Brick-and-Mexit: Retail’s Ongoing Evolution

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Brick-and-Mexit: Retail’s Ongoing Evolution

By Jordan Speer - 08/03/2016

In working on this month’s and last month's cover stories, on the top five department stores and top 50 apparel companies, respectively, there appeared, as usual, a number of threads that ran throughout the majority of the profiled companies and wove a tapestry that told a story larger than the fortunes and challenges of any one individual player in the rankings.

One of these stories I’ve dubbed Brick-and-Mexit, and while it’s been going on for several years now and perhaps is picking up in intensity, it has a different feel to it. Brick-and-Mexit — the pull-back from brick-and-mortar stores, both via shutterings and fewer builds — is not just a response to 2008’s Great Recession, or a correction of overbuilding in real estate or basic response to a drop in market demand, or part of a larger cost-savings plan — although it is all of those things, too. But it’s also a smart strategy for engaging the customer by developing the optimum balance of the right types and right sizes and right number of stores in the right places with stellar digital e-commerce sites across devices — not to mention all of the channel crossovers and category expansions and new in-store and digital experiences that are very much on the rise.

Who’s closing stores? Well, just about every retailer has at least one underperforming store to wrangle with each year, but recently more than the usual number have made announcements of widespread store closings, including Chico’s, Tailored Brands and Wolverine Worldwide. Consider Macy’s, No. 2 in the department store rankings this year, which closed 40 stores this past spring, after closing 14 last year. I’m not trying to sugar coat this: Macy’s suffered through a dismal holiday season, and Q1 was no better, with weak tourist spending. But Macy’s has been paying attention to the shifts in retail, in the economy and in consumer behavior for some time now. It’s been adjusting its strategies to keep pace with our new era of retailing, with significant investments in omnichannel, in new collaborations and brands, in its Bluemercury acquisition, in its outlet businesses Backstage and Last Act, in improved customer service and engagement, both online an in-store — Macy’s is now the sixth-largest online retailer in America — as it works to create a space that draws customers in. These store closings are not fantastic news, but they’re also to some degree a sign of a strategy shift that is necessary to align with the overarching changes in retailing.

Many other retailers are undergoing these shifts as more people shop online. Earlier this year, Walmart announced it is closing 269 stores, including 154 in the United States, 102 of which are the stores in its smallest format, as it shifts its focus to supercenters, neighborhood markets, e-comm and pick-up services for customers.
 
Yes, there is a correction, but more to the point, there is a tectonic shift in retailing, and although not all will survive, many will come through the transition stronger and more adaptable — and  with the ability to solve more problems and to provide more fun and even offer more purpose to their customers.  

Consider American Eagle, which announced mid-2014 that it would close 150 stores over the subsequent three years. Things looked rather bleak at that time — teen retailers across the board were suffering — yet AE has absolutely turned its business around in the two years since then, eliminating underperforming stores while strengthening its brands with smart marketing, more trend-right merchandise, fewer markdowns and a thriving e-comm business, made stronger by heavy investment in digital marketing and improvements to its site. In Q1 2016 the company drove almost $30 million of revenue through ship-from-store. Think about that. $30 million from ship-from-store, a model, along with BOPIS and other channels that essentially did not exist five years ago.

Brick-and-mexit isn’t just about closing stores. It’s about opening stores too, but fewer, and the right ones. Neiman Marcus, for example, is opening a new store in Long Island, and one in Manhattan, while Nordstrom, which will finally open a full-line store in NYC in 2018, has now announced it will add a second, smaller store in Manhattan at Columbus Circle. Retailers are looking to open stores in vibrant cities and neighborhoods that are already destination locations — and to add to the experience. They’re expanding into new categories, incorporating digital interactivity and offering new opportunities to connect to their brands. Brick-and-mexit is about shutting some stores but also adding PokÉmon GO lure modules to other retail locations (you know it’s coming).
     
The world is changing, and while not everyone would have voted for brick-and-mexit, it is a strategy that will most probably be necessary for apparel retailers to transform themselves into successful players in the new era of shopping.

Jordan K. Speer is editor in chief of Apparel.
She can be reached at [email protected]

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