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In between the numbers – Big Changes for Stores

March 31, 2011 at 8:35 pm PST

 14.2 Billion Square Feet

 Was doing the Google-dive a few days ago in preparation for a customer presentation.

 Two numbers popped out.  Amazon sales were up 40% in 210, to $34 billion.   And the current vacancy rate in US shopping centers is at 10.9%.

 At first glance, it’s easy to see that online sales are eating into store-based sales.   Morgan Stanley reports that online is now more than 10% of all revenues in a number of product categories, from consumer electronics to jewelry.

 It’s also painfully obvious that the greatest creators of new retail real estate vacancies in North America (Borders,  Hollywood Video, and Blockbuster) have digital tire tracks on their chests.

 Hmmm . . .

 But let’s take a moment, and look beyond the obvious.    And specifically at the future of the 1.22 million stores in the USA  that occupy 14.2 billion square feet of gross leasable area.  Which calculates out at 46.6 square feet of total retail space for every man, woman, and child in the country.

 What retailers are learning – all too slowly, in many cases – is that the opening of more stores is not the end-all, be-all path to revenue growth.   In certain categories, comp-store revenues in status quo stores will decline faster than good stores can be opened.  Revenue is now a question of channel optimization.   Store operation is more a question of net margin.

 Second, the store’s not dead.   But the store must evolve rapidly – probably into smaller footprints, with virtual selections and services.  Probably into living-breathing web sites, where net-based experiences offer the transparency, speed, abundance, and expertise that shoppers find on the web.   Probably into interactive, educational, experiential zones, where shoppers learn and play.   Probably into a tri-furcated structure of large, full services-experience stores, small footprint urban-and-fast stores, and down-sized low-cost stores.

 Status quo just won’t work.  Big changes ahead

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Welcome to Cisco’s Inaugural Retail Industry Blog!

In January I was at the National Retail Federation trade show for their 100th annual convention in New York City. While at the show it struck me that the world of retailing has changed a lot in the past century – not that I’ve been around to witness ALL those changes although sometimes it does feel like it :-)

Cigar boxes   gave way to mechanical cash registers to today’s sophisticated point of sale systems.  Farm and artisan products delivered by wagons morphed to sophisticated supply chains integrating distribution centers, trucks, ships and aircraft.  Most people today associate the word “amazon”  with an online retailer rather than a river in South America.

As we look forward to the next 100 years of retailing, the industry is facing a huge transition.  Consumers are shopping on the web, on the phone, in the stores and leveraging personal technology to  do “My Shopping, My Way” -- they’re looking for a truly custom shopping experience.  Consumers are interacting with retailers not just through their purchases, but also through social media such as Twitter, Facebook, blogs etc. in real time.  They are expecting their online and offline shopping experiences to  look and feel   the same. They don’t care about channels – they demand a ubiquitous brand experience.

For retailers, these rising expectations have profound impact on their strategies in a number of areas from marketing,  to store operations,  to real estate, to employee retention,  and physical and data security.  In this retail blog, we will be exploring the impact of technology in these areas with Cisco and third party experts in a number of settings  including  industry events and online discussions as we talk about  how retailers can address this market transition.

We hope you will join us going forward and also participate in our other retail social media properties including Cisco retail on Twitter, Facebook, YouTube and Linked In.

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