazon bought out Souq. So what? Well here is a sobering fact.
From 2010 to 2016, Amazon’s sales in North America went from $16 billion to $80 billion.
Retail didn’t grow by that much, so the reality is that Amazon is cannibalising sales from traditional merchants. An even bigger concern for GCC retailers is that the largest online shopping category is now apparel, and advances in Ecommerce technology mean that mobile makes it even easier to shop online.
There are too many malls.
Alarm bells should be ringing in places like Dubai. According to the Atlantic article, mall visits in the US fell 50 percent between 2010 and 2013 and have kept falling since then. There is a need for malls, but the shift to Ecommerce in inevitable and the offline model needs to fundamentally change.
The underlying drivers of malls also need to be looked at. Are cinemas and food-courts enough to bring people to the venue? If cornerstone brands fail, then all the tenants are at risk as traffic falls away.
Look Outside your Bubble
While much of the decline in bricks and mortar retail can be attributed to online shopping, there are bigger things going on. Customer habits are changing. There is evidence to suggest that people are less materialistic and are choosing to spend money in other areas rather than clothes, or home decoration.
“Spending on clothes is down—its share of total consumer spending has declined by 20 percent this century.”
Instead, customers are choosing to travel and eat out. Airlines in the US, despite PR blunders, are flying more passengers around than ever before. Think about the new franchises that have popped up here and around the world – they aren’t selling clothes or mobile phones, they are selling coffee and avacado smash.
HISTORIC: For the first time ever, US consumers spent more on food at restaurants/bars in Jan. than at grocery stores pic.twitter.com/j3UpDnDG4Y
— Mark J. Perry (@Mark_J_Perry) March 4, 2015
Look at the Demographics
The populations of the countries in the Middle East are young, and they are driven by different motivators. There are only so many instagram pics you can take of lipstick. Experiences and being with friends drive social interaction. This might seem paradoxical – that malls and offline retail should be able to drive sharable experiences, but they need to change to make the most of this shift.
It would be easy for GCC retailers to dismiss these events as being something confined to America, but the signs are there. Retail needs to address the reality of a new way of thinking about shopping.
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