3 Brick-And-Mortar Industries Killed By The Online Retail Apocalypse
Toys R Us has become the latest retailer to fold in the wake of online competition, shutting down its e-commerce operations in April as the 70-year-old toy giant prepares to close and sell off its 735 U.S. stores. Indeed, Toys R Us is one of the biggest brands to succumb to the “retail apocalypse,” which claimed 9,000 retail locations in 2017, a number that’s expected to swell to 12,000 this year.
While brands like Sports Authority and Toys R Us are going out of business entirely, others like Sears, Macy’s and J.C. Penney are being forced to adapt to a larger e-commerce business model. But it’s not just individual brands going under. Whole brick-and-mortar business models are becoming extinct, replaced by digital or hybrid equivalents.
Here’s a look at three industries that have relied on brick-and-mortar storefronts to sell products and services and which have been hit hard by the retail apocalypse.
One of the first industries to feel the effects of burgeoning e-commerce sales were bookstores. In fact, Amazon originally started as an online bookseller in 1994, when American shopping malls featured retail bookstore outlets like Waldenbooks, Borders, B. Dalton, Barnes & Noble and Crown Books. At that time, Kmart had enjoyed more than a decade of success running Waldenbooks locations across the country and had recently acquired Borders to expand its bookstore holdings.
Eventually, Kmart merged the two chains in the hopes that management at Borders would help promote the expansion of Waldenbooks. Instead, many personnel left, leaving the new Borders-Walden Group struggling to fend off rising competition from other bookstore retailers.
In a strategic response that backfired, Borders made the mistake of outsourcing its online sales to Amazon, effectively handing over control to a direct competitor. And as Amazon grew its market share, many book consumers turned to “showrooming,” or browsing for books in-store and then buying them from Amazon.
By 2013, all of Amazon’s major bookstore competitors had gone out of business, with the exception of Barnes & Noble, which had successfully expanded into e-commerce book sales. But Barnes & Noble soon faced a new threat, as Amazon began opening physical bookstores in 2015 after researching how to merge its online operations with a brick-and-mortar business presence. Today, Amazon opens a new brick-and-mortar storefront each time a Barnes & Noble closes.
2. Record Stores
Before music sales went digital, American malls featured record stores like Sam Goody and Tower Records. At its peak, the largest national music chain — the combined Musicland and Sam Goody — operated 1,300 retail locations, which Best Buy eventually swallowed up in 2010 when it acquired the record store conglomerate.
But Best Buy soon discovered that it, too, wasn’t creating a bigger market share nor answering the call to generate greater record sales. Eventually, the company was forced to sell off its acquisition of Musicland to Sun Capital, who, in turn, experienced the very same issues related to growing online music downloads. By 2012, Sam Goody had almost completely shuttered; in fact, only one brick-and-mortar storefront was still in operation in 2015 before it eventually closed.
3. Call Centers
Yet another industry that has been reshaped into a digital business model is the modern day call center. The history of the traditional call center dates back to 1965 in the U.K., where the Birmingham Press and Mail set up automatic telephone switching systems to replace human switch operators, enabling groups of agents to handle larger volumes of calls.
The 1960s also saw the emergence of touch-tone dialing, which enabled computers to handle calls digitally, as well as toll-free 800 numbers, which encouraged more U.S. consumers to call companies directly. By the 1980s, these technologies had evolved to the point where computers were quickly determining the types of calls they were receiving before routing them to live agents, thereby establishing the traditional call center as we know it. Call centers expanded internationally during the 1990s, and demand for these operations continued throughout the early 2000s.
But the 2000s also saw the rise of the cloud and emergence of smartphones, which together rapidly disrupted the call center industry. Companies quickly began to adopt cloud call center solutions, which allow customer service reps to work remotely and resolve support issues via phone, email, social media and more.
Cloud call centers also provide a virtual interface for integrated omnichannel support, which has become increasingly more important as support requests come in through not only the phone, but also via texting, live chat, email and more. These benefits helped sway companies to adopt cloud contact center solutions, as well as increase overall market share from a mere 2.2 percent in 2008 to roughly 18.1 percent by 2016.
Over the years, bookstores, record stores and call centers were three of the biggest industries that relied on physical storefront locations to generate sales. But in all three cases, ownership and management didn’t see the writing on the wall and stood firm in choosing not to expand operations online.
Indeed, the internet killed the proverbial bookstore, record store and call center star. Still, many other industries have adapted to this change, illustrating that businesses can survive if they’re able and willing to adapt to emerging technology trends.