The State of Retail, Q1 2018


Brick & Mortar Innovation + MadTech = Surviving or Thriving? A lot has been said about ‘The Retail Apocalypse’... the good, the bad, and the uglyThis substantial shift of brick-and-mortar retail experiences – thanks primarily to online giants like Amazon – has resulted in a serious shakeup of shopping malls. 


Veteran retailers are required to quickly adapt to the changing landscape; startups are strategizing better customer experiences that will drive sales. But, to the overarching observation of Forbes, “Instead of thinking of [The Retail Apocalypse] as the end of the world, we should really be looking at this as the natural evolution of life and business. Is the E-Commerce movement amplifying the state of retail?”


On the Ropes, or Down for the Count? 

I once tried to karaoke “Come on Eileen” after a few drinks at a bar, was immediately gonged, and told to get off the stage. Bad, I know, but the current state of retail is in a much worse position. This year alone, nineteen retailers have filed for bankruptcy protection, closing over 5,000 stores. According to RetailDive, twelve others may join them, going bust over the next year. How did this happen?

  • The rise in E-Commerce(e.g., Amazon)
  • Lack of innovation around the in-store customer experience
  • Changes in Millennial and Gen-Z shopping behaviors

Most importantly, though, is that retailers have been focused on store expansion, which has led to a crazy amount of debt. Just like a shopaholic that opened an unnecessary number of credit cards, retailers do not have the funds to pay the debt. There are billions in borrowings on their balance sheets; sustaining that load has hit a breaking point. In fact, one retail consultant in a Bloomberg Businessweek feature stated that, “Terry Lundgren's 2005 decision to double Macy's size with the purchase of May Department Stores was one of the top five worst decisions in retail history." 


Getting Consumers Back Into Stores?

There are a few positives caused by the drastic shift in retail – one being that it’s forcing retailers to experiment, iteratively and rapidly, to understand customer behaviors. Taking a page from digital, retailers are beginning to take advantage of tools such as E-Commerce Cart Management which, “Optimizes user interactions during the checkout process… including UX simplification, pre-sales and payment processing, and re-engagement via automated email marketing based on abandoned cart items.” By adopting and adapting these practices, bridging the online and offline experiences, retailers can drive traffic back toward brick-and-mortar.

Retailers are also putting a heavy emphasis on The Importance of Audience Data. More specifically, in the ability to capture and sync consumer data across multiple devices in order to provide VIP experiences when consumers walk into stores.  


In-Store Experiences

Retailers are beginning to add in-store experiences – from Brooks Brothers serving Stumptown Coffee in its “Red Fleece” concept store, to Nike partnering with Foot Locker to re-open Sneakeasy

We also cannot forget the Tasty Anecdote™for our past Roundtable: “The Dude Seat,” brought to you by Chris Cunningham. “My wife brought me into Rag and Bone, down in SoHo. And, there’s that classic “dude seat” that’s off to the side that keeps you happy… there’s a bunch of dudes on the dude seats and they literally come up and say, ‘Do you want a Heineken?’ I’m like, ‘Of course I want a Heineken.’ I went from… ‘I want to get out of here’ to like ‘All good… go ahead.’ You know that cost them like $1.50 and I know we spent more than that there.”  


Partnerships & Collaborations

If you can’t beat ‘em, forge a partnership with a company that can ultimately wipe you off the retail map?

Calvin Klein has partnered with Amazon Fashion to open holiday pop-up shops in New York City and LA, as well as adding an online brand store on Of course, the pop-up shops will have the usual celebrity attraction, but what’s really interesting are the fitting rooms and payment experience. The fitting rooms will have Amazon Echos allowing shoppers to ask Alexa questions about Calvin Klein products as well as control lighting (outfits look different in certain lighting) and play music. Moreover, shoppers will be able to purchase items in-store in the traditional way, or by scanning barcodes in the Amazon App, ultimately having their items delivered to their home. Both experiences aren’t new per se, however stand as examples of a legacy brand learning how to integrate new tech to deliver an enhanced experience to customers with an established leader in the space.

It’s safe to say that Lord & Taylor has seen better days. The oldest company in North America, recently announced that it was selling their famed New York Flagship store to WeWork. This might look like a sad ending at first glance, but this – plus their recent partnership with Walmart– is what Lord & Taylor needed to do in order to shed debt, be in very close proximity to constant foot traffic, and provide consumers with a better online experience via the Walmart partnership. However, it’s an all hands on deck effort, MarketWatch reported that, “Share of Walmart Inc. on Tuesday [February 20, 2018] got walloped, with the retailing giant notching its worst dollar decline of all time.” Is the industry seeing a true David v. Goliath battle? The veteran retailer vs. Amazon? Time will tell.  


Trying On A New Business Model

Today, many brands have adopted a subscription service model – via acquisition (e.g., Unilever-Dollar Shave Club and Petco-PupBox). Others have begun to create these models in-house. One notable brand is Under Armour. Consumers have the option to receive boxes of Under Armour gear tailored to their preferences, shipped directly to them at regular intervals. When consumers sign-up, gender, fitness goals, work, lifestyle, activities, style preferences and size data are collected. Consumers have one-week to decide what to keep and send back. Similar to Stitch Fix, consumers get a 20% discount if they keep everything delivered. 

According to an August 2017 Forbes article, “In the month of April 2017, subscription company websites had about 37 million visitors. Since 2014, that number has grown by over 800%.” 




Besides the fact that 41 percent of revenue in retail businesses in the U.S. comes from repeat customers, below are reasons why retailers are adding subscription service offerings:

  • The lifetime value of a regular consumer is much higher than the value of a customer who makes an expensive one-time purchase
  • Subscription-based models make for easier sales forecasts
  • Social shareability (Influencer Marketing) and unboxing videos have become trends that retailers can’t ignore
  • The ‘convenience factor’ adds enough value to make a recurring charge part of a customer’s spending norm

A word of caution, though: Adding a subscription service offering isn’t a sure thing. While Dollar Shave Club started this boom back in 2012, their sales have flatlined and customer retention has become a major concern, according to an analysis by 1010data. The barrier to entry is very low for subscription services – customer churn, number of competitors, and money needed to continuously acquire new customers are huge pitfalls. 


Survive > Thrive

For retailers, the goals are simple: survive and thrive. It's great to see retailers experimenting with new concept stores and tactics, but they have to ask themselves if they are experimenting for buzz and PR purposes, or if are they experimenting to answer and/or solve actual business challenges. Retailers that identify core challenges, large or small, and then experiment will be better off than retailers who experiment before defining these challenges.  


Startups Worth Watching

  • OverviewTulip deploys tablets to store associates in brick and mortar locations to enable them to instantly access customer and product information, brand content, limited time offers, inventory checks, and CRM data to provide consumers with white glove service.
  • Why you should care: Tulip is able to aggregate customer dataacross different touch points (apps, site, social, wearables, etc.) into a customer profile and make this information accessible through a mobile app on the tablet.
  • Additional Details: Clients include Saks Fifth Avenue, Coach, Frank + Oak, and Bonobos.
  • Competitors: Red Ant, NewStore, Mad Mobile

Focal Systems / Standard Cognition
  • Overview: At a high level both Focal Systems and Standard Cognition are using computer vision and machine learning to provide retailers with inventory and shelf analytics. However, they differ in two ways - user experience and data capture - and are relevant to different types of retailers.
  • Why you should care: Focal Systems captures data through a tablet-like device attached to shopping carts and focuses on out-of-stocks detection and indoor location (store navigation & in-store advertising). Standard Cognition on the other hand, captures data through a set of cameras within the retail space but focus on vision-based checkout, similar to AmazonGo.
  • Competitors: Amazon Go, Radar


Angel Mendoza
Angel Mendoza
Angel Mendoza is the Partnerships Director for the IPG Media Lab - a specialized group dedicated to bringing innovation to brand clients across Mediabrands. Mendoza is tasked with understanding how new technology trends will impact media consumption, consumer behavior, and evaluating startups for client test pilots. In addition, Mendoza provides clients with actionable insights to help navigate the evolving media landscape in the form of editorials and through the IPG Media Lab’s podcast called Floor 9.