The steadily rising number of retail stores closing each year has many contributing factors, with changing customer behaviours and new ways for companies to supply their goods to customers.
The most obvious change to retail in recent years has been the rise of internet shopping. Prior to this, there were few alternatives to visiting a physical retail store, with mail order only accounting for a small amount of overall volumes. Shoppers are now able to buy a very wide range of goods simply by browsing from their computer, with delivery direct to their home. Some of these sales may even be actively driven by online channels, for example purchases prompted by promotion on social media.
As well as the convenience of online shopping, without the overhead costs of a physical store, internet retailers are able to offer a wider range of goods, and more attractive pricing, than their high street competitors. Consumers often see online channels as more price competitive and may visit physical stores to view and select goods, but then shop around online to find the best price. Delivery charges can often be offset by savings on the cost of goods.
Online retailers may also be able to be more nimble, reacting quickly to changing demands. They also tend to have more data to work with, allowing them to effectively market to their customer base with customised offers. These, plus a multitude of other factors, mean that online purchases are gaining an increasing share of overall retail sales, with some of the largest online retailers particularly dominant.
Another issue affecting smaller, independent retailers, as well as some larger chain stores, is the reduction in high street footfall. One of the most notable reasons for this is competition from out-of-town retail parks, which may offer larger stores, with a wider range of choices and free parking. However, even these out of town locations are increasingly struggling.
An inability to service debts has also resulted in many retail closures. Stores invest heavily in stock (as well as general overheads such as rent) and when sales are not sufficient to cover these costs, the situation may be unrecoverable. Many issues, such as a fall in consumer confidence, increasing costs due to exchange rate fluctuations, rising rents, or mandatory increases to the minimum wage paid to staff, can all combine to negatively impact the economic health of a retailer.
Some stores close simply because the type of product they offer is no longer relevant. For example, stores offering DVD rental became obsolete with the introduction of streaming services and digital downloads.
It is suggested that for retail stores to survive, they need to adapt to their role as one of several sales channels used by consumers. Retail stores can focus on offering excellent customer service, building loyalty by providing expertise which cannot be found online. Physical stores can serve as spaces for customers to engage with products, even if they then switch and make their purchase online. Some retailers are already using stores as distribution points, where goods purchased online can be collected.
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