Retail, as we once knew it, is collapsing. Over 15,000 stores are expected to close across the U.S. this year – more than double the number of closures seen last year. Even iconic names like Sears and Toys “R” Us have vanished from malls and main streets, casualties of a retail landscape unable to adapt to profound changes. The so-called “Retail Apocalypse” is real, and it’s accelerating.
But is the death of physical retail inevitable? We argue no. Retail isn’t dying, it’s evolving. And, at the heart of this transformation, is a revolutionary model called Open Commerce – which could hold the key to reversing the downward spiral.
Unpacking the Retail Apocalypse: A Closer Look
The Retail Apocalypse didn’t happen by chance. It’s driven majorly by shifting consumer habits, inefficiencies caused by outdated operational systems, and the aggressive domination of e-commerce giants like Amazon. Traditional retail has been facing a long decline for several compelling reasons:
1. Rapid shift in Consumer Behavior
Consumers today display a high degree of flexibility in their shopping behaviors, readily shifting between brands and channels based on convenience, value, or preference. Research shows that younger consumers, particularly Millennials and Gen Z, gravitate towards direct-to-consumer (D2C) brands and smaller, more agile companies.
For example, over 60% of Gen Z shoppers are drawn to “fun” and newer brands, viewing legacy retailers as outdated and uninspired. At the same time, online retail now accounts for 29% of all U.S. retail sales – a leap from 21% just a few years ago, highlighting the growing preference for the convenience and cost-effectiveness of online shopping.
2. Inefficiency of Legacy Retail
Traditional retail operations are riddled with inefficiencies. Outdated supply chains, poor inventory management, and rigid pricing models have created gaps between what consumers want and what stores deliver are just some reasons why.
For instance, many brick-and-mortar retailers still rely on manual processes and often struggle to adapt to supply chain disruptions or respond effectively to sudden shifts in demand patterns due to a lack of visibility across their supply chains. This lack of agility frequently results in inventory challenges – products going out of stock (which frustrates customers) or accumulating excess stock (which ties up valuable resources).
The consequences of these inefficiencies are staggering. Globally, inventory distortion costs retailers nearly $2 trillion annually, as highlighted in this study by Zebra. Problems with supply chain partners alone account for $602.6 billion in lost sales each year.
3. Domination of E-Commerce Giants
Traditional e-commerce giants like Amazon and rising platforms like Shein monopolize the market, capturing massive market share while undermining traditional and independent retailers. Their closed ecosystems leave many businesses unable to compete, widening the inequality within the retail landscape. Amazon holds nearly 50% of the e-commerce market share, making it tough for smaller retailers to compete on price or scale. Worse still, it operates as both a marketplace and retailer, which would allow the platform to use the data they capture from third-party retailers, to drive sales for their own first-party products.
These challenges have collectively created a landscape where even well-established brands face significant hurdles in staying innovative and relevant. This is not merely a setback – it’s a critical inflection point. The current system demands a re-evaluation of strategies, pushing businesses to rethink how they adapt, compete, and thrive in an increasingly dynamic environment.
Open Commerce Technology Can Solve the Retail Apocalypse
At its core, Open Commerce takes the opposite approach to the closed systems dominating the e-commerce landscape. Built on transparency, inclusivity, and competition, Open Commerce is a digital-first model designed for modern retail dynamics that can benefit both brick and mortar and online businesses. By leveraging data, automation, and Artificial Intelligence, Open Commerce enables retailers – big and small – to compete effectively in the evolving market.
Here’s how Open Commerce directly addresses the key pain points of the Retail Apocalypse:
1. Bridging the “Inventory Gap”
Retailers today face a stark choice: either understock and lose sales or overstock and waste resources – a lose-lose situation that threatens profitability and long-term growth. Open Commerce addresses this issue head-on by leveraging AI-powered forecasting and real-time analytics to eliminate inefficiencies. By providing accurate data and actionable insights, it empowers retailers to strike the ideal balance between supply and demand, safeguarding profitability and enhancing operational efficiency.
Research demonstrates that, by leveraging AI-driven demand forecasting tools such as those offered by Open Commerce, retailers can significantly improve business performance, achieving a 15-20% improvement in forecast accuracy. This is a critical factor in making informed operational decisions and can reduce excess inventory costs by the same margin – crucial for both physical and online stores.
Smaller retailers can now make data-driven decisions just like the big playes, ensuring shelves are stocked with what consumers genuinely want.
2. Leveling the Playing Field
The traditional e-commerce model systematically disadvantages third-party retailers and small businesses by creating a cycle of dependency on dominant platforms. These businesses are forced to rely on e-commerce giants for visibility, traffic, and sales –
often at the expense of their autonomy. This dependency strips them of control over their branding and customer relationships, eroding their ability to build lasting connections with their audience. Such a system consolidates power in the hands of a few while smaller players struggle to compete on an uneven playing field.
Meanwhile, e-commerce platform’s algorithms dictate product rankings, leaving smaller retailers struggling for exposure unless they invest heavily in advertising. Additionally, high commission fees, stringent policies, and competitive pressures from the platform’s own products further erode profit margins. It’s a snowball effect that limits innovation and autonomy, tying the success of small businesses to the whims of the platform rather than empowering them to grow independently.
However, Open Commerce is leveling the field. By connecting independent retailers directly with brands and distributors, it empowers small and local retailers with the same level of visibility, pricing updates, supply availability and tools that large corporations already enjoy.
3. Eliminating counterfeits
The online retail space is dominated by monopolistic e-commerce platforms – many of which are filled with fake products and counterfeiters. For many smaller and even larger retailers who want to move online, switching to a traditional e-commerce platform can spell the death of their business, with counterfeiters and fake products resulting in lost sales. Research shows that up to 60% of the products sold on Amazon can be fake and that 47% of brands are losing revenue to counterfeit products. These problems are so severe that even high-profile brands like Nike stopped selling their products on the platform.
Counterfeiting is a growing challenge, but Open Commerce technology offers a powerful solution. RedCloud’s Open Commerce platform leverages advanced AI to perform rigorous diligence on business entities, ensuring that all parties involved in transactions are thoroughly validated. This proactive approach directly addresses the root causes of fraud, significantly reducing the risk of counterfeit goods infiltrating the supply chain.
4. Transforming Consumer Engagement
Open Commerce is redefining the customer experience by leveraging micro-segmentation. This means retailers can analyze individual purchasing habits to create highly personalized shopping experiences.
For example, a retailer using Open Commerce technology can leverage data from across the supply chain to discover that teenage consumers in a specific region prefer eco-conscious brands. Armed with this insight, the retailer strategically develops targeted marketing campaigns, curates product selections tailored to this demographic, and strengthens loyalty within this micro-segment. By aligning with consumer values and behaviors, the retailer not only enhances brand resonance but also drives brand reputation, meaningful engagement and long-term growth within a highly specific audience.
5. Automating Efficiency
Industry research from McKinsey estimates that new technologies like AI-powered Open Commerce could automate over 55% of tasks in a traditional retail store, significantly reduce SG&A (sales, general and administrative) costs, enhance customer and employee experience, and free up funds to fuel growth elsewhere. It’s the modernization that brick and mortar need to future-proof its existence. Automated supply chain management, AI-driven pricing, and mobile payments are some of the built-in features of Open Commerce technology that enhance operational efficiency while freeing up resources to fuel growth.
For example, by automating its pricing strategy and supply chain logistics using Open Commerce, a grocery retailer could simultaneously lower selling costs and improve customer satisfaction – fueling profitability while enhancing the in-store experience.
The Future of Retail Belongs to Open Commerce
The Retail Apocalypse isn’t an unsolvable crisis but a call to innovate. Open Commerce embraces the essence of retail evolution – it’s transparent, adaptable, and, most importantly, inclusive. By integrating Open Commerce into operations, retailers and brands can create meaningful connections with customers both on- and offline and fight against monopolistic ecosystems. From improved inventory management to personalized consumer experiences fueled by AI, this revolutionary model transforms the inefficiencies of the past into the opportunities of tomorrow.
While the Retail Apocalypse might mark the fall of unadaptable systems, it’s also an urgent wake-up call for the industry to rethink its approach. Open Commerce, with its ability to drive transparency, inclusivity, and competition, is the solution retail needs for a thriving, sustainable future.
Are you ready to future-proof your retail business? Start by integrating Open Commerce principles into your operations today. Explore our resources to see how Open Commerce can reinvent what’s possible for your retail brand. Get in touch today.
