Black Digital Gold

Black Friday exposes bleak outlook for bricks-and-mortar retailers

This year, on Black Friday, which took place on 29 November, US shoppers made more purchases online than in shopping malls, further challenging the future of many traditional bricks-and-mortar stores. The event, often seen as the start of the Christmas shopping season, was the second biggest online shopping day in the US on record, producing $7.4 billion in sales. It was second only to last year’s Cyber Monday, which racked up $7.9 billion in sales.

Online sales rose about 20% from 2018, according to Adobe Analytics, which measures transactions from 80 of the top 100 online retailers in the US. The jump in cyber activity is a sign that consumers are becoming more comfortable buying larger items at discounted prices online. The average order value is believed to have set a new record for Black Friday, at $168, up almost 6% year-on-year. Adobe predicted that spending on Cyber Monday hit an even bigger record, of $9.4 billion, a jump of 19% from 2018.

But it’s becoming clear that the line between physical and digital shopping is blurring: the two are no longer mutually exclusive as retailers have been using a “bricks and clicks” model mixing an offline and online presence. People who placed orders online flocked to stores to pick up their goods, with click-and-collect orders growing a strong 43% year-on-year, suggesting that retailers are successfully bridging online and offline retail operations.

We’ve noticed that over the years the customer journey has evolved and can now start anywhere online, in-store and end anywhere. Many businesses are learning that they should be pragmatic about how modern consumers buy products. Flexible retailers know that they must adjust the experience to keep customers loyal. The consumer journey isn’t the reward.

It’s notable that this year’s Black Friday was estimated to be the biggest day ever for mobile shopping, with smartphones being behind $2.9 billion in sales. This means that almost 40% of all e-commerce sales were made on smartphones, a 21% rise year-on-year. It has also been reported that 61% of all online traffic to retailers came from smartphones, 16% higher than a year ago.

The hottest products sold online on Black Friday included Disney’s Frozen 2 toys made by Hasbro, Nerf toy guns also from Hasbro, and Nickelodeon Paw Patrol toys made by Spin Master.

Traditional store-front retailers such as Walmart, Target and Best Buy have poured billions of dollars trying to expand their e-commerce operations over the past decade, preparing to capture growing online revenue in an effort to fight off online giant Amazon. It would appear that these investments are finally paying off. However, there’s now a real fear that some major US retailers including Gap and Macy’s are finding it difficult to evolve. We expect more adjustments to come in the consumer retail business model in the US and around the globe.

That said, some traditional stores such as GNC, Heath Mart, Rite Aid, Stag Stores and all 1,150 Kohl’s shops are now working with Amazon to let customers collect parcels and drop off returns. This could be viewed either as desperation or open-minded thinking that helps to increase footfall at a challenging time for old-fashioned retailing.

However, the sad reality is that as consumer trends change rapidly, and with mounting pressure from e-commerce players, traditional bricks-and-mortar businesses and brands have been closing shop at a high rate. Until now, the record year for shop closures in the US was 2017, with 8,139 shuttered stores; in 2018, 5,854 stores closed. There are ominous signs for 2019, as more than 9,000 US stores are expected to close, heralding the so-called “retail apocalypse”. Similar trends are also being observed in other countries worldwide, notably in the UK, where high streets have been decimated. With e-commerce growing in leaps and bounds, the future for many bricks-and-mortar stores looks bleak.