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Some Thoughts on the Future

Monday, April 6th, 2009

We are not normally in the business of predicting the future, but because there are many dramatic changes taking place in the world at the moment and because we have been asked a number of times by a number of clients recently, we thought we would outline some internal thoughts we have on what might happen in the world of retail during the coming years. Some of this might seem obvious, and there are bound to be things we have missed, but the intention is to revisit these in two years to see how we did.

Macro Retail Changes

Economic factors will continue to have a significant impact on the retail industry in the U.S. during the next 24 months.

We expect to see:

  • Further consolidation as retailers with strength buy their weaker counterparts to drive growth through acquisition. Manufacturers will need to provide leadership and intellectual property to the retailer to gain influence. Bigger business-building ideas for retailers will be required on a more regular basis.
  • Further store closures through both the bankruptcy of retailers and reduction in footprint as retailers close underperforming stores. New development and building will be limited. We are unlikely to witness much expansion. Plenty of retail property will lie dormant for some time. Strong stores and locations will get stronger.
  • Changes in the nature of formats. Any potential development will likely be concentrated on larger retailers developing smaller, more personalized, and locally relevant formats.

Store-Level Changes

  • Increasing emphasis on value. Our own recent research has revealed a significant increase in the use of coupons and the search for greater value while shopping.
  • The store as a measured medium. We must all be on top of new measurement approaches and the search for an accepted currency now that P.R.I.S.M. has been shelved. Creating measures for our manufacturer brands will also be important to enable strong strategic planning and greater ROI effects.
  • A significant shift to private-label purchases. Again, our own research is showing a big swing to private-label brands as shoppers seek greater value. Manufacturers will need to ensure that brands stay relevant amid changing consumer/shopper needs. They will also need to help retailers structure categories for effective shopping with the challenge being how to create brand dominance within a category.
  • Further development of retailers’ clean store policies. There will be an increased emphasis on packaging design, the role of paid in-store media within overall relationships (to generate revenue for the retailer), and the design of the category environment. This will require category leadership to be the manufacturer that helps retailers succeed.
  • Increasing need for shopper-based design, helping retailers build efficient and effective aisles that shoppers want to shop. With clean store policies, making aisles more intuitive to shop and improving conversion rates will become more important in the next few years.

Shopper Changes
There is a lot of data that already exists and is being generated at the moment that shows us what shoppers are thinking, how they are feeling, and how they are changing their behaviors. Here are some thoughts on the implications of some of this data.

  • The sport of shopping has died. Significantly more planning is taking place out of store; list preparation is at an all-time high and the seeking-out and use of coupons is currently very high. All this means that the culture of shopping as a sport in the U.S. is over. Masters in shopping now rule.
  • There is greater need for thinking that converges in both the digital and retail worlds. Technology gives shoppers the potential to be better informed and to shop more efficiently. It allows them to be able to balance their price and quality trade-offs to ensure that they find the right deals for themselves. It also provides the opportunity for greater engagement and understanding for brands.
  • Brands that dare to be interesting and brave will engage shoppers and ultimately win.

Warren Buffet said,

“Be fearful while others are greedy. Be greedy while others are fearful”
Now is a time to be greedy.
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