Within this research my main goal would be to analyze in-depth the crisis in the retail sector, which are the main factors that have created it, how is it related to the digital revolution and the consequences it would have in the store of the future. By evaluating the current situation in the fashion retail sector, I will see how the role of the store has changed through out the years, as it is no longer a pure selling point, its function has also transformed within the whole business strategy.
Worldwide we are facing a global recession; Slowing down economy, the business environment is getting more and more unpredictable, consumers are better informed and therefore, unpredictable, they’re technologically strong and demanding. Twenty or thirty years ago the physical stores were the only a selling point which was bringing 100% of the revenues of a brand, because they were the only place where you can make a purchase, their role was completely dedicated to driving consumers to spend as much as possible. The store design, layout, merchandising and training of the sales team was completely dedicated to driving sells, since Brands had no other alternative to make profit.
However, in 2017 the situation has changed, giving more possibilities and freedom of choice to the consumer. The options from where to make a purchase are plentiful, from online monoBrand stores, wholesale online stores, wholesale offline stores, less and less customers make a purchase through the physical mono-brand store. The digital era has given plenty of opportunities, which is leading to closures of more and more stores every year worldwide. For example, in 2017 Louis Vuitton has closed 50 stores in China and by the middle of 2018, 20% of the stores in China will be closed. The rising share of e-commerce is one of the factors behind it, another is that physical retailers struggle to innovate and are kept behind with an old vision of the store. The commonly used technologies inside the store include kiosks, RFID, mobile devices, smart carts, wireless sensors, contactless payment, etc. However, this is not enough for Millennials and Generation Z, who have are born tech-user and expect more interaction with technology inside the store. According to a survey, (?) the role of the offline store has changed, it should be more entertaining place where the consumer gets in touch with the Brand, create a stronger and more powerful, personal bond. It should be a place where you can understand the Brand identity, build a relationship with it, not just a mere selling point.
Within this Major Project, I would like to analyze why the retail is in crisis, why so many luxury fashion stores are closing down, and what role does digitalization play in it, since the role of the physical store has changed and will surely change in future.
Hypothesis: In 2017, more than 9000 stores have closed down, 1500 of which are fashion ones, which is more than the number during the Great Recession in 2008. One of the main reasons behind it, could be the advances in the digital world and
E-commerce. However, the reasons behind the retail crisis are multiple, but digitalizations lies in most of them. In future the physical stores will change even more by being more digital, by taking advantage of the artificial intelligence and the endless opportunities technology has to offer. Even though, the store of the future will change, it will never disappear.
My main objective is first to understand the main factors behind the retail crisis, what are the reasons that caused it and from the other hand, what opportunities does it hold for the digital era, by understanding how does the digital era influences the store closures. My main goals is to examine the shifting role of the stores nowadays, from a pure selling point to an entertaining, informative center for the brand.
Another objective is to analyze how consumer needs have changed, As our society is increasingly organized around consumer-control. Understanding the new digitally-born generation Z will help analyze the difference during shopping, compared to Generation X. The future generation is likely to embrace faster and in a more widely-spread way the technological innovations, compared to the older generations. What is more, I would like to analyze How the consumer buying process has changed compared to 20 years ago, before the masses started using Social Media, Online shopping or just looking for information online. This would help visualize the changes that have occurred in the last years and follow the future trends that are occurring globally also in other industries.
case study on Louis Vuitton, closing stores worldwide
In 2017 more than 1500 fashion shops have closed, and the Fung Global Retail& Technology is projecting 9,452 store closure in total, which is 53% more than during the Great Recession in 2008. The crisis also had an impact on the luxury sector. Louis Vuitton is one of the many Brands, which After the aggressive expansion in China in 2009 and onwards, when retailers were investing millions in being present in every Chinese city, nowadays they do not need to be present in 2-3 outlets in one city. The strategy has changed and store openings is no longer the way for Brands to catch the attention of the costumer. One of the major luxury Brands which has suffered from the shift in the Market is Louis Vuitton, which part of the world’s largest luxury group LVMH in terms of revenue in 2017 has closed one of the flagship stores in Guangzhou and intends to close more stores in other cities like Harbin and Urumqui.
However, the trend is Global and other luxury Brands have followed, during the past two years, Burberry closed four stores on the mainland, Coach shut two, Hermes one, Armani five, and Prada went from 49 to 33, just in China. Anyways, closing physical stores gives space for brands to enhance the digital opportunities, the fashion system is moving towards the direction where the percentage of people who purchase online is growing every year with more than 5%. The reason is the active purchasing consumers nowadays are Millennials.
Change in consumer and their buying process, Generation Z vs Generation X
The consumer is always present, constantly seeking opportunities and value, taking advantage of the multiplying media around it and at the same time being bombarded form media, this is also the reason why marketers are always on. The connection with them requires continual experimentation, innovation and shift in strategy.