Retail Apocalypse: Good News For E-Commerce?

Retail Apocalypse: Good News For E-Commerce?

Written by Leong KexinJune 30, 2018

Retail Apocalypse: Good News For E-Commerce?

The great retail apocalypse looms over the global industry, sending retailers in a frenzy. But what exactly is this phenomenon? It refers to increased closure of brick-and-mortar stores, especially among retail conglomerates. This renders brand and retail owners terror-stricken at the impending doom of their stores, with big brands like Gap shutting down over 200 stores in 2017.

Source: The Atlantic

What Are the Reasons Behind Retail Apocalypse?

In the United States alone, millennials are the largest age group, spending over $600 billion annually. The majority of the age group (over 75 million in the United States) alone is enough to impact the retail industry, especially with the reported shift in their spending habits, being one of the attributes to the retail apocalypse. Studies have shown that millennials are now more inclined towards spending on experiences rather than items, thereby limiting impulse purchases in retail, which further adds a strain on retailers’ profit margins.

Source: Telegraph

The Migration of Sales To E-Commerce

However, many have been quick to point fingers at the imminent e-commerce industry for the increased shutdown of brick-and-mortar stores. There is no denying that e-commerce has made shopping more convenient for tech-savvy millennials.

While consumers celebrated the new-found efficiency of online shopping , the same cannot be said for physical retail stores. With the closure of more brick-and-mortar stores, surely the increased e-commerce traffic guarantees improved sales online.  Or does it?

The Downfall of Factorie Malaysia

During early 2018, Australian retail brand, Factorie, announced their nationwide closure in March. Massive closing-down sales were held at all Factorie outlets to clear inventory prior to the departure of their brick-and-mortar stores in Malaysia, leaving Zalora to be the only platform to sell Factorie items. Below are the gathered stats illustrating the sellout rates for Factorie from January to May.

Factorie Zalora Sellout Rate

After studying Factorie’s performance on the online multi-label retailer, Zalora, we could see that the demise of their brick-and-mortar stores did not translate to an upsurge in online sales. The increased SKUs, as of March, resulted in a decline in sellout rates from January to May.

Online retailers who were jumping for joy at the predicted migration of sales to e-commerce might have to snap out of their reverie. While e-commerce is at its pinnacle, it does not guarantee blooming online sales. The reality is that e-commerce is just an online extension of a brand. If the assortment fails to perform in brick-and-mortar stores, chances are, their e-commerce performance will share the same fate.

Factorie Performance Womenswear Menswear

After the closure of their brick-and-mortar stores in March, both genders had subpar online performances (shown in the table above). Womenswear bore higher results than menswear, hinting at a lack of in-demand assortments for the latter. However, it is evident that sales were all extremely discount-driven, given the generous amount of discounts from Factorie, which were unfortunately met with disappointing sellout rates.

Factorie Female Bestsellers

From left to right (all from Factorie): White Mom shorts, Lets Roll Shorts, Denim Mom Shorts

We analysed items that performed well from Factorie and noticed that denim shorts were especially loved by consumers, experiencing rampant stockouts and also replenishments especially for sizes UK 8 and UK 10.

Factorie Bestseller Menswear shorts

From left to right (all from Factorie): Viper Shorts, Denim Jogger, Shredded Shooter Shorts

As for menswear, denim bottoms were equally popular, ranging from shorts, mid-length to long pants.  

Based off their bestsellers for both genders, it seemed that denim bottoms, especially shorts, performed the best for Factorie. With denim shorts being their forte, Factorie should have played off this strength to strategise their assortment in hopes of salvaging their e-commerce presence to generate better sales and market share.

Retail Apocalypse or Renaissance?

The so-called “retail apocalypse” could just be an exaggeration of the shift in the retail industry and how consumers shop. While more brick-and-mortar stores are closing down, this is by no means the demise of physical stores and neither is this a guaranteed sales boost for e-commerce. Think of this as purgatory for brick-and-mortar stores to eliminate stagnancy and run-of-the-mill brands. As shared by strategic advisor, Steve Dennis, to Forbes, physical retail is not dead, boring retail is. This forces retailers to be nimble and re-evaluate their strategy in order to survive competition.   

Key Takeaway

Without proper information and strategisation, this earns brand and retailers a one-way ticket to failure, be it brick-and-mortar or e-commerce. Either way, retail data helps as a tool to magnify the current demands or gaps in the market, enhancing consumers’ shopping experiences and also generating strong and consistent sales. Retailers of all markets should always be attuned to the shift in the current industry because at the end of the day, consumers are the ones making the purchase.

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