THE FUTURE OF RETAIL

By Evan Wise

The following analysis and conclusions are based on an article in WSR (Frugal Shoppers Appear Here To Stay by Lisa Lockwood 8/16/2010) about various observations of the direction of retail. Keep in mind none of these are absolutes but rather a continuum of change. We are at various stages of that continuum and it will affect some more than others.  I hope that these observations help you identify where you are situated in your own store with your own customer base. This Is an overview of the general  retail situation so there will be many individual examples of exceptions to these observations.  Like any forward looking analysis, the best use is to be aware of changes and see if there are signs in your business that reflect these observations.  If so, you then need to identify the changes in your marketing ,selling, buying and planning to be certain that you are ahead of the curve.

Thoughts about the future of Retail:

  • More Technology
  • Less Branding
  • Move toward Need not Want

The “high end” retailers will be dealing with a smaller demographic. Those shopping the high end will be more aligned with that income and economic level, regardless of social level as in the past.  This will be offset by less competition and a flight from the big box environment to the stability of the independent. With a smaller pool of potential customers and fewer competitors, the high end is ripe for developing dedicated communities and networks of shoppers.  Those networks will be more critical to future success than any traditional marketing in print or broadcast mediums.

Technology

The overriding theme for the future of everything seems to be technology. The younger generations that will feed future purchases are so tuned in to technology that phone calls are becoming passé in favor of texting and other communication methods. Phones do so much and their worst feature is that it is becoming harder to talk to other people on it. People will want a relationship but it will be nurtured differently than in the past. Print media and radio are dying  as social networking, twitter, facebook, linked- in and word of mouth through technology takes over.  The website is a natural transition to the brick and mortar buying experience and no longer a separate experience as many retailers treated it in the past. That means that even if you are not into e-commerce, the website should display your top lines just like your window. Change the website even more often than you do your window.

The retailers that can adapt to the latest technology will gain an edge.  We are on the cusp of automatically sending  a text  or Twitter to prospects when they enter a radius ½ mile from your store  or closer and stores  will invite traffic that is potential business when they are close.  The more creatively you can use technology the more tuned in to growth you will be.  That means not only on the floor but in the back office too.  The need for forecasting and technology in managing your buying and your cash has increased. Lack of this technology has been a prime driver in who survived the recession and who succumbed and that pressure will only increase.

Technology will find its way into fashion products too.  I was at the WSR shoe show in Las Vegas last week and saw technology for comfort, cushioning and balance incorporated into shoes.  Technology to develop a custom fit in the store is here and serves to bring the customer into the technology of finding the right shoe.  Just like the phone has evolved to become a camera, texting device, internet access etc, fashion will provide muscle exercise, slimming, and health benefits too.  That means that every sales person must have more product knowledge about the features and benefits with details and background information. Communication of the technology of the product, how it is used  and its manufacture will be more important.  Organic stores, new materials, humanitarian manufacturing and just plain information about the features and benefits of each article is already on the scene. Look for more technology in the items sold in stores at all levels.  Shoppers want value and that comes with knowledge. As consumers get more thoughtful about what they buy, it must not only look and feel good but must be good for the environment and be made in quality ways that deliver greater benefits.

Less Branding

Brand loyalty is on the way out as people are looking to their friends and networks for the thing to buy; whats hot and whats not.  In some ways this is a logical extension of how shoppers get their information.  This is a fundamental shift and has many interesting ramifications!

Magazines, newspapers, and broadcast marketing to develop a brand is waning. That leaves vendors without a key tool they always used to develop their brand.  They are transitioning to the internet  and email but that is a personal medium where most email that is not personal gets filtered out with spam before it reaches the shopper.  That means the branding will shift to the local level.  Retailers will be in a stronger position with vendors since the market development will depend more on them.  Look for vendors to shift more marketing funds and efforts to the retailers!

Look for vendors to search for technology and other features to drive their lines.  No longer is fashion the key driver since those fashion statements were driven by mass marketing.  With people looking to what their own network is wearing, they will be less driven by a fashion trend than in the past. That being said, technology of new fabrics, function and design will eat away at the emphasis on fashion.

Brands will come under pressure from shareholders to maintain traditional profits.  To do that they will need to expand their customer base or raise their prices as those that qualify to buy at the high end shrinks. Some will dilute their brand to sell to the less affluent. Others will maintain their quality and brand image to sell to a smaller pool at a higher margin.  Retailers will have similar pressures to either stay the course and find ways to stay profitable or expand their target to change their focus to attract a larger client base.

Technology has redefined the fashion world. When a vendor could create a fashion and be exclusive for a season the brand image meant a lot. Today when a fashion is launched on the runways of Paris, technology allows it to be knocked off in the factories of China so the exclusivity may last a couple weeks.

One example of this move is the Vibram 5 finger toe shoe.  The design looks awful but has technology features designed into it all over! You probably have not seen an ad for it because their investment has gone into patents and aggressive protection of those patents.  The design is “foot functional” rather than fashion desirable and retailers can’t keep them on the shelf. Word of mouth in networks of runners and other young people are driving brisk sales.

More Need and Less Want

Future customer service will focus on developing networks and relationships through the networks.  More time will be spent communicating individually and electronically and less will be spent mass marketing in the media, direct mail and broadcast. Customer service means different things to each person and the best retailers will look for those differences and customize their “service package” for each customer. That will be a differentiator!  Technology can help log that information  and guide the building of a strong relationship.   Need will show up in more than just product and the best retailers will provide the retail experience, service and product that fills the need of each customer.

Events and experience will become more important than particular lines or brands.  The store experience will be much much more important. The words DYNAMIC AND SPIRITED jumped off the report.  What words define and depict your store and the experience your customers receive.  What feelings and emotions do your customers feel as they leave your store.

Mass media, broadcast and direct mail will all continue to wane. Why do you think the post office is hurting so badly!  Newspapers are going out of business on a consistent basis. The customer is smarter and more informed due to the internet and the networks of friends comparing information and data. When you are in a group of people under 30 and you want to go out to eat, phones come out and heads go down and  people get on their phones to type in yelp.com or some other evaluation site on the internet to see how many stars their friends rated the place!  They are doing that with your business too.

Summary

You must make sure that your customers are talking about you; you can’t be talking about yourself!

Vendors are becoming less important as customers are becoming more so.  Retail is changing in fits and starts. Nothing will always work but ideas that fit these changes will work more often as time goes on.