We’ve been hearing about the death of retail for years now. An April report by Credit Suisse predicted that 8,600 brick-and-mortar stores will padlock their doors this year—a shakeout that dwarfs the closings seen even in the wake of the Great Recession. Malls in particular face the bleakest future, with somewhere around a quarter of them predicted to close in the next five years. In a conference call with investors in March, Urban Outfitters CEO Richard Hayne said that the retail bubble had burst and “we are seeing the results—doors shuttering and rents retreating.”
“This trend will continue for the foreseeable future and may even accelerate,” Hayne said.
And it doesn’t take an MBA to understand why this is happening. Ecommerce is taking the place of the time-honored trip to the store and, what’s more, millennials—now 87 million strong—are at the root of it.
Or are they?
A new report suggests that contrary to popular assumptions about the much-coveted generation of digital natives, millennial shoppers actually like going to brick-and-mortar stores—a great deal, actually. According to research by behavioral marketing firm SmarterHQ, a whopping 50 percent of millennials not only go to physical stores, they prefer going to them as a primary means of shopping.
The finding is bound to leave retailers in a tough spot. With bankruptcies at record levels and so much of commerce moving to the web, “marketers have emphasized optimizing their digital marketing strategies with the idea that consumers prefer to shop primarily online,” the report says. “However, our data shows that it’s important for brands to breathe life back into their brick and mortar as well.”
But what about all the intelligence that said 20- and 30-something shoppers are most comfortable spending their money via web sites and apps—is that data incorrect? Well, no. But SmarterHQ’s study presents a more nuanced view of millennial shopping patterns, which, you might say, are multistage. As CEO Michael Osborne put it: “They’re using the in-store experience as research, but they’re not buy everything that way.”
In other words, millennials are big practitioners of “showrooming”: They frequently test drive products in stores then purchase them online at home (assuming they don’t whip out their phones and buy it while standing in the store itself.)
Historically, retailers have dreaded showrooming for obvious reasons. It leaves them in a position of footing the costs to put merchandise on display only to ultimately lose the sale to giants like Amazon that don’t have to contend with the overhead of mall rents or maintaining a store on Main Street. But Osborne believes that millennial showrooming isn’t as poisonous as it may seem.
A retailer that takes a holistic view of revenue, one that doesn’t pit brick-and-mortar sales against online sales, can adapt to showrooming, he said, by closing low-traffic locations and designing its ecommerce platforms to catch millennial shoppers as they exit stores with a purchase in mind.
“If you have a strategy around this and you’ve closed the unprofitable stores, this can be a good thing,” Osborne said. “Your digital channels will [get] a better margin.”
As to why millennials like to go to physical stores, it seems that (surprise!) they’re actually not much different from anyone else. Stores offer the opportunity to try out (or, in the case of apparel, try on) the goods before the purchase is made. And, like other age cohorts, millennials head to the store for a wide variety of reasons. According to SmarterHQ’s data, 30 percent are looking for a bargain, 18 percent have a specific purchase in mind, 17 percent are researching and 14 percent are simply browsing.
Even while it points out an unlikely affinity for brick-and-mortar shopping, SmarterHQ’s study does confirm much of what retailers have long presumed about millennial shoppers. They are not especially loyal to brands; they are rankled by too many marketing messages sent their way and they demonstrate a remarkable capacity to shop while simultaneously engaging in other activities (among them watching TV, chatting, and working).
The picture that emerges is that millennials are not as easy to snare as their Gen X and boomer counterparts. Even so, a number of retailers have already adapted to the millennial shopping patterns identified in SmarterHQ’s report. They have, in essence, confronted showrooming by opening showrooms. Men’s apparel brand Bonobos, for example, has what it called a “guideshop” that displays its clothing and assists walk-in customers wanting to try items on for size—but the store then places the order online, allowing the customer to “walk out hands-free.” Similarly, women’s professional-apparel retailer MM.LaFleur uses showrooms and pop-up locations to help customers find the outfit they want then ships it to them.
The bottom line, Osborne said, is that brick and mortar still has a place in the retail landscape, but only those brands that calibrate themselves to the hybridized shopping habits of millennials can expect to prosper in the fast-changing environment. The findings of the study point to “a greater, longer-term trend in retail, which is if you don’t adapt to the changing consumer base and how and what [it] wants to buy … you’ll be left behind. If you adapt to your customer, you get to stay around. If you don’t, you don’t.”