In 2007 PricewaterhouseCoopers did a study about the developments in the retail industry with the name: “Retailing 2015: New Frontiers”. That study was updated in 2012 with new insights named ”Retailing 2020: Winning in a polarized world”.
As a result both studies confirm that the retail industry is becoming more complex and changing faster than ever before. The furniture industry faces the same challenges. A look in the retailer magazine of the North American Home Furnishing Association shows that new technology and changing customers are forcing retailers to adapt to the changing retail environment. On the other hand, new technology and a bigger variety of customers also opens opportunities in the retail market.
In order to take advantage of the upcoming changes Jazzy Jobber follows this development very closely. The following post identifies three key developments in the retail marketplace:
- Changing customers and business models
- New technology
- Service and personalization
Changing Customers and Business Models
The generation of Baby Boomers is retiring. Unlike previous generations Baby Boomers have solid financial resources and are more focused on staying young and healthy. It is expected that this generation will still be active as customers in the next years, but certainly to a smaller degree than the millennial generation.
Millennials are used to the lifestyle of their parents. Many millennials are reaching the top point of household formation now and will try to accommodate a similar lifestyle of their parents. Millennials are a diverse group of buyers and they show different patterns on what, where, and when they buy. This is a challenge for traditional retailing.
Besides the difference in the age of customers there is a multitude of other changes facing retail markets. Customers are more educated than ever, households are downsizing and multicultural trends are becoming stronger.
This increasingly diverse population has money to spend and will impact retailers regarding tastes, customs, interests, and spending habits. Consumers today choose wisely whom to do business with and value ecological and environmental approaches.
Retail stores will be more specific regarding their target customers. Even the location of a store will still be important, the focus will be on customers with a very specific taste in local shopping centers. The shopping center of the future will be closer to the customer. The product shifts in the background and the customer in the forefront. The buying experience including food and entertainment becomes essential. This kind of lifestyle retailing will on the one hand broaden the spectrum of products of retailers but on the other hand the focus on a target customer will also limit the offer.
Extended service offers will become a big part of the buying experience. This can be everything from home delivery to financial management. The retailer as knowledgeable consultant gets a new definition and function. Although margins for commodity style products will be lower, services will create more cash flow.
Short living trends will open niche opportunities that are only available in certain stores for a short time. Some retailers will work closely with manufacturers to offer virtual unlimited supply of customized products.
Because of the continuing growth of online stores, physical shops must be different from their competitor. The stores will be much smaller and much more flexible. The place becomes the destination for a certain type of lifestyle.
Social media will continue to grow and create new channels to inform customers and become active in responding and engaging. This way of being connected will influence social networking, communication, and socialization of customers. Consumers will have almost perfect knowledge about products and pricing. Retailers and producers will no longer be able to have significant prices for general commodities.
Customers will know exactly what they are looking for. If they can’t find what they want, they will expect to have the opportunity to develop and create it. For retailers, this demand-based management only works with real-time data information provided by new technology delivery systems. That means retailing will become more personal. Customer data and relationships will become key assets for retailers.
Stores as we know them increasingly will exist primarily to provide brand experiences and immediate fulfillment. Different forms of shops, including pop-up stores and virtual stores will be an addition to the retail picture. Stores without inventory and kiosks in stores that provide the “endless aisle” will become more common as well as drive-through and touch-screen windows that take orders.
Service and Personalization
In order differentiate themselves from other stores and build brand identity, retailers will increasingly add services to their portfolio. Some will develop store-in-the-store concepts to offer services (Clinique), other retailers will only sell services and no products (custom made furniture). In some cases retailers will partner with classic service providers like hotels and spas. Customers could try out a bed, the Jacuzzi or a carpet in these places before buying the product. Retailers and suppliers will become trading partners who share details and processes along with the complete supplying and sales process including ordering, manufacturing and delivering the product.
The future of retailing is selling less of more. Retailing will become an industry that creates its offerings to selected customers. Consumers will buy less of what’s “popular” and more of what suits them. Consumers will have almost limitless opportunity to get what they want by participating in the value chain as creator, co-creator, adapter, editor, re-mixer and re-packager. There will be more customer input, more mass customization, more personalization and more onsite manufacturing. Customers will demand complete transparency of raw materials, fair trade procurement and environmental friendly production, transport and packaging. Just-in-time supply chain and the technology to support it will become no-brainers. Much shorter product circles will require faster trend identification and product implementation. Consumers will share more information with retailers and suppliers but expect to get more value in return. The belief that bigger is better will break down. Small will be the new big.
Successful retailers will be good listeners to their customers and their needs. They will be able to communicate a trustful and confident image of their brand. The future is bright for retailers. Change and adapting to it will create opportunity.