Brick and mortar retail getting a second chance

Brick and mortar retail getting a second chance


By Rob Zomok, president, global operations, Inmar

There's a very bright spot along the retail horizon and its location will be a surprise to many. The secondary market.

The intensity of that bright spot and the warmth it's providing manufacturers contending with the chill of sluggish sales was illuminated by Dr. Zac Rogers, professor of operations and supply chain, Colorado State University at the 2017 Inmar Analytics Forum in Winston-Salem, NC.  Findings from Dr. Rogers' research for his presentation, "The Growth of the Secondary Market: The New Realities of Non-Traditional Retail," are summarized below.

A decade of growth

While the closing rate for U.S. malls has tripled in the last couple of years, and 25 percent of the remaining malls are in danger of closing within the next seven to eight years, the secondary market — including dollar stores, value retailers, and manufacturer outlets — has grown at a phenomenal rate. The size of the secondary market increased 79 percent in the last eight years, growing eight percent to nine percent annually from a total value $309 billion in 2008 to $554 billion in 2016.

As premium malls have continued to suffer from the shuttering of hundreds of anchor store locations, outlet malls sales have grown 208 percent since 2008. The momentum does not appear to be slowing as estimates have these suburban centers adding 11 million square feet of space in the next few years.

At the same time, Dollar Tree (the parent company of Family Dollar) opened 584 locations in 2016 while Dollar General opened a whopping 1900 new stores between 2016 and 2017. Value retailers, e.g. Marshalls, TJ Maxx, Ross, etc., have enjoyed their own healthy growth as their collective value has increased 71 percent since 2008.

A change in mentality

At the center of this growth has been a significant shift in perspective on the part of both buyers and sellers. Although the last recession is long in the rear view mirror, the change in shopper mentality that developed during that economic downturn has become entrenched. Shoppers have become permanently cost conscious and the stigma once attached to shopping in the dollar channel has gone — its evaporation further accelerated by retailers in this channel broadening inventory, establishing loyalty programs and driving significant additional engagement through digital promotions.

At the same time, primary channel retailers and manufacturers across categories have come to recognize "pennies on the dollar" as a good thing. Resale value is, of course, not financially optimal for these trading partners, but it still represents revenue. And with the increasing number of retail locations remarketing their products and the increasing traffic in those locations, they're stacking those pennies higher and higher. More and more brands are also taking the long-term perspective that by engaging shoppers who may be availing themselves temporarily of the secondary market they can cultivate these shoppers as brand champions and count on them for their loyalty when they return to the primary channel.

An opportunity not be ignored

Value recovery through the secondary market is not, typically, a core competency for most retailers and manufacturers nor has it been, for many, a priority. The perceived complexities, the uncertain costs and the seeming logistics demands have combined to make many trading partners reluctant to pursue strategic remarketing in favor of more indiscriminate and ultimately less desirable bulk dispositioning.

This hesitancy is unwarranted and financially unhealthy as providers exist that can cost-effectively enable business-building liquidation and remarketing, shouldering the burden and delivering real return. In today's omnichannel marketplace, failure to leverage all points of sale constitutes not just a chance missed, but a costly mistake.

Topics: Consumer Behavior, Customer Experience, Trends / Statistics

Sponsored Links:

Related Content

Latest Content

Get the latest news & insights





Amazon Prime Day kicks off with big sales, but Target not sitting idle