What's to Blame for Traditional Retailers' Struggles


By Brandon Embreus

Lately, some traditional retailers have been facing enormous challenges.   While online retailers like Amazon are raking in huge profits, traditional retailers are being forced to close stores or, in some cases, file for bankruptcy.  Although some of this is undoubtedly attributable to technological advancements, I can’t help but think there is more to the story.

A recent article released by USA Today shows the impact of age demographics on the retail industry.  Americans ages 55 and older account for 42.0% of consumer spending, as compared to just 12.7% for those ages 34 and under.  These more mature consumers tend to spend more on services such as health care and entertainment over consumer goods.  One could argue that the disproportionate spending is the result of higher levels of disposable income, which one would expect from a more mature worker.  However, recent news also indicates that baby boomers on average are 60% underinvested for their retirement needs.  Assuming the older demographic spends conservatively, many people likely try to increase their savings in their last years in the workforce.

Shopping trends corroborate the conservative spend assumption.  The Total Retail Survey released by accounting firm PwC in February of this year indicates that 64% of shopping decisions are dictated by low price.  Convenience was also found to be a major contributor to online sales success, but ultimately, low price was the determining factor across all channels surveyed.

Consumers are more concerned than ever with affordable prices, but is it out of choice or necessity?  Most people today are familiar with the concept of wage stagnation (i.e., how real wages, adjusted for inflation, have barely risen over the past 40+ years).   Additionally, in another article released by USA Today in January of this year reported that millennials earn 20% less than boomers did at the same stage of life.  Yet, the majority of consumer products marketing is directed at this age demographic.  Millennials simply can’t afford to spend as much in relative dollar terms.

So what then is the solution for traditional retailers?  Do you change your marketing strategy to focus on an older demographic?  Maybe if your Hawaiian shirts come with complimentary IRAs.  Do you lower the price on everything and focus on greater volume?  Probably not when the online retail behemoths have enough clout with their suppliers to undercut any discounts you could offer.   As a millennial myself, I think the solution is clear…wages have to increase or the standard of living will decline.  This solution obviously extends beyond just retailers, but as the industry that employs the single largest job (retail salesperson) by volume in the country, what better place to start?  If you can afford it, pay your people more than they need to survive, and I bet you will see that money come right back into your business. 

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