On the Money

How ‘Cyber everything’ is changing the way retailers cater to shoppers

Reinventing retail

Whether it's the way you communicate, live, or shop, the Internet is changing the game.

And in order for retailers to survive, they will need a new strategy to keep up with consumers' changing habits, experts predict.

"It's really hard [for retailers] to make a living online, however, if you're going to compete you have to put your capital into online," retail consultant Jan Kniffen told CNBC's "On the Money" in an interview.

"Every time you put a sale online, and out of the store, your [return on investment] goes down," he added.

Many retailers are already in the midst of adopting to the new reality. Macy's recently announced it plans to close 100 stores and will invest money into its best locations, in addition to spending heavily on digital and mobile.

Kniffen also noted that Walmart is slowing down their brick and mortar expansion, while building up its online offerings, such as its $3.3 billion acquisition of Jet.com. Meanwhile, Nordstrom's will also be shifting more capital towards online retail.

Taken together, the environment underscores the growing power of the Web. According to the National Retail Federation, this year's Black Friday sales were almost evenly split with 44 percent of consumers shopping online and 40 percent shopping in stores.

People carry retail shopping bags during Black Friday events on November 25, 2016 in New York City.
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Kniffen acknowledged overall sales were up 3 percent for the Black Friday weekend. However "100 percent of the growth in retail sales came from online - brick and mortar was flat."

Forget "Cyber Monday," Kniffen said it was "cyber everything."

December 17th "should have been the biggest selling day for brick and mortar, but remember, the weather was awful around the country…and I suspect that everybody went online," the analyst said.

In the old days, Kniffen said the lost sales due to bad weather would be made up during the last week leading up to Christmas, but he doesn't think that will be the case this year. Instead, he believes people still shopped that Saturday, they just did so online.

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In 2009, 2.9 percent of sales were online, but by the end of 2015 that number swelled to 11 percent. This year, Kniffen estimated, it will be 15 percent and by 2030 it will be as much as 50 percent.

That may sound grim for beleaguered malls, yet Kniffen doesn't think the American shopping center is completely dead.

"There are 250 great malls in America, their traffic's going to be up, their earnings are going to be up, their rents are going to be up," he said. "The bad news is there are 1,100 enclosed malls in America."In order to survive, Kniffen says the malls need to become less about shopping and more about experience.

"They're going to have to redevelop and find something you can do as opposed to something you buy," he added.

"So you go there because they are offering you a great movie theater, a great restaurant, a great bar, something, and then hopefully you'll buy some stuff while you're there," Kniffen said.

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