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Robert grossman, Repositioning and Restructuring Retail
This document discusses how the rise of online retail is putting pressure on traditional brick-and-mortar stores. It notes that online sales are growing much faster than traditional retail sales. This shift is translating to excess physical store space for many retailers. The document advocates that retailers re-evaluate their real estate strategy by recognizing surplus square footage, evolving physical stores to enhance the customer experience, and planning for potentially smaller or fewer stores going forward to account for the ongoing migration of sales online.
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Robert grossman, Repositioning and Restructuring Retail
- 1. Repositioning and Restructuring Retail The Evolution of the Store and its Impact on Real Estate Strategies May 9, 2012 Rob Grossman, Principal Deloitte Consulting LLP
- 2. “If everyone does their shopping online, the malls will close and we won’t have anywhere to hang out.”
- 3. The Retail Industry is Feeling Pressure from Every Direction Consumer Behaviors Stagnant & Lifestyle Macroeconomic Environment Heightened Consumer Technology, Competition & Price Transparency, Lowered Barriers & Secure to Entry 24/7 Access
- 4. Online Sales Growth Continues to Outpace Traditional Growth YoY Quarterly Growth: Ecommerce vs. Traditional Retail 30% 25% 20% 15% 10% 5% Ecommerce 0% Brick and Mortar ‐5% ‐10% ‐15% Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Source: U.S. Census (Quarterly Ecommerce reports, Monthly Retail Trade reports)
- 5. During Cyber Week, 2011: I shopped online instead of in stores because there were 72% better deals online I shopped in stores less because I shopped online 59% instead Bizrate Insights/Forrester Holiday Shopping Flash Surveys, Q4 2011 (Forrester Research, Inc.)
- 6. Ecommerce Sales are Reshaping Brick‐and‐Mortar Economics $3,800 $3,600 $3,400 By 2015, it is estimated that Sales, Millions $3,200 $175 billion $3,000 will shift $2,800 out of stores $2,600 to online $2,400 Ecommerce – Incremental Ecommerce – Shifted out of Stores Traditional Retail Sales Source: Multichannel Forecast for the US and the UK. Gartner Oct. 2011 (US sales numbers only), Deloitte Analysis
- 7. Translating Sales Into Square Footage Consider revenue numbers and growth rates for traditional and ecommerce Determine physical footprint and Sales/Square Foot metrics Forecast growth of all channels based on projected trends and current performance Estimate the sales ‘shift’ from the store to online, and translate into square footage
- 8. Some Retailers Have Already Begun Reacting to the Shift % Change in Average Physical Store Square Footage 2002 ‐ 2011 5% 0% % Change (Year‐over‐Year) Kohl’s ‐5% Home Depot ‐10% Best Buy ‐15% J.Crew Nieman Marcus ‐20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Company 10k reports (U.S. Stores only)
- 9. Lower In‐Store Sales Warrant a Reduction in Square Footage Excess square footage by 2015, Department Stores 5‐25% Excess square footage by 2015, Specialty Retail 10‐45% Variation in range depends on retailer’s multichannel maturity Source: Company 10k reports, InternetRetailer.com, Deloitte analysis
- 10. Smaller Stores, Fewer Stores, or Both? The considerations are complex The Competition The Customer Advertising Logistics Economics Each retailer must weigh its own situation and objectives
- 11. Implications for Retailers Existing Stores: Reimagine and Repurpose ‐ “Show‐rooming” & showcasing ‐ New services & customized experience ‐ Stores‐within‐a‐store Future Stores: Reduce and Reinvent ‐ Understand implications of ecommerce sales on square footage ‐ Consider smaller stores, fewer stores ‐ Focus on the customer experience
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- 13. New Services & Customized Experience (Irfan Khan/Los Angeles Times/MCT)
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- 15. Summary As retail sales continue to shift out of stores, retailers will increasingly need to re‐evaluate their real estate strategy: • Recognize and repurpose surplus square footage • Evolve the physical store to deliver a superior customer experience • Reimagine new stores in terms of size and density
- 16. For Additional Information or to Discuss Further: Deloitte Consulting LLP 1633 Broadway New York, NY 10019 Rob Grossman Tel: +1 212 492 4219 rgrossman@deloitte.com
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