September 28, 2012
Big Boxes to Fade Away in Retail’s Polarized Future
An interesting thing happens when you read the new Retailing 2020 report from PwC US and Kantar Retail. You get the distinct impression that you’ve actually experienced many of the changes predicted for the years ahead.
The report discusses an increasingly polarized economic environment with fewer and smaller stores operating in an omni-channel world.
"Retailers will need to prepare for a wall-less omni-channel retail world, one where shoppers will come to expect a seamless brand experience online, in-store and across multi-media touch points," said Susan McPartlin, PwC’s US retail & consumer industry leader, in a statement. "This multi-format portfolio combined with the proliferation of small, urban, alternative retail formats will pave the way for future growth, dismantling the mass homogenization and scale assumptions that propelled two decades of retail growth."
PwC US and Kantar see older consumers becoming more financially conservative than younger shoppers from the effects of living through several recessions in their lifetimes. Shoppers will be divided into two distinct purchasing nations — over fifties and under thirties.
"The demographic and income gaps between shopper segments are expected to widen creating more shopper segments with different expectations for product offerings and shopping experiences," said Bryan Gildenberg, chief knowledge officer at Kantar. "Retailers must do away with the ‘one size fits all’ approach and consider the ever-diverging needs of both the ‘Have’ and ‘Have Not’ consumers to remain viable in the future."
Discounters will continue to grab share of grocery at the expense of traditional food, drug and mass merchants. Annual growth for large chains in the years ahead will remain close to current levels. Roughly one-third of the increases will come through online sales.
One of the casualties of Retailing 2020 will be supercenters. Consumers will increasingly make use of digital channels purchasing products through their mobile phones, tablets and personal computers.
"Forward-thinking retailers should diversify format portfolios, test smaller footprints and offer niche products targeted to specific shopper segments," said Mr. Gildenberg.
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Discussion Questions
What do you think retail will look like in 2020? What paradigm shift will rock retailing in the next 10 years?
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I don’t agree with the premise that combination food/discount stores are doomed (both Target and Walmart are both committed to the food and consumables businesses), but the giant footprint under one roof may be another story. On the other hand, the “category killer” big box store (toys, electronics, office equipment) is definitely struggling with the effects of technology on its business.
Think about Best Buy, Staples and Toys “R” Us as examples: Both Amazon and the discounters provide plenty of price and assortment competition. More importantly, many of these stores are still devoting space to products (CDs, DVDs, printers and paper) that are quickly losing steam with consumers. It pays for stores like Best Buy to keep rolling out small-footprint stores focused on a single category like mobile.
One of the trends I think we will see finally come to fruition will be the “neighborhood” store format. At some point retailers will embrace the concept of the store shopping experience being the destination for the local consumer rather than the banner across the top of the building. So for grocery retailers, for example, it will be possible to walk into a Safeway in one neighborhood versus another and have completely different POS, assortment and brand messaging. The current vanilla one-size-fits-all may go away.
So is it the “have nots” vs. the “haves” or the “over 50s” vs. the “under 30s”? Everything I’m reading is the younger generation is closer to my grandparents’ thriftiness. The largest consumer market for luxury goods is the 55 year old, so I’m not sure how this rampant run to younger demographics squares with the thinking Boomers will still be driving the economy for the foreseeable future.
By 2020 there will be new retailers and some older ones will be gone. Nothing new there since it happens all the time. Many of the larger store formats will venture into trading areas that cannot support large stores, so smaller store formats will open with the ability to order anything, but pick up in a store. Stores may carry fewer items since more shopping will be done online. By 2020, the next big thing that replaces Apple will be here and having an impact on retail. For most of us, we will continue to shop in stores as we do today but just differently.
10 years is not enough time for a drastic shift, but you will see a more pronounced introduction of the online store in the bricks and mortar location.
The next 10 years brings in smaller and smaller retail boxes with only the top SKUs in stock in the store, but hundreds of thousands available online. The in-store focus will shift to ‘let me show you what we have online’. The customer knows they are in the store, but may not realize all the additional SKUs they can get online.
While the associate is showing the customer the awesome website that this bricks and mortar store has — “Let’s make sure you download our latest app/mobile website onto your phone and register your information with us so you can purchase while you are on the go. We will also set auto delivery of your key items (milk, prescription drugs, the new Michael Kors fall collection…etc). AUTO FULFILLMENT – It will ship to your house and you can return it if you don’t need it.”
My crystal ball isn’t working this morning, but what I think I know is that the future will be great for consumers. Retail just keeps getting better in every aspect.
Here’s one thing I believe: store staff will continue to become more important to a retailer’s brick and mortar business. Retailers will invest more in them, not less. As a result, they will perform better and give customers a great shopping experience. This will become closer to the norm. And when it does, we all will head back to the malls to shop and socialize happily.
The future is always a pile of opinions on who is the next Walmart or Amazon, but through it all, the local neighborhood store is still hanging in there. A well-run local independent operator is still the lifeblood of small communities. Yes we have been beaten up, and purged of our bottom line due to the big discounters, but a smart and well informed independent can actually do well, if they stay on top of their game.
Online will continue to take the non-perishable staple game away, but there is always the opportunity to sell the perimeter, as online can not match the experience. I will probably be the oldest living store owner someday, and that is just fine with me, because retirement seems pretty boring. I’m shooting for 75 years in the food business, as I already have 51, so hang in there all of you neighborhood people, your time is right around the corner….
The essence of this report is not that channels are blurring, rather the concept of a defined channel in the mind of the customer no longer exists, if it ever did. Whenever convenience and the need for a product or service collide, a buying and selling occasion exists. I agree with most of the predictions in the report and also the point that many are already in place or are being tested.
The secret is to identify your target customer and figure out which problems they will give you permission to solve. Then solve them better than anyone else.
Predicting 10 years into the future is a fool’s errand. For a retailer looking to take specific actions, it is hard enough to predict what is going to happen next month.
The right approach to guiding action is evolutionary. That is, get a bigger portfolio of growth and innovation ideas, some bigger and some smaller. Then try them. Let the ones that work flourish and the ones that don’t change or die (thus “evolution”).
Some may say this is incrementalism and that companies that act this way will be victim to mega-trends in the retail environment. It isn’t true. Again, look to the world of biology for all the radical “innovations” that happen in response to natural selection. The key is to have the discipline (1) to test more things and (2) to let ideas that fail tests die. The second is critical and difficult — being as ruthless as nature is hard for people.
Ironically, retailers with a smaller footprint will have an upper hand over the next 10 years as big box looks for ways to downsize. RadioShack, Famous Footwear and of course Apple stores and other retailers that have lots of smaller locations should quickly figure out how to take advantage of this trend driven by technology, economic conditions and overall customer wants and needs.
Some thoughts on what to do:
Omni-Channel – Make sure your message including price is the same across all channels. Make sure the experience is seamless. If a customer can’t find what they want, make sure they can buy it from your online site (ship to home or store). Mixed pricing across channels will confuse customers and impact your credibility.
Smaller footprint – If you have a small footprint already, great. If not, start thinking about ways to create one. Imagine if Best Buy took their box and broke it down to include 8-10 complementary stores under one roof?
Experience – Across your Omni-Channel what type of experience are you offering customers? Think about Apple Stores and how the experience drives people to not only stores, but online as well.
Services – Beyond products what services can you offer customers? Walgreens offering flu shots, Apple with tech support. Customers want more than a product they want the service that enhances that product.
What an amazing time for retail. Don’t get caught sleeping at the wheel.
Smaller stores with more specialization and reduced SKUs, a much higher amount of online purchases, continued decline of traditional methods of advertising and promotion with much more emphasis on digital, mobile and social channels. Just to name a few….
I’m not buying what these folks are selling, particularly when they speak about “dismantling the mass homogenization and scale assumptions” that have driven corporate retailing.
Their primary assumption seems to be that because there are too many stores, and that those stores are too big, and that we now are in a technology-driven, multi-channel world, that the mass market will devolve into a seemingly endless series of niches.
I just don’t see that happening. The one clear fact that any vision of the future has to take into account is the unrelenting pressure on prices resulting from the intense competition for limited consumer dollars. That pressure reinforces homogenization and the need for scale.
The most successful corporate retailers will be the ones who can most effectively drive their marginal costs down, to offer the sharpest prices, while providing a baseline level of customer service, across every channel.
We have heard much of this before. Retailing will continue to become an omni-channel experience, forcing retailers to compete in a multidimensional world for consumers. Smart retailers are currently honing their presence across selling platforms, listening to consumers and engaging in constructive self evaluation.
I would agree with the conclusions of the 2020 Report. In the grocery channel we are already seeing the growth and the future of the sector positioned in the two polar ends of the market. Smaller “price” formats designed for a quick shop, yet with the savings of a Big Box, is working and thriving for Aldi and to some extent, Sav-a-Lot.
On the other end of the spectrum, fresh specialty stores like Whole Foods, Trader Joe’s and Fresh Market are expanding at the expense of the traditional supermarket. Consequently, if traditional grocer formats are to survive long term, they will need to re-think their entire go-to-business strategy, including store size, interior traffic flow and layouts as well as assortment.
In the coming years, I see shoppers viewing the grocery channel operators with three distinct lenses: Those that offer the best overall price, those that offer the best in-store experience and shopper conveniences, and finally, those that offer the best quality and assortment of perishables. To win, the retailer will need to be the BEST in their marketplace at one of these three categories and be reasonably competitive in ONE of the other two.
Many traditional grocery stores today, even some of the newest and nicest, cannot distinguish themselves in any of these three areas, and will likely struggle and eventually fade from the scene. Exciting times are upon us, but change and adaptation is a must if the retailer plans to be relevant in 2020!
The continued erosion of the traditional ‘brick & mortar’ retailer as we know it. Grocery will be the exception as fresh food distribution and logistics require a physical presence. Retailers that embrace the reality of showrooming will succeed. The rise of the ‘shop-in-shop’ strategy will take hold as brands create mini showrooms within a larger footprint where shoppers can experience products in a multi-sensory physical space, but then order through their device.
If Wall Street lets them, JCPenney will emerge successfully. Brands will continue to marginalize retailers as they leverage ‘big data’ in order to establish and maintain a relevant and personalized dialog with their customer-for-life. Brands will realize that they have an invaluable library of content that is relevant in maintaining their dialog with their customers and will become publishers. By consolidating ‘Big data’ with omni-channel marketing and merchandising strategies designed from a consumers perspective — shoppers will again be surprised and delighted by the shopping experience!
PwC US and Kantar….Shoppers will be divided into two distinct purchasing nations, over fifties and under thirties.
No one is talking about who makes up that under 30s. It’s the multicultural consumers: Hispanic, African American and Asian. In general they consider retail shopping “family entertainment.” Multicultural births are now the majority in the U.S.
I’m cautious about long term prognostications like these. Kantar releases nothing here to suggest WHY these predictions are true — probably they really just want us all to buy the data (and these are motivating headlines for selling data). Yet buyer beware.
My recommendation is that retailers need to stay focused on how each can create the strongest business for their unique situation. Even if this broad theory about big box is true, there will also be specific retailers who thrive because it’s not true for them and they sort that out.
It’s far more important to find individual strengths and uniquenesses than to dash off after the crowd.
Retail 2020 has a nice ring to it. I think we’re already there and the next eight years will be all about execution against it. Direction to smaller formats is already here and by definition, that means erosion of big-box share of the market — nothing new. Retailers need to think not of “online STEALS trips” but “online SEALS trips”. The new economics in the report are more about using measurements from a physical-store-only universe despite the reality of an omni/multi-channel world. Sales per square foot and same store sales no longer have the same value or representation of retail success — store and online are the same thing for the shopper, and measures that focus on a channel don’t tell the whole story; even worse, they tell the wrong story.
The notion that retail will become more dynamic and require greater flexibility makes sense, but limiting the “pulling together of data” in the future leading up to 2020 to three types (two product related and one on tectonic shifts) loses sight of the critical LOCAL nature of success in retail, and the individual shopper, AND at the same time providing a consistent brand experience across all channels.
The biggest shift has been, and will continue to be, consumer-centric retailing in every sense of the word. Full stop.
Let’s get on with executing against the future that’s already here.
I’m looking forward to seeing wonderful store experiences that entice me to shop. After all shopping is a pastime for many and a fun way to spend a few hours, catch up on trends, and socialize. I will also expect to see some of the big box stores become their own showrooms. Let me see what this will look like in my home complete with all the trimmings I might have overlooked, but now must have to go without.
And BTW, young people today are super conservative. Yes they all have smartphones, but many do not buy the data package. If Wi-Fi is not there, they aren’t either. Nope, I’m not drinking the Kool-Aid from this article. Sorry.
I don’t buy it. The housing and commercial real estate recession is not going to let any of this manifest in the next 12-20 years.
In addition, it will be hard to invest or create new hub and spoke models to compete with supercenters. In fact, I expect supercenters to dominate more by building smaller spokes to their supercenter hub.
Maybe it IS better to burn out than to fade away. We’ve been talking about big box fading away since the ’90s. Few with name recognition have actually vanished (CompUSA). Those that are walking wounded (Kmart, Office Depot) have been doing so for long enough now that the Millennials only know them as such. Those that are on their “second wind” (JCP, Sears) are really on their 4th and 5th wind — writing about them every day just fell out of vogue.
YES. There will be change. YES. It will be predicated on societal changes (car pooling, working from home, returning multi-generations under one roof). Just like it always has. The neighborhood store is a place we’re returning to, not one that we’re inventing. It, too, will run another course (boom, latent, bust) and we’ll be back to thinking that a “warehouse concept” might be cool….
Everything’s cyclical. One day, there may even be a world where Walmart’s not the biggest. One day.
Cool! “Chief Knowledge Officer!” That is a terrific title, Bryan Gildenberg of Kantar Retail, and one I couldn’t get in my own house. B-b-but, why would any retailer be interested in trying to sell to “Have Not consumers” If they truly “have not?” How can they be consumers and buy stuff? Perhaps that’s what “Knowledge Officers” know and leave the rest of us to discover eventually in our torpid way.
As others have noted, the “insights” from this “Retailing 2020 report from PwC US (who’s that?) and Kantar Retail” are wholly predictable, unimaginative, un-scary, un-new, and sans-insight.
A thought: More iPhones are sold through service providers — e.g., AT&T — than are sold in Apple stores. Thus, the hyper-publicized lines waiting to enter Apple stores on immaculation day for new products represent the smallest group of user/customers. This is a futuristic blend of online and B&M sales, with “online” winning the day.
Any retail paradigm shifts by 2020 will be product-driven, availability-driven, and format-driven; not sales-driven. Different strokes for different folks. For instance, I’ll wait to buy certain book titles until there are Kindle versions. I don’t want printed copies. Price is not an issue, and I don’t like shopping in stores. Am I alone here?
The challenge here is to optimize consumer targeting capabilities so that the physical stores that remain are viable competitors against the increasing presence of online stores.
If anyone could predict what the retail world will look like 10 years from now, they’d have a different title besides “Knowledge Officer.”
Take a moment to even think of the discussions this week — the iPhone. The first release of the iPhone was in 2007. Could the “Knowledge Officers” of the world have predicted in 2002 that five million or more would line up for a company like Apple? Maybe Steve Jobs had a glimmer in his eye, but anyone that claims they would have is being disingenuous.
The predictions made here are broad and general and given much better adjectives by Doc Banks than I could provide. What has actually happened over the past 10 years, if predicted back then for online sales, would have been shot down quick by talking heads. Amazon.com didn’t even turn a profit until 11 years ago and wasn’t even considered all that viable 10 years ago.
Think about it. Has it been an evolution? Or, has it really been a revolution? Ten years ago, the unemployment rate we have currently was unimaginable. Ten years from now, who knows? Whole Foods Market wasn’t even a Fortune 500 Company until 7 years ago. Get the picture?
While the economic outlook is bleak, it could change and it will change. A wider split between “haves” and “have not” is always the mantra in a down economic period. Yet, the overwhelming majority of income in the U.S. lies right in the middle. It certainly wasn’t only the “haves” that lined up for the iPhone. Or, for that matter a pad, notebook or the next new thing. Not only the “haves” rocketed Amazon to where they are today.
Defining the “have nots” has dramatically changed. It’s not a very well-defined term in this case. My prediction is that they (whoever they are) are driving just as much of the evolution/revolution as the “haves.”
While retailing may be evolving, underlying that is a revolution that only history can fully describe. We can’t because were in it. It’s a heck of a ride.
“Prediction is very difficult, especially about the future.” Niels Bohr, Danish physicist (1885 – 1962) With that caveat, I prefer to think about capabilities that exist, and how those are moving, and discern trends from that. Hence, my articulation some time ago of the coming Convergence of Online, Mobile and Bricks (COMB) retailing.
This coming convergence is driven by the capabilities of the smart phone, wedding the internet to bricks stores. The consequences of this can’t be reduced to “big box” vs. neighborhood market – but are more driven by the evolution of society in relationship to INFORMATION. This means big, BIG data will disrupt retail in ways few are yet conceiving.
I said here recently, a FEW retailers will drive the coming retail revolution, just as ONE smart phone supplier has driven consumer technology adoption over the past few years. The massive success of those few will be followed by the rest of the survivors. 😉
Retail landlords need to begin marketing box spaces to non-traditional retailers and find ways to integrate them into retail projects. There will not be enough retail tenants to fill all of the vacancy. Many centers need to be open to adding medical, office, education, and religious uses. I recommend retail landlords get involved in NAIOP and local economic development.
In the late 1800s the Wells Fargo wagon delivering items purchased from the Sears & Roebuck catalog was to destroy local merchants. It had an impact. In the 1930s through ’50s the grocery chains threatened to destroy butcher shops and green grocers. It had an impact. In the ’70s and ’80s Walmart’s arrival on the outskirts of town threatened many smaller town central business districts. It had an impact. In the same period giant malls in the suburbs of larger towns threatened to destroy many neighborhood strip centers. It had an impact. In the early 2000s the Internet threatened most commodity retailers and many specialty retailers. It is having an impact. In the two-thousand teens the Internet threatens “big box” retailers whose only real value add is immediate access to the product. It will have an impact.
I contend the “paradigm shift” resides only in the life of the retailers who fail to create and then exceed consumer expectations. That means retailers ESPECIALLY BRICK & MORTAR retailers HAVE to improve their ability to ADD VALUE.
Retailing has always and will continue to be a very dynamic endeavor with constantly evolving consumer expectations (largely created by retailers with a vision and the ability to execute their vision) where retailers and their suppliers continually develop new stuff to expose consumers to and new methods to cause such exposure.
What most think of as a paradigm shift (Sears & Roebuck, large grocery stores, suburban strip centers, malls, Walmart, Internet, etc.) I submit are simply mechanisms which speed up the consumer’s ability to learn about a product or service, determine that the product or service is wanted or needed, make a decision to purchase, then execute the purchase decision. This consumer process has not changed and I suspect will not change. The only change is the speed with which the process can be completed by the consumer. That includes the convenience of more consumer choice.
As always retailers must be relevant to the consumer’s desires and be; better, faster and/or cheaper. Usually a retailer can only be two of these three choices and a consumer can realistically expect to realize only two of these three choices.
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I don’t agree with the premise that combination food/discount stores are doomed (both Target and Walmart are both committed to the food and consumables businesses), but the giant footprint under one roof may be another story. On the other hand, the “category killer” big box store (toys, electronics, office equipment) is definitely struggling with the effects of technology on its business.
Think about Best Buy, Staples and Toys “R” Us as examples: Both Amazon and the discounters provide plenty of price and assortment competition. More importantly, many of these stores are still devoting space to products (CDs, DVDs, printers and paper) that are quickly losing steam with consumers. It pays for stores like Best Buy to keep rolling out small-footprint stores focused on a single category like mobile.
One of the trends I think we will see finally come to fruition will be the “neighborhood” store format. At some point retailers will embrace the concept of the store shopping experience being the destination for the local consumer rather than the banner across the top of the building. So for grocery retailers, for example, it will be possible to walk into a Safeway in one neighborhood versus another and have completely different POS, assortment and brand messaging. The current vanilla one-size-fits-all may go away.
So is it the “have nots” vs. the “haves” or the “over 50s” vs. the “under 30s”? Everything I’m reading is the younger generation is closer to my grandparents’ thriftiness. The largest consumer market for luxury goods is the 55 year old, so I’m not sure how this rampant run to younger demographics squares with the thinking Boomers will still be driving the economy for the foreseeable future.
By 2020 there will be new retailers and some older ones will be gone. Nothing new there since it happens all the time. Many of the larger store formats will venture into trading areas that cannot support large stores, so smaller store formats will open with the ability to order anything, but pick up in a store. Stores may carry fewer items since more shopping will be done online. By 2020, the next big thing that replaces Apple will be here and having an impact on retail. For most of us, we will continue to shop in stores as we do today but just differently.
10 years is not enough time for a drastic shift, but you will see a more pronounced introduction of the online store in the bricks and mortar location.
The next 10 years brings in smaller and smaller retail boxes with only the top SKUs in stock in the store, but hundreds of thousands available online. The in-store focus will shift to ‘let me show you what we have online’. The customer knows they are in the store, but may not realize all the additional SKUs they can get online.
While the associate is showing the customer the awesome website that this bricks and mortar store has — “Let’s make sure you download our latest app/mobile website onto your phone and register your information with us so you can purchase while you are on the go. We will also set auto delivery of your key items (milk, prescription drugs, the new Michael Kors fall collection…etc). AUTO FULFILLMENT – It will ship to your house and you can return it if you don’t need it.”
My crystal ball isn’t working this morning, but what I think I know is that the future will be great for consumers. Retail just keeps getting better in every aspect.
Here’s one thing I believe: store staff will continue to become more important to a retailer’s brick and mortar business. Retailers will invest more in them, not less. As a result, they will perform better and give customers a great shopping experience. This will become closer to the norm. And when it does, we all will head back to the malls to shop and socialize happily.
The future is always a pile of opinions on who is the next Walmart or Amazon, but through it all, the local neighborhood store is still hanging in there. A well-run local independent operator is still the lifeblood of small communities. Yes we have been beaten up, and purged of our bottom line due to the big discounters, but a smart and well informed independent can actually do well, if they stay on top of their game.
Online will continue to take the non-perishable staple game away, but there is always the opportunity to sell the perimeter, as online can not match the experience. I will probably be the oldest living store owner someday, and that is just fine with me, because retirement seems pretty boring. I’m shooting for 75 years in the food business, as I already have 51, so hang in there all of you neighborhood people, your time is right around the corner….
The essence of this report is not that channels are blurring, rather the concept of a defined channel in the mind of the customer no longer exists, if it ever did. Whenever convenience and the need for a product or service collide, a buying and selling occasion exists. I agree with most of the predictions in the report and also the point that many are already in place or are being tested.
The secret is to identify your target customer and figure out which problems they will give you permission to solve. Then solve them better than anyone else.
Predicting 10 years into the future is a fool’s errand. For a retailer looking to take specific actions, it is hard enough to predict what is going to happen next month.
The right approach to guiding action is evolutionary. That is, get a bigger portfolio of growth and innovation ideas, some bigger and some smaller. Then try them. Let the ones that work flourish and the ones that don’t change or die (thus “evolution”).
Some may say this is incrementalism and that companies that act this way will be victim to mega-trends in the retail environment. It isn’t true. Again, look to the world of biology for all the radical “innovations” that happen in response to natural selection. The key is to have the discipline (1) to test more things and (2) to let ideas that fail tests die. The second is critical and difficult — being as ruthless as nature is hard for people.
Ironically, retailers with a smaller footprint will have an upper hand over the next 10 years as big box looks for ways to downsize. RadioShack, Famous Footwear and of course Apple stores and other retailers that have lots of smaller locations should quickly figure out how to take advantage of this trend driven by technology, economic conditions and overall customer wants and needs.
Some thoughts on what to do:
Omni-Channel – Make sure your message including price is the same across all channels. Make sure the experience is seamless. If a customer can’t find what they want, make sure they can buy it from your online site (ship to home or store). Mixed pricing across channels will confuse customers and impact your credibility.
Smaller footprint – If you have a small footprint already, great. If not, start thinking about ways to create one. Imagine if Best Buy took their box and broke it down to include 8-10 complementary stores under one roof?
Experience – Across your Omni-Channel what type of experience are you offering customers? Think about Apple Stores and how the experience drives people to not only stores, but online as well.
Services – Beyond products what services can you offer customers? Walgreens offering flu shots, Apple with tech support. Customers want more than a product they want the service that enhances that product.
What an amazing time for retail. Don’t get caught sleeping at the wheel.
Smaller stores with more specialization and reduced SKUs, a much higher amount of online purchases, continued decline of traditional methods of advertising and promotion with much more emphasis on digital, mobile and social channels. Just to name a few….
I’m not buying what these folks are selling, particularly when they speak about “dismantling the mass homogenization and scale assumptions” that have driven corporate retailing.
Their primary assumption seems to be that because there are too many stores, and that those stores are too big, and that we now are in a technology-driven, multi-channel world, that the mass market will devolve into a seemingly endless series of niches.
I just don’t see that happening. The one clear fact that any vision of the future has to take into account is the unrelenting pressure on prices resulting from the intense competition for limited consumer dollars. That pressure reinforces homogenization and the need for scale.
The most successful corporate retailers will be the ones who can most effectively drive their marginal costs down, to offer the sharpest prices, while providing a baseline level of customer service, across every channel.
We have heard much of this before. Retailing will continue to become an omni-channel experience, forcing retailers to compete in a multidimensional world for consumers. Smart retailers are currently honing their presence across selling platforms, listening to consumers and engaging in constructive self evaluation.
I would agree with the conclusions of the 2020 Report. In the grocery channel we are already seeing the growth and the future of the sector positioned in the two polar ends of the market. Smaller “price” formats designed for a quick shop, yet with the savings of a Big Box, is working and thriving for Aldi and to some extent, Sav-a-Lot.
On the other end of the spectrum, fresh specialty stores like Whole Foods, Trader Joe’s and Fresh Market are expanding at the expense of the traditional supermarket. Consequently, if traditional grocer formats are to survive long term, they will need to re-think their entire go-to-business strategy, including store size, interior traffic flow and layouts as well as assortment.
In the coming years, I see shoppers viewing the grocery channel operators with three distinct lenses: Those that offer the best overall price, those that offer the best in-store experience and shopper conveniences, and finally, those that offer the best quality and assortment of perishables. To win, the retailer will need to be the BEST in their marketplace at one of these three categories and be reasonably competitive in ONE of the other two.
Many traditional grocery stores today, even some of the newest and nicest, cannot distinguish themselves in any of these three areas, and will likely struggle and eventually fade from the scene. Exciting times are upon us, but change and adaptation is a must if the retailer plans to be relevant in 2020!
The continued erosion of the traditional ‘brick & mortar’ retailer as we know it. Grocery will be the exception as fresh food distribution and logistics require a physical presence. Retailers that embrace the reality of showrooming will succeed. The rise of the ‘shop-in-shop’ strategy will take hold as brands create mini showrooms within a larger footprint where shoppers can experience products in a multi-sensory physical space, but then order through their device.
If Wall Street lets them, JCPenney will emerge successfully. Brands will continue to marginalize retailers as they leverage ‘big data’ in order to establish and maintain a relevant and personalized dialog with their customer-for-life. Brands will realize that they have an invaluable library of content that is relevant in maintaining their dialog with their customers and will become publishers. By consolidating ‘Big data’ with omni-channel marketing and merchandising strategies designed from a consumers perspective — shoppers will again be surprised and delighted by the shopping experience!
PwC US and Kantar….Shoppers will be divided into two distinct purchasing nations, over fifties and under thirties.
No one is talking about who makes up that under 30s. It’s the multicultural consumers: Hispanic, African American and Asian. In general they consider retail shopping “family entertainment.” Multicultural births are now the majority in the U.S.
I’m cautious about long term prognostications like these. Kantar releases nothing here to suggest WHY these predictions are true — probably they really just want us all to buy the data (and these are motivating headlines for selling data). Yet buyer beware.
My recommendation is that retailers need to stay focused on how each can create the strongest business for their unique situation. Even if this broad theory about big box is true, there will also be specific retailers who thrive because it’s not true for them and they sort that out.
It’s far more important to find individual strengths and uniquenesses than to dash off after the crowd.
Retail 2020 has a nice ring to it. I think we’re already there and the next eight years will be all about execution against it. Direction to smaller formats is already here and by definition, that means erosion of big-box share of the market — nothing new. Retailers need to think not of “online STEALS trips” but “online SEALS trips”. The new economics in the report are more about using measurements from a physical-store-only universe despite the reality of an omni/multi-channel world. Sales per square foot and same store sales no longer have the same value or representation of retail success — store and online are the same thing for the shopper, and measures that focus on a channel don’t tell the whole story; even worse, they tell the wrong story.
The notion that retail will become more dynamic and require greater flexibility makes sense, but limiting the “pulling together of data” in the future leading up to 2020 to three types (two product related and one on tectonic shifts) loses sight of the critical LOCAL nature of success in retail, and the individual shopper, AND at the same time providing a consistent brand experience across all channels.
The biggest shift has been, and will continue to be, consumer-centric retailing in every sense of the word. Full stop.
Let’s get on with executing against the future that’s already here.
I’m looking forward to seeing wonderful store experiences that entice me to shop. After all shopping is a pastime for many and a fun way to spend a few hours, catch up on trends, and socialize. I will also expect to see some of the big box stores become their own showrooms. Let me see what this will look like in my home complete with all the trimmings I might have overlooked, but now must have to go without.
And BTW, young people today are super conservative. Yes they all have smartphones, but many do not buy the data package. If Wi-Fi is not there, they aren’t either. Nope, I’m not drinking the Kool-Aid from this article. Sorry.
I don’t buy it. The housing and commercial real estate recession is not going to let any of this manifest in the next 12-20 years.
In addition, it will be hard to invest or create new hub and spoke models to compete with supercenters. In fact, I expect supercenters to dominate more by building smaller spokes to their supercenter hub.
Maybe it IS better to burn out than to fade away. We’ve been talking about big box fading away since the ’90s. Few with name recognition have actually vanished (CompUSA). Those that are walking wounded (Kmart, Office Depot) have been doing so for long enough now that the Millennials only know them as such. Those that are on their “second wind” (JCP, Sears) are really on their 4th and 5th wind — writing about them every day just fell out of vogue.
YES. There will be change. YES. It will be predicated on societal changes (car pooling, working from home, returning multi-generations under one roof). Just like it always has. The neighborhood store is a place we’re returning to, not one that we’re inventing. It, too, will run another course (boom, latent, bust) and we’ll be back to thinking that a “warehouse concept” might be cool….
Everything’s cyclical. One day, there may even be a world where Walmart’s not the biggest. One day.
Cool! “Chief Knowledge Officer!” That is a terrific title, Bryan Gildenberg of Kantar Retail, and one I couldn’t get in my own house. B-b-but, why would any retailer be interested in trying to sell to “Have Not consumers” If they truly “have not?” How can they be consumers and buy stuff? Perhaps that’s what “Knowledge Officers” know and leave the rest of us to discover eventually in our torpid way.
As others have noted, the “insights” from this “Retailing 2020 report from PwC US (who’s that?) and Kantar Retail” are wholly predictable, unimaginative, un-scary, un-new, and sans-insight.
A thought: More iPhones are sold through service providers — e.g., AT&T — than are sold in Apple stores. Thus, the hyper-publicized lines waiting to enter Apple stores on immaculation day for new products represent the smallest group of user/customers. This is a futuristic blend of online and B&M sales, with “online” winning the day.
Any retail paradigm shifts by 2020 will be product-driven, availability-driven, and format-driven; not sales-driven. Different strokes for different folks. For instance, I’ll wait to buy certain book titles until there are Kindle versions. I don’t want printed copies. Price is not an issue, and I don’t like shopping in stores. Am I alone here?
The challenge here is to optimize consumer targeting capabilities so that the physical stores that remain are viable competitors against the increasing presence of online stores.
If anyone could predict what the retail world will look like 10 years from now, they’d have a different title besides “Knowledge Officer.”
Take a moment to even think of the discussions this week — the iPhone. The first release of the iPhone was in 2007. Could the “Knowledge Officers” of the world have predicted in 2002 that five million or more would line up for a company like Apple? Maybe Steve Jobs had a glimmer in his eye, but anyone that claims they would have is being disingenuous.
The predictions made here are broad and general and given much better adjectives by Doc Banks than I could provide. What has actually happened over the past 10 years, if predicted back then for online sales, would have been shot down quick by talking heads. Amazon.com didn’t even turn a profit until 11 years ago and wasn’t even considered all that viable 10 years ago.
Think about it. Has it been an evolution? Or, has it really been a revolution? Ten years ago, the unemployment rate we have currently was unimaginable. Ten years from now, who knows? Whole Foods Market wasn’t even a Fortune 500 Company until 7 years ago. Get the picture?
While the economic outlook is bleak, it could change and it will change. A wider split between “haves” and “have not” is always the mantra in a down economic period. Yet, the overwhelming majority of income in the U.S. lies right in the middle. It certainly wasn’t only the “haves” that lined up for the iPhone. Or, for that matter a pad, notebook or the next new thing. Not only the “haves” rocketed Amazon to where they are today.
Defining the “have nots” has dramatically changed. It’s not a very well-defined term in this case. My prediction is that they (whoever they are) are driving just as much of the evolution/revolution as the “haves.”
While retailing may be evolving, underlying that is a revolution that only history can fully describe. We can’t because were in it. It’s a heck of a ride.
“Prediction is very difficult, especially about the future.” Niels Bohr, Danish physicist (1885 – 1962) With that caveat, I prefer to think about capabilities that exist, and how those are moving, and discern trends from that. Hence, my articulation some time ago of the coming Convergence of Online, Mobile and Bricks (COMB) retailing.
This coming convergence is driven by the capabilities of the smart phone, wedding the internet to bricks stores. The consequences of this can’t be reduced to “big box” vs. neighborhood market – but are more driven by the evolution of society in relationship to INFORMATION. This means big, BIG data will disrupt retail in ways few are yet conceiving.
I said here recently, a FEW retailers will drive the coming retail revolution, just as ONE smart phone supplier has driven consumer technology adoption over the past few years. The massive success of those few will be followed by the rest of the survivors. 😉
Retail landlords need to begin marketing box spaces to non-traditional retailers and find ways to integrate them into retail projects. There will not be enough retail tenants to fill all of the vacancy. Many centers need to be open to adding medical, office, education, and religious uses. I recommend retail landlords get involved in NAIOP and local economic development.
In the late 1800s the Wells Fargo wagon delivering items purchased from the Sears & Roebuck catalog was to destroy local merchants. It had an impact. In the 1930s through ’50s the grocery chains threatened to destroy butcher shops and green grocers. It had an impact. In the ’70s and ’80s Walmart’s arrival on the outskirts of town threatened many smaller town central business districts. It had an impact. In the same period giant malls in the suburbs of larger towns threatened to destroy many neighborhood strip centers. It had an impact. In the early 2000s the Internet threatened most commodity retailers and many specialty retailers. It is having an impact. In the two-thousand teens the Internet threatens “big box” retailers whose only real value add is immediate access to the product. It will have an impact.
I contend the “paradigm shift” resides only in the life of the retailers who fail to create and then exceed consumer expectations. That means retailers ESPECIALLY BRICK & MORTAR retailers HAVE to improve their ability to ADD VALUE.
Retailing has always and will continue to be a very dynamic endeavor with constantly evolving consumer expectations (largely created by retailers with a vision and the ability to execute their vision) where retailers and their suppliers continually develop new stuff to expose consumers to and new methods to cause such exposure.
What most think of as a paradigm shift (Sears & Roebuck, large grocery stores, suburban strip centers, malls, Walmart, Internet, etc.) I submit are simply mechanisms which speed up the consumer’s ability to learn about a product or service, determine that the product or service is wanted or needed, make a decision to purchase, then execute the purchase decision. This consumer process has not changed and I suspect will not change. The only change is the speed with which the process can be completed by the consumer. That includes the convenience of more consumer choice.
As always retailers must be relevant to the consumer’s desires and be; better, faster and/or cheaper. Usually a retailer can only be two of these three choices and a consumer can realistically expect to realize only two of these three choices.