Don’t Blame the Retail Apocalypse on Online Shopping Just Yet

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Read about the retail apocalypse and it’s easy to conclude that fast fashion and online shopping are solely to blame for brick-and-mortar’s woes. But new research published in the Harvard Business Review about retail consumption earlier this month may signal that the way people shop actually hasn’t changed much in the digital age. According to the study, shoppers still prefer to buy clothing in person, and when they do, it’s usually to replace the staples in their wardrobes, not to purchase cheap new trends that are bound to fall apart after a few washes.

“People like to buy the same thing over and over again,” Stephanie Tuttle, a principal in Oliver Wyman’s retail and consumer goods practice, told Racked. She and Jeremy Sporn, a partner in the global management consulting firm, studied 1,500 US apparel and footwear shoppers to discover what motivated them to shop, the decisions they made while shopping, and how they felt afterward.

Fifty-seven percent of these shoppers were women, and 43 percent were men. Thirty percent were in the 18-to-35 age group, 36 percent were ages 36 to 55, and 33 percent were over 55. Thirty-one percent resided in cities, 17 percent in rural areas, and 52 percent in suburbs.

What the research uncovered, according to Tuttle, is that shoppers are pretty predictable. If they like the cut and style of a pair of pants, they’ll keep replacing those same pants, she said. In fact, repeat purchases were made during 83 percent of shopping excursions. And if sportswear was involved, that figure jumped to 87 percent.

The idea that customers are more likely to make repeat purchases than anything else could seem surprising during a time that’s seen journalism repeatedly raise concerns about fast fashion, the Confessions of a Shopaholic series, and exposés like Overdressed: The Shockingly High Cost of Cheap Fashion. In that book, one shopper confessed, “I have enough clothing to open a store.” But if most Americans really are shopping responsibly, it could be related to the research suggesting that millennials in particular would rather spend money on experiences than on stuff.

The prevalence of sensible shopping isn’t the only surprise Tuttle and Sporn found. Their study also challenged perceptions about online shopping versus brick-and-mortar consumption.

“It is apparent that people are still shopping at stores,” Tuttle said. “Seventy-nine percent of people are still going to a store. Some of those people are going online first, but ‘retail apocalypse’ is not the term we’re at yet.”

But the term is everywhere, from the Atlantic to Business Insider to, yes, Racked. Tuttle acknowledges that retail is hurting but said that’s not because Americans have abandoned brick-and-mortar for online merchants. She said there’s a glut of stores in this country.

“There is a very clear problem of over-storing in the US,” she said. “There were just way too many stores, especially if you compare how many stores are here to how many there are in Europe. We’re on the high end. [The retail apocalypse] is just a bit of a reckoning. Once we take the excess store population out, I think it will stabilize. It may mean places are going bankrupt, but for the most part, it’s less extreme than it may seem.”

While Tuttle’s remarks may raise eyebrows, she’s not alone. From 1970 to 2015, the number of US malls grew twice as quickly as the American population, the Atlantic reported last year, citing research from Cowen and Company.

“The US has 40 percent more shopping space per capita than Canada, five times more than the UK, and 10 times more than Germany,” it found.

And when Footlocker in March announced plans to close more than 100 stores, CEO Dick Johnson slammed reports that pointed the finger at the “retail apocalypse.” He said in May that the retailer had closed 1,000 stores over the past 10 years, not an unusual move. While he may have been doing damage control, he cited the same reason as Tuttle and Cowen and Co. did for store closures — a surplus of retail space.

In May, presenters at the International Council of Shopping Centers’ trade show also pushed back against the retail apocalypse headlines, blaming store closures on “unbridled expansion, demographic changes and stagnant wage growth,” Forbes reported.

E-commerce and mail order businesses made up just 9 percent of retail sales last year, according to SiteWorks Retail Real Estate Services. And fewer than 1 percent of e-commerce sales took place at Amazon, everyone’s favorite scapegoat for retail’s struggles. In November, Bloomberg also acknowledged that neither Amazon nor millennials were to blame for store closures and that there was truth in the complaint that the media had somewhat overblown the struggles of the retail industry.

In the first three quarters of last year, US retailers announced more than 3,000 store openings. But there were also 6,800 store closures during a time when the unemployment rate is low, an unexpected outcome. The root cause for store closures, according to Bloomberg, “is that many of these long-standing chains are overloaded with debt,” particularly from private equity firms.

Although the research makes it clear that customers have not abandoned the in-person shopping experience, those who shop online do tend to spend more. But that’s largely because they have to pay shipping fees.

“Meeting the basket size requirements to get free shipping is a motivator,” Tuttle said. “The customer thinks that if ‘I have to spend $75 [to] get free shipping, then I’m going to add a pair of shoes.’”

Tuttle and Sporn found that virtual shopping carts are 25 percent larger than the average real-life cart. But there’s a twist: Online shoppers spend 64 percent more when they’ve visited a physical store location first. So rather than pitting online shopping against in-person shopping, the researchers suggest that brick-and-mortar stores make use of digital technology to enhance the customer experience. That could mean offering a wider variety of inventory online than in physical stores, directing in-person shoppers to visit the store’s website, and collecting data about shoppers to better meet their needs wherever they make a purchase. In the end, the retailer still profits.