Consumer Spending at Luxury Retailers – Miami Design District

It seems like you couldn’t open a newspaper or business journal in 2017 without the headlines screaming, “Retail Is Dead“.  There are lists of store closures for 2018 and many large retailers are on those lists.  Toys R Us, Macy’s and The Gap are just a few that are closing stores and more companies will probably be added as the economy continues to improve but companies fail to adapt to the changing retail landscape.

E-commerce, demographics and consumer tastes are all contributing to the shift in, not death of, retail.  As Arden Karson, Senior Managing Director of South Florida for CBRE, emphasized in her presentation at the 2018 CCIM Commercial Real Estate Outlook Conference,  it isn’t that the consumer isn’t spending, or if they are they are only spending online, but rather that consumer spending is shifting.  In what she calls an economic bifurcation, where consumers are shopping at luxury retailers, such as Louis Vitton, and discount retailers, such as Home Goods, consumers are shunning the department stores.  Guess who makes up a large part of the closing lists?  Yep, department stores.

As to whether or not Amazon will be the final nail in the coffin to brick and mortar retail, according to eMarketer Amazon accounts for 4% of online sales.  Although online sales as a percent of consumer spending are increasing, they account for approximately 10% of retail sales and a lot of those sales are multi-channel, such as ordering online and picking up at the store or ordering online and then returning in the store.  My experience with a lululemon gift from my husband is a great example of how shoppers are changing how they shop.

Lululemon Creates A Great Customer Experience

I love lululemon workout clothes so my thoughtful husband ordered me new running pants and a top as a gift.  They were perfect, except the top was too large.  Instead of packing up the top, printing out the return label, taking it to the UPS store to return, tracking the return and the credit, and then ordering another top that hopefully fit, I will be returning it to my nearest lululemon store, where I will try on tops to make sure they fit.  So is retail dead?  I don’t think so.  The retailers that are doing well are adapting to what the consumer wants by making the entire purchasing process a pleasant experience.  Today’s consumer is more interested in the shopping experience than in shopping itself and they share that experience, whether or good or bad, online.