Closing of department, big box stores ushers in new opportunities for retail

Empty big box store that recently closed

It's unclear what will happen to the big box stores that now sit empty. Iowa State researchers say while some of the closings were inevitable, there is still opportunity for retailers. Photo by Christopher Gannon

AMES, Iowa – The demise of several big box and department stores was inevitable given the changing retail landscape, but a team of Iowa State University researchers says not all retailers are destined for a similar fate.

Linda Niehm, Ann Marie Fiore, Telin “Doreen” Chung and Jessica Hurst, in ISU’s department of apparel, events and hospitality management, say overexpansion and competition from online retailers forced the closure of many stores. However, there is opportunity for retailers willing to embrace technology and create a different shopping experience for consumers.

“What we’re seeing is in part a natural evolution of the retail cycle, and old formats are replaced with something more relevant,” Niehm said. “It’s really a transitional time and the retail industry is still figuring it out. Retail is a dynamic industry and it will continue to thrive, but the bar has been raised and consumers expect more, not the same old tired stuff.”

With so many options, consumers are more selective than ever. If they can’t find what they’re looking for in a store or online, mass customization makes it possible to design what they want down to the last detail, Fiore said. And when they do go shopping, millennials especially want and expect an experience that fits their lifestyle. Niehm says this presents opportunities for small retailers who can provide these experiences and directly engage with customers.  

A new look for retail

To give consumers that experience, the look and layout of retail is changing. For example, more stores are adding full-service restaurants. Fiore says millennials spend more of their disposable income on food rather than apparel, which is why stores are integrating food service into the retail space with the hope that consumers will come for a meal, socialize and then stay to shop.

Pop-up shops within vacant store fronts, unusual structures (such as cargo containers) and as permanent elements of department stores are a popular way to promote a brand or product line for a short period of time. In a 2010 study, Fiore and Niehm were part of a team of researchers that found consumers like the novelty and excitement of pop-up retail and exposure to the new, unique products it offers.

Some stores have replaced fragrance counters with beauty bars, where you can have your hair and makeup done for a night out or a new look. Retailers also are featuring more local or one-of-a-kind gifts and items consumers can’t find at every other store.

“It’s understanding that retail is not just selling a product, but really building an experience,” Fiore said. “It’s also about building brand identity and bringing that brand to life. The whole hospitality aspect can really reinforce a brand image for the customer.”

Millennials look for brands they trust and which resonate with their values. They also are less interested in large stores featuring a variety of options, and prefer shops curated to their interests, Fiore said.

Technology is vital

Customer service remains an important element of that brand identity and shopping experience, which technology can enhance, the researchers said. Retailers are relying more on big data to understand their customers and make informed decisions about product sales and development. Hurst says the growth in radio-frequency identification, or RFID tags, is a good example.

RFID technology is incorporated into the hang tag on an item and provides real-time inventory tracking and updates. When the tag is scanned at the checkout counter, a fill order is sent to the stock room so that sales associates can quickly replenish the item on the sales floor, Hurst said. If customers are looking for a specific size or color, sales associates can do a simple search and know if the item is in stock. The technology improves efficiency and allows sales associates to spend more time with the customer, Hurst said.

“You can’t provide good customer service if you’re always back in the stock room trying to find an item,” she said. “Stores that have tested this technology saw an increase in sales within the first few weeks the system was implemented.”

Streamline the process

Consumers have naturally adapted the different retail channels – online, store, mobile – to fit their shopping preferences and retailers are following suit. Chung says retailers had maintained online and brick-and-mortar stores as separate entities, but are now integrating the two to create a seamless experience for the consumer.

For example, if a customer can’t find a size in the store, a sales associate can go online and have the item shipped to the customer’s home. Online shoppers have the convenience of picking up or returning items at the store. Retailers are utilizing mobile apps to offer deals to get shoppers in the store.    

Technology also makes it possible for new retailers to test the waters online, Chung said. Some startups are using Kickstarter to generate funding as well as interest from future customers. She says this approach works well with ideas that are innovative or resonate with consumer values.

“We see retailers using technology to involve customers as a partner in their business,” Chung said. “The customers participate in all aspects. They may have a say on marketing, what type of products they want to see or the value a retailer should carry.”

Social media is another way retailers can engage consumers to express views about a brand or product. This has advantages and disadvantages. If consumers share photos of a great meal or fun pop-up experience on Instagram or Snapchat, it generates positive word-of-mouth for the retailer, the researchers said. However, negative photos or comments can have the opposite effect.

Chung’s latest research utilizes big data to understand whether consumers use social media hashtags to influence others through their decisions or more as a conversation starter. She and her colleagues looked specifically at the #BoycottNFL hashtag over a nine-day period. Chung says initially, it was more of a call to action related to brands, but shifted to more of a conversation starter related to patriotism and political agendas.