How have the nation’s traditional retailers gone bankrupt? The answer — gradually, and then suddenly

May 5, 2017

This year has been particularly cruel to chains across all market segments as more have filed for bankruptcy protection in four months than did during the entirety of 2016. USC experts in business, policy, architecture and culture discuss the current sea change in the retail market as storefronts continue to shutter under the weight of fixed costs, low-margin big boxes and ‘e-tailers’ that keep shipping faster and cheaper.

Image: Photo/iStock

Contact: Ian Chaffee at (213) 810-8554 or ichaffee@usc.edu

 

Decaying advantages for brick and mortar 

“Many brick-and-mortar stores could survive for years despite the lower prices and convenience of online retailers. They had the consumer’s trust and the advantage of a physical shopping environment to inspect products. But these advantages are decaying.

“Consumers are increasingly more trustworthy of web-based payment systems. And new technologies like virtual mannequins and showrooming apps diminish the advantage of having a physical environment. So it is not surprising to see so many conventional retailers closing.

“It may not be the end of brick-and-mortar stores entirely, however, because many people still enjoy the shopping experience. Shopping with a good friend, followed by coffee or a movie, is impossible to deliver online. This could explain why many malls have repackaged themselves as ‘experiential retail’ centers.”

Anthony Dukes can discuss legacy brands, the consumer retail experience and the impact of big box stores. He is an associate professor of marketing at the USC Marshall School of Business.

Contact: (213) 740-3486 or dukes@marshall.usc.edu

 

Conspicuous consumption vs. conspicuous production 

“Historically, consumers paid top dollar for material goods — particularly luxury goods — that reveal status. This practice is classically known as ‘conspicuous consumption.’

“In today’s contemporary retail market, a new phenomenon is emerging, what I call ‘conspicuous production,’ whereby consumers are more concerned with the process by which an item is made and where it is from far more than simply the good’s aesthetic value.

“People seek out curated consumer experiences and meaning in the items they buy, which for many of us means we buy less, and we are much more discriminatory about what we buy and where we buy it.

“With all of this information available, we are becoming conscious of reckless materialism and how it affects our world. As a result, for many of us, the retail process has become streamlined and pared down.

“We want much more meaningful retail experiences and our purchases must symbolize more than just acquisition of material things.”

Elizabeth Currid-Halkett can discuss conspicuous consumption, social dynamics of shopping, and the impact of high-end retail. She is the James Irvine Chair in Urban and Regional Planning and professor of public policy at the USC Price School of Public Policy. Her book on consumption practices, The Sum of Small Things: A Theory of the Aspirational Class, is forthcoming with Princeton University Press next month. You may learn more about her work at www.elizabethcurridhalkett.com.

Contact: (213) 740-4012 or currid@usc.edu

 

More than a container for goods 

“In the age of e-commerce, the physical space of retail might better be seen as a showroom rather than a sales floor. As the point of sale becomes more and more virtual, we are seeing a move toward retail spaces being more experiential as opposed to transactional.

“In its most pragmatic capacity, this shift defines the physical space of retail as an opportunity to browse and inspect goods prior to purchase. However, the biggest potential impact this shift in thinking provides is the elevation of physical space to be more than a container for goods, but rather the embodiment and, more importantly, the experience of brand identity.”

Alvin Huang can discuss traditional and modern retail design, branding spaces, and interactive architecture and responsive environments. He is an associate professor of architecture at the USC School of Architecture.

Contact: (213) 438-9967 or (323) 698-7001 or alvin@synthesis-dna.com

 

Two decades in the making 

“The current situation is likely the result of a number of factors that have occurred over the last two decades.

“Retail is extremely sensitive to volumes since there are high fixed costs. Thus, a small decline in sales volumes can have a large impact.

“The siphoning of sales to online merchants clearly has had some impact. Showrooming has occurred to some extent, but more and more, many consumers are likely to buy online, based in large part on ratings and reviews.

“A much bigger impact than online merchants has been the proliferation of discount stores such as Walmart and Target. With large volumes, they can maintain relatively low margins. Stores such as Sears and Macy’s, which have been heavily hit, are known as being ‘stuck in the middle’ — they have to compete on the upside against high-service chains such as Nordstrom and on the downside with Target and Walmart, which offer deep discounts.”

Lars Perner can discuss historical offline and online shopping trends, the impact of Amazon, consumer behaviors and the psychology of shopping. He is an assistant professor of clinical marketing at the USC Marshall School of Business.

Contact: 213-740-7127 or perner@marshall.usc.edu

 

Rethinking “post-mall” priorities 

“In Relocations, I wrote about how service and retail replaced the defense industry [which replaced agriculture and citrus] in SoCal’s suburban economies. Given the current administration’s budget proposal, it looks like the increase in defense spending is a compensatory gesture for this ‘apocalypse’ in the retail sector.

“As enclosed malls are phased out in working-class, ex-urban regions, will cities have the wherewithal to rezone malls for mixed-use space [community centers, churches, libraries, etc.] as they did during the sub-prime crisis of 2008-09?”

Karen Tongson can discuss the culture of retail, how it fits with the subcultures of California and beyond, and the new suburbia. She is an associate professor of English and gender studies at the USC Dornsife College of Letters, Arts and Sciences and the author of Relocations: Queer Suburban Imaginaries (NYU Press). She has a forthcoming book with ForEdge Press called Why Karen Carpenter Matters and has two books in progress, Normal Television: Critical Essays on Queer Spectatorship after the “New Normalcy” and Empty Orchestra: Karaoke in Our Time.

Contact: 323-687-2574 or tongson@usc.edu

 

A perfect storm of negative factors 

“There are many reasons why store chains are closing locations. Among these are the disruptive force of the internet, the hassle of driving and traffic, price competition, aging storefronts, poorly trained and unhappy salespeople, lower promotional budgets and the laziness of the modern consumer.

“Since time immemorial, companies and end buyers alike have been looking to cut out the resellers, or middle people, to save money and sell more. This is to be expected, and many middle people that have not succeeded in proving their added value to end buyers have gone out of business.

“Retail stores, however, can still be successful in the age of the internet. Many people will always like the social interaction and comfort of checking out the products in person, asking questions of knowledgeable sales people and making sure the products fit their needs.” (Comments adapted from HuffPost.)

Ira Kalb can discuss how traditional and new retailers are employing branding, marketing strategy, high-tech marketing and social media. He is an assistant professor of clinical marketing at the USC Marshall School of Business.

Contact: (213) 821-1886 or ikalb@marshall.usc.edu