RetailWire/Dechert-Hampe Study Results: What’s Next at Retail?
What’s the next big (or
small) concept that will rock retailing? That was among the questions asked
in the newly released RetailWire/Dechert-Hampe report, Retail
Formats in Transition, the first in a series of forward-looking studies
entitled RETAIL:NEXT. (Click to download the Executive
Summary…)
Respondents were, for
the most part, upbeat, with 54 percent looking for the retail industry
to experience modest or better growth over the next three years. The most
bullish segment of the 228 individuals interviewed for the study was retailers.
A full 65 percent of merchants responding are looking for moderate growth.
Less than half of manufacturers, 45 percent, felt the same way.
The study found that
a number of factors will influence upcoming store format development in
the future as the economy improves. Consumers will increasingly be drawn
to concepts that offer convenience, service and a better shopping experience.
Source: RetailWire/Dechert-Hampe – “Retail Formats in Transition” – Nov/Dec, 2008
Concepts seen as having
the best chance for success in the future included quick/fresh small format
grocery (Trader Joe’s, Fresh &
Easy, Marketside, etc.) and experiential stores,
such as that operated by Apple.
Other retail concepts
that respondents said would achieve success were mission focused (OfficeMax
Mini Mart), consumer-centric (Best Buy), outlets targeting an audience
based on ethnicity or age, lifestyle stores (Outdoor World) and home delivery
services (Peapod, etc.).
Interestingly, considering
the current push, concepts driven by innovative technology, including virtual
stores (kiosks), automated merchandisers (Zoom, etc.), are predicted to
be less successful. Others that respondents believed would face major challenges
included pop-up locations, on-campus stores and specialty category (cookware,
etc.).
Those outlets given little
or no chance for future success included drive-thru stores such as Dairy-Mart
as well as extreme mall concepts and occasion stores.
Survey methodology:
The “RETAIL: NEXT – Retail Formats in Transition” survey was fielded
in November/December, 2008 by Dechert-Hampe Consulting.
It was conducted as an internet survey covering the RetailWire community
and other industry participants. The survey results are a composite of 228
total responses. The respondent population breaks down as: 32 percent manufacturer/vendor;
24 percent retailer/wholesaler; 31 percent services/research/consultant;
13 percent agency/other.
Discussion Questions:
Based on the study results, and your own prediction of where store formats
are headed, which retail operators have the best handle on where the
market is going and what consumers will be looking for in the next few
years?
The next big thing in retail is whatever it takes to attract and retain loyal shoppers–sounds so easy and is so difficult to execute. With consumers having the ability to purchase on the Internet there has to be a reason to go to the retail location–whether it is to touch the products, to participate in the activity, to be seen, etc. Can retailers create an environment to which their consumers want to go? Will they have the products their consumers want to purchase?
We will have a large older population who are not all similar in their interests as well as a large group of younger people who have diverse interests. One size and one approach for everyone won’t really work for everyone. Even the big box stores with low prices will have difficulty because the larger older population may not be interested in walking through the whole store to find what they want.
At the high-altitude view the document provides some interesting data and compelling observations. Digging down deeper, I struggle with the suggested applications. The market has fundamentally shifted and therefore the vocabulary should shift too. President Obama is the only example we need to know that we have shifted from demographics to behaviors.
Therefore what do these mean? “Value for the money,” “consumer experience,” “ethnic targeting,” and “limited assortment”? The challenge remains the same – precise definition of the target audience and focused effort to build the selling model and delight them. Without clear, objective direction and alignment among the silos, merchants, operators and marketing retail formats fail. As we all know, “retail ain’t for sissies.”
There are some great examples here of directions retailing could take. But I’m always amused by those who are looking for the “next big thing” when they still can’t get the “current” one right.
I’m not saying that the industry should go into its corporate fetal position and ignore possible future scenarios. But try to use, experiment and perfect what you’ve already got in terms of marketing, merchandising and execution before bouncing over to the next thing.
If you’re doing a mediocre or lousy job catering to ethnic, senior or teenage consumers now, chances are you won’t get any better simply by changing the square footage.
If the economy ever returns to “normal” and diverse preferences continue to proliferate, those formats that best target major preference areas will most likely succeed–providing they are operationally efficient and highly responsive.
If the economy should get worse or shatters, price will become king and that would favor good private label retailers and also Wal-Mart, although they have been raising their food prices.
My sense is that the retailing world will take on the look of the Long Tail. From a revenue standpoint, there will be a small grouping of very large retailers providing core “basics,” from grocery to apparel to home electronics, in large formats. Product differentiation will be seen as less of a factor by the public than price. The commoditization of these core basics will continue.
Beyond that, there will be a very large grouping of smaller, entrepreneurial, niche retailers. They will be tightly focused on a narrowly defined customer. Their strategic approach will be lifestyle driven rather than product driven. Margins will be sustainable because customers are motivated by their passions, not by price. Store formats will be small, and scalability will be dependent upon identifying markets that can support the niche.
I agree with the last comment I read, and would like to take it a bit further. Absolutely, my opinion coincides with the conclusions of the study. However, I remain extremely wary of a focus on any one dimension of the retail enterprise, such as “format.” The focus on a single aspect often has the intoxicating sense of being easily or simply changed. The reality is so much different.
Implementing a new format is NOT accomplished by designing a different physical space, or even identifying a newly-focused target for the assortment. Instead, what is required is at once both a holistic and highly detailed approach to transforming the entire retail enterprise in support of the realignment. Otherwise, we’re putting lipstick on pigs again. And again.
We need to face the same unpleasant reality our country faces right now. The infrastructure of retail was designed on the basis of the economic, social and cultural truths which evolved over the decades of the 70s, 80s and 90s. They don’t work anymore, aren’t applicable anymore, and proved to be no more dynamic than the concrete bridges our highway system so badly needs replacements for. Retail organizations evolved (or in some very isolated cases were built) to meet these now obsolete truths–systems, people, processes, culture–every single aspect of the retail enterprise developed or responded to these now outdated realities.
What’s next at Retail? More of the same if all we do is tweak, adjust, and tinker. The REAL winners and dominant players for the NEXT decade are going to be those organizations which seek right now to redefine themselves, and then restructure, re-energize and refocus around that new definition.
The simple answer would be to take a look at Apple’s stores: interactive, simple, heavy on customer service, flexible sizes, brand right and of course–fun to be in. That says it all, doesn’t it?
The more complex answer is: smaller at retail, bigger online. The retail experience is going to have to take huge leaps in order to woo consumers back out, especially with the progressions online retailers are making. So, smaller physically, but cooler in both bricks and clicks.
I have a hard time distinguishing between some of these categories–experiential vs. customer-centric, for example. And any of these store formats could be “customer-centric” in their design–it’s not just Best Buy who has a lock on trying to design their format to better align with how customers shop.
I think the two extremes we’ve been seeing in formats will continue–the success of the supercenter and the success of more targeted or specific formats, like smaller grocery stores or mission-focused formats. The one appeals to the price-conscious shopper, and the other fits into the focus on home and immediate neighborhood, and the more focused shopping trip of limited budgets.
I would argue that “the next big thing” may turn out to be small-format stores, whether in food or non-food retailing. The idea behind “Fresh & Easy” (tightly edited assortments, convenient locations) has application to all sorts of businesses. Think of the newly announced “C-store” version of OfficeMax as a good example, allowing OfficeMax to spread its best-selling and most frequently-shopped items into smaller footprints. (These have the advantage of lower cost and site development along with the sort of ubiquity connected to successful stores like Walgreens.) The era of the “big box” isn’t over by any means, but also-ran players are falling by the wayside rapidly.
The next big thing at retail? Given the dynamics in today’s marketplace, many will focus merely on “survival.” I would agree with many of the other remarks on this topic, big things do not come to those who simply tweak, adjust and continue delivering the same basic retail experience with a new wrapper.
What’s truly required is game-changing innovation. I believe enhancements to cater to the self-service and self-directed consumer will be paramount (this probably includes informational and product assistance kiosks in the aisles as an extension of the store staff…that’s one of the reasons we’re entering this space in a new alliance.
Another area that will transform retail is a true convergence of the online (virtual) retail experience with the brick-and-mortar. Sure some have tried, but examples like an integrative approach like that being embarked on by Walgreens may be just what the retail world needs to be shaken and reinvented.