In order to cater for connected, global-minded consumers, major retailers should no longer be thinking in terms of large bricks-and-mortar sites. Instead they should be looking at a series of smaller retail formats, both in-store and online, geared to the needs of different customer segments.
Now that shopping online and using mobile devices such as telephones and tablets is a widespread phenomenon does this herald the demise of retail chains as we know them today? Overall, retail players seem to have grasped the importance of the Internet and mobile technologies and more and more of them are embarking on multi-channel strategies which make parallel use of all means of communicating and selling. However PwC US and Kantar Retail, which have just published their Retailing 2020 report, expect to see even more radical change by 2020 in the United States. According to these consultants, the retail industry should be moving towards even greater segmentation, which should lead to more successful online brands and the disappearance of huge store complexes in favour of multiple niche boutiques serving specific needs. This will mean fewer mass market brands and a proliferation of smaller city outlets where the brand is not rigidly defined by a bricks-and-mortar or digital format. The report warns that national consumption patterns are about to become widely polarised. Meanwhile the rise of the middle class consumer in emerging countries will drive demand for a ‘global retailing’ approach that requires retailers to be able to respond to local needs everywhere.
A polarised, fragmented world
"We’re now entering an increasingly complex retail landscape with accelerating competitive pressures and a broad range of digital shopping options,” says Susan McPartlin, PwC’s US Retail & Consumer Industry leader, explaining that “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 multimedia touch points.” The report also predicts that the growth of very different consumer types will lead to fragmented shopper behaviour. Unsurprisingly, the older generation tend to be more financially conservative than younger people. The study forecasts that by 2020 this generational difference will have created two mega-cohorts – the ‘over 50s’ and the ‘under 30s’ – essentially dividing the United States into “two distinct shopping nations”. Demographic and income gaps between shopper segments are expected to widen and retailers will have to get away from the ‘one size fits all’ approach. They will need to use a range of channels to interact with the consumer, using both bricks-and-mortar and online outlets if they are to meet segmented consumer demand effectively.
Big Data, new skillsets
To make the transition successfully, PwC US/Kantar believe retailers must “leverage the use of ‘big data’ to gain a deeper understanding of individuals”. In the future, they will need to have a more granular picture of product movement, using tracking technologies such as Radio Frequency Identification (RFID).Inside the company, retailers will have to think about creating new job positions such as‘ecosystem managers’ – clued-up staff with a good grasp of individual markets and their particular features on a local and personal level. The study sees these changes coming gradually. It estimates that by around 2020 growth in major bricks-and-mortar retail chains will have ceased. By then, non-store sales, which are today dominated by the internet and will soon be taken over by mobile devices and tablets, are likely to constitute the main growth channel, with one third of all growth in major retail stores’ revenue coming from online sales that year, say PwC US/Kantar Retail.