What is the best way forward in today’s changing retail environment? That is the question that many brands are asking. Some online-only retailers, such as Amazon, are rolling out ambitious plans to open new brick-and-mortar locations; other popular retailers are moving out of malls and into the e-commerce sphere.

Two well-known clothing brands, Bebe and Kenneth Cole, recently announced that they would be closing most or all of their physical U.S. locations to focus instead on their online presence and international stores. This announcement will affect more than 170 locations in the United States; it also will be yet another blow to shopping malls, which already have been suffered through the exits of other popular chains, such as The Limited, Wet Seal, and BCBG Max Azria.

For many brands, shedding the brick-and-mortar division has obvious benefits. Savings can be immediate, by eliminating rental fees and reducing the number of employees. However, there are other challenges that these brands will face when they attempt to compete solely as an e-tailer.

First, online giant Amazon has conditioned consumers to expect free shipping and fast delivery options, and these benefits often cannot be replicated by other brands in a cost-effective manner. Second, customers expect free or low-cost return policies, so that they can return items if the size is wrong or the garment has flaws. These costs can largely offset or even exceed the cost that some retailers were paying in rental fees, suggesting that an online-only strategy may not the ultimate cost-saving solution it initially seemed to be. Third, customer brand loyalty and finding a particular e-commerce niche are keys to long-term success as an e-tailer, so these brands will need to work hard to ensure their clothing can still hang with the competition.

Discussion Questions: 

1. Which mall retailers are closing their stores in favor of online-only?
2. Why have they closed their stores?
3. What mall stores, if any, do you think may follow this trend?
4. How has your shopping behavior changed in the last two years regarding mall versus online?

Source: Matthew Stern, Retail Wire, March 24, 2017