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How retailers can keep up with consumers ?

The retail industry is more dynamic than ever. US retailers must evolve to succeed in the next decade.The North American retail landscape looks quite different today than it did even ten years ago. The way that consumers make purchasing decisions has dramatically altered: they stand in stores, using their smartphones to compare prices and product reviews; family and friends instantly weigh in on shopping decisions via social media; and when they’re ready to buy, an ever-growing list of online retailers deliver products directly to them, sometimes on the same day.

There is historical precedent for this kind of upheaval, which recasts the industry’s winners and losers. Within the past century, local corner stores gave way to department stores and supermarkets, then to suburban shopping malls, then to discount chains and big-box retailers. Each of these shifts unfolded faster than the one that preceded it, and each elevated new companies over incumbents. Indeed, six of the ten largest US retailers in 1990 have since fallen from their positions as new winners, such as Amazon.com, Costco, and Walgreens

New retail business models

No doubt, retail competition just keeps getting tougher. Consider the ongoing blurring of lines between formats and sectors as retailers try to steal shopping trips and share from one another (for instance, fresh food is no longer the dominion of supermarkets alone but is also increasingly found in warehouse clubs, convenience stores, pharmacies, and even dollar stores). More manufacturers are selling directly to consumers; examples include Apple, Nike, and—via Vitacost.com—several consumer-product manufacturers.

Until recently, retailers didn’t have to worry much about global competition until stores started sprouting down the street—nor did they have an opportunity to access global consumers from North America—but that is changing as technology helps break down barriers and generates new retail business models.

What retailers should do

These trends will put considerable strain on the traditional retailers’ economic model, with challenges to both the top and bottom lines. On the revenue front, the biggest obstacle will come from a channel shift: in-store purchases will grow by only about 2 or 3 percent a year, and some formats should see in-store sales decline by 5 to 7 percent a year. Gross margins will come under pressure from both price transparency (retailers will need to keep prices low to stay competitive) and a reduced share of trade spending (vendors will allocate fewer trade dollars to secure shelf space in physical stores and more to promote brands in the digital realm, where retailers are but one of many ways to reach consumers). To increase revenues, gain share, remain profitable, and manage capital investment effectively over the next 10 or 15 years, retailers must take aggressive action

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