It’s common to blame ecommerce for the downfalls of the brick and mortar retail industry, but there’s a second culprit to blame. Retail rent has skyrocketed since the 2008 recession, and it is putting major financial stress on retail businesses. Even big box retailers like Barneys New York are facing possible bankruptcy due to climbing rent prices. Rent is 30% higher, if not more, for some businesses. A lot of retailers took advantage of inexpensive rent after the recession occurred, but increases in rent began kicking in because of inflation. With ecommerce increasing as well, keeping shops open is challenging for businesses of all sizes.
Brick and mortar retail and ecommerce need to coexist in order to fulfil the needs of all consumers. Competing with online shopping can be a challenge for these businesses if they do not bring in a unique shopping experience to their location. There needs to be a reason for customers to come in the door, whether that be expertise or other in-person benefits, in order for the consumer to physically enter a business instead of ordering their items online.
The question is, “Is the increase of rent going to yield more revenue for the business?” and the answer is typically no. If there have been no other changes to a location other than the price of rent, the increase is just cutting into the profitability of the store. In terms of shopping experience, ecommerce cannot offer what brick and mortar businesses can. The public still wants an in-person shopping experience, but these companies are going to be looking into downsizing, or getting rid of their stores altogether to focus on online sales and avoid high rent prices.
As small and mid-size business owners, you will want to keep an eye on these changes. Deciding to give up your space to avoid rent and spend the money in more profitable ways can be a very difficult decision. It is smart to figure out what would create an in-person shopping experience that keeps customers coming through the door before committing to a fully online experience.
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