STORES Global Powers of Retailing 2009 - (Page 45) 2009 global powers of retailing enabling consumers to find the information they need for successful shopping. Indeed, millions today use the Internet for research before visiting stores. For retailers, the challenge is to intercept consumers online before they go elsewhere to get their information or purchase their goods. Retailers have not always done this well. Many websites today offer consumers unique opportunities for purchasing, research, interaction, and entertainment—often bypassing the retailers who have the most to offer. Part of the problem is that many retailers were not quick to exploit this opportunity, or struggled when they tried to do so. Yet all is not lost. Consumers can be convinced to visit new sites if the value proposition is strong. Going forward, the best retailers will be those that successfully use the Internet to seamlessly deliver information and products to consumers in conjunction with store experiences. As Internet shopping grows as a share of total shopping, failure to execute this strategy could spell trouble for retailers. Think market segmentation In major developed nations, the mass market is rapidly disappearing. There has been a relative increase in the number of lower- and upperincome households with the middle class becoming a smaller share of the total. The consumer market has also become fragmented in terms of lifestyles. The result is that, for retailers as well as their suppliers, marketing to the masses, or appealing to the needs of a mass market, is increasingly problematic. Indeed, we have seen the rise of niche players as well as the rise of discount and luxury retail formats at the expense of traditionally mass-market formats. Consequently, retailers will increasingly focus on appealing to niche household segments. This will take two forms. First, marketing efforts will increasingly shift away from mass-market advertising toward interacting with individual consumers—either online or instore. The use of retailer websites will play a critical role not only in directly selling to consumers but also in developing relationships with consumers that drive them into stores. As such, multi-channel activity will be a critical element in developing segmented markets. Second, large retailers will grow, in part, by developing new nicheoriented formats and fascias rather than simply rolling out cookie-cutter stores on a mass basis. Alternatively, retailers will maintain existing formats and fascias yet do a better job of customizing them to the needs of specific consumer cohorts. This will require more sophisticated knowledge of consumer lifestyles and needs as well as more complex organizations capable of managing on a more granular basis. Think smaller stores In recent years, much emphasis has been placed on operational efficiency and on providing consumers with a one-stop shopping experience. Hence, very large stores were the order of the day. Although they will not soon disappear, big stores will not play as significant a role in retail growth as they have in the recent past. Instead, retailers will increasingly focus on opening smaller stores. There are several reasons for this. First, regulatory restrictions on store development will mean that retailers will face fewer obstacles to opening smaller stores. Second, the fragmentation of the consumer market means that it will be more difficult to satisfy the needs of a mass market. Smaller stores will do a better job of appealing to niche consumer segments. Third, consumers do not always engage in massive shopping expeditions and often shop for only small quantities of goods. In this case, the large store experience does not necessarily match the needs of consumers. Finally, large stores require large populations in order to be profitable. This means longer trips to stores for many consumers. Yet long trips do not make sense when shopping for modest quantities. Thus, there remains a strong raison d’être for smaller stores. In the future, large retail chains will likely develop a combination of large and small stores, enabling them to satisfy different consumers on different occasions. This, combined with online selling, will offer consumers a variety of venues for interacting with a favored retailer. Think global For the better part of two decades, the push toward retail globalization has been deemed imminent. And while many retailers have gone global, many haven’t. Moreover, many that have done so have found the terrain far more challenging and not quite as lucrative as originally anticipated. That said, the reasons to globalize have not disappeared. Indeed, they have been reinforced by recent events. In developed countries, the United States in particular, retail spending growth is weak and, due to a combination of demographics and shifting economic structure, it is likely to remain so. Apart from gaining market share at home, the world’s leading retailers will only find strong growth by moving into new markets—especially fast-growing emerging markets. The world’s biggest retailers, particularly those that focus on food, have already made substantial investments outside their home markets. In the coming years, we’re likely to see second-tier retailers as well as more non-food retailers take the plunge. In addition, we are also likely to see retailers based in emerging markets continue the path www.deloitte.com/consumerbusiness STORES / January 2009 G4 http://www.deloitte.com/consumerbusiness
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