Inside This Issue - News
Retail industry 2020
October 29th, 2012
NEW YORK – The retail industry may be moving toward a “post-modern consumer-centric” era triggered by the speed of technological advances, globalization and fierce competition, both online and off-line, according to a new report from PwC US and Kantar Retail, titled “Retailing 2020.”
To succeed, retailers will need to adapt to increased channel fragmentation resulting in greater nonstore retail growth and smaller brick-and-mortar formats, the report says. Retailers will also need to respond to more disparate socioeconomic classes that will redefine distribution channels.
"As we enter an increasingly complex retail landscape with accelerating competitive pressures and digital shopping options, retailers will need to prepare for a ‘wall-less’ omnichannel retail world, one where shoppers will come to expect a seamless brand experience online, in-store and across multimedia touch points," said Susan McPartlin, PwC’s U.S. retail and consumer industry leader. "This multiformat portfolio combined with the proliferation of small, urban, alternative retail formats will pave the way for future growth, dismantling the mass homogenization and scale assumptions that propelled two decades of retail growth."
The U.S. retail industry will have entered the post-modern period — marked by the end of the supercenter — by 2020, according to the report. E-commerce, driven by online retailers today, and mobile and tablet commerce in 2020, is expected to be the fastest-growing channel. Large chain retail growth through the decade is anticipated to remain very close to the early 2010s recessionary rate, with one-third of large chain growth projected to come from online sales. Discount channels will capture larger growth while mass merchandisers and food and drug retailers are expected to face a tougher environment.
In its analysis of shopping behavior changes, Retailing 2020 finds that the older generation, having lived through several recessions, is more financially conservative than the younger generation. By 2020 this generational difference will create two “mega-cohorts” — the “over 50s” and “under 30s” — dividing the country into two distinct shopping nations.
"The demographic and income gaps between shopper segments are expected to widen, creating more shopper segments with different expectations for product offerings and shopping experiences," said Bryan Gildenberg, Kantar Retail’s chief knowledge officer. "Retailers must do away with the ‘one size fits all’ approach and consider the ever-diverging needs of both the ‘have’ and ‘have not’ consumers to remain viable in the future. Forward-thinking retailers should diversify format portfolios, test smaller footprints and offer niche products targeted to specific shopper segments."
By 2020 the speed of technological innovation will further transform the retail landscape, according to the report. Retailers will leverage “big data” to gain a deeper understanding of individuals. In doing so they will have a more granular comprehension of product movement. Tracking such technologies as radio frequency identification (RFID) and other innovations will enable seamless checkout while also ensuring that shoppers can understand everything from product origin to brand legitimacy on a mobile device.
In addition to addressing the impact of income polarization, Retailing 2020 addresses globalization implications. "Increased consumer connectivity and a rising middle class in emerging markets will drive demand for global retailing," said Lisa Feigen Dugal, PwC’s North American retail and consumer industry advisory leader. "Retailers must rethink where and how they sell and operate for future growth. Brick-and-mortar retail operators will be under pressure to balance localization and personalization in an increasingly global world. Retailers will need to seek a balance between global skill sets that can be applied everywhere and a need to adapt to the local market."
The report outlines several success factors for retailers and suppliers to manage the complex and diverse realities of the retail landscape in 2020. These include: total value chain management, dynamic clustering to optimize fragmented growth, competing on a truly global scale, branding in omnichannel space, managing data security and privacy, and managing diverse retail models.
Retailers will need to integrate themselves seamlessly into their shoppers’ replenishment processes, and best-in-class operators will find ways to act as a bridge between real-time consumer data and the rest of the supply chain, the report says.
Forward-looking retailers will also reframe the way their teams think about the business by consistently experimenting with structure and adapting it to shoppers’ cultures.