Apocalypse now? We don't think so for American retail

The closure of Toys 'R' Us was, for some, the final nail in the coffin for American retail. The supposed retail apocalypse had been coming for some time, and the liquidation of the super toy store seemed to signal that it had finally come.
Deteriorating profits, more people shopping online, and malls closing up and down the country have all been cited as hallmarks of the retail apocalypse. However, a new report by Deloitte suggests that the industry is, in fact, experiencing a renaissance.

Apocalypse of the middle retailers

The Deloitte report splits retailers into three separate categories:

  • Price-based retailers - deliver value by selling at the lowest possible prices.
  • Balanced retailers - deliver value through a combination of price and promotion.
  • Premium retailers - deliver value through premier or highly differentiated product and/or experience offerings.

Those retailers that operate on either end of the spectrum (those offering premium or budget products) are performing well. Premium retailers have seen revenues increase 81 percent over the past five years, and price-based retailers have seen increases of 37 percent over the same period.

It is only the stores operating in the middle that are seeing profits dip. In the last five years, balanced retailers have seen revenues increase by only 2 percent.

This is backed by data from research firm Boenning & Scattergood. Though many malls have closed in America in recent years, high-end ones are still performing strongly, with the 20 most valuable malls in the US bringing in roughly $21 billion in retail sales annually. These malls tend to have more premium stores, as well as those that offer experiential venues.

Economic shifts leading to fewer middle income spenders

Deloitte argues that the reason for this shift is that economic developments have caused a broadening wealth gap. The vast majority (80 percent) of US consumers have seen a lowering of their income, and therefore are attracted to budget offerings. Meanwhile, some have seen their incomes increase, leading them to spend more at premium retailers. Far fewer people have been left in the middle to purchase from balanced retailers.

Communications is essential
Premium and price-based retailers have succeeded because they've looked at the economic and business climate and have managed to fill a need. It's important retailers use every tool available to differentiate themselves, and unified communications is one way they can achieve this.
NetFortris' secure voice, data and video communications allow easy collaboration across locations, and our extra security features mean you will easily comply with PCI standards.
For more information, reach out to NetFortris today.

Team NetFortris
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