Tag: evolution

The evolution of retail in a post-pandemic world

The rhetoric of ‘retail is dead’ is incorrect. In fact, retail is advancing at a rapid rate to meet the consumer demands for in-store innovation and service solutions for their shopping requirements in this post-Covid era.

This was the view of industry thought leaders who participated in the Fortress Retail Evolution webinar that took place recently. This online event was hosted by Mike Stopforth and included a panel discussion between Vuso Majija, Alex Morar, Tshiamo Mathibela and Richard Mukheibir, as well as commentary from other retail experts.

A key insight shared by Graeme Codrington is that the pandemic has accelerated a lot of the trends that were already underway. “E-commerce is one of the biggest trends at this time, but it’s not merely about putting your products online and then hoping somebody buys them. It is not competition to traditional retail; it extends and expands traditional retail. You need to develop relationships with your consumers and then personalise your connection with them through the right in-store experiences that gives them reasons to keep coming back– it’s not just sales.”

When discussing the innovations that are in play at this time, Vuso Majija explained how the tenant mixes are evolving and changing in response to changes in customer behaviour. “Pre-Covid-19, we saw space consolidation by tenants, including the closure of non-performing stores. For example, banks closed branches and Edgars closed certain stores. On the other hand, certain retail categories including grocers, pharmacies, and athleisure tenants were opening new stores. This is directly because shoppers were focusing on essential items, health and beauty products and changes in clothing preferences.”

“Our biggest challenge as landlords at this time isn’t omni-channel retail, it’s economic growth. There is appetite from small and large retailers to open stores, but the current economic situation is the main hindrance,” commented Majija.

SMEs are key drivers of economic growth in the country, which is the area where landlords are hoping to attract new tenants to shopping centres. “Both large and small partners are looking for space – it’s not all doom and gloom. Our priority this year is to try and accommodate as many of those opportunities as possible,” added Majija.

Richard Mukheibir supported these views, saying, “As a franchise business, we couldn’t sell franchises during hard lockdown in our usual face-to-face manner. Our sales model changed to weekly webinars and within a month, I had spoken to more than 100 people about franchising. Subsequently, we have sold 11 franchises as at the end of January. There are now more stores, but the size of the stores has reduced, with lower overheads and in turn, more profit. This proved how discomfort has resulted in interesting, innovative solutions that led to growth.”

Bathu Shoes have directly contributed to economic growth by opening twelve stores during 2020, despite the pandemic and its difficulties. Tshiamo Mathibela shared her views on how this emerging business overcame their challenges: “We don’t have a blueprint for the way we do things. Instead, we focus on innovation and customer experience. For the new stores, we paid a lot of attention to in-store design elements which have technological features that engage our customers as they approach the store – for example, the levitating sneaker machine makes the shoes look like they are floating. We consider the music we play, the images we use and fragrances we have in stores in detail. Most importantly, our engagement with customers through trained sales executives in a safe manner that makes customers feel secure in store. Furthermore, we built South Africa’s first sneaker customisation lab as an extension of customer engagement.”

The conversation around offline or online, this binary notion of one or the other, seems to be fading into obscurity. Retailers are looking to landlords to aid and advice in giving their customers a more seamless omni-channel experience. Alex Morar, CEO of NEPI Rockcastle, commented on how this has played out in the Central and Eastern European region: “We will never go back to the way things were, but that is always the case. Circumstances and operations continuously evolve and there is not a “one size fits all, all the time” strategy that we can apply. Landlords and retailers are part of one ecosystem. We need to work together to provide the best retail experience for our customers and partners. Landlords need to make sure shopping centres are attractive, well located and that the entire tenant mix is advertised. By integrating the various retailers’ concepts into digital advertising, we can ensure we are where the customers are searching. We need to have a joint strategy to approach this omni-channel experience.”

Retailers have realised that customer experience is only as strong as its weakest link. When the retail ecosystem works together to provide operational excellence, it benefits the customers. Most importantly, paying attention to what customers need and the level of human interaction that people are looking for was they come out of lockdown.

Majija made the point that customer experience does not start with the sales executive in store. “It starts with the car guard in the parking area and includes everyone in the shopping centre environment. The entire ecosystem must provide a great experience. Upskilling all staff to interact with customers will increase the interactions and will add to the overall shopping experience.”

It is a known fact that consumer behaviour is dictating most of the changes that have been implemented in recent months. The number one priority for customers is convenience. Majija related how Fortress partnered with a company that focused on Click and Collect. This company opened booths at many of the Fortress centres and there are plans to open more booths this year. In addition, Takealot opened a depot at Pineslopes. “We have seen a massive increase in delivery services like Uber Eats at a number of our centres, especially those with lots of restaurants and fast-food outlets”.

Mukheibir discussed the trend of people thinking about the trend of reuse, recycle and repurpose and wanting to live a more nomadic and agile existence. “This trend is playing really well into our hands. People are selling unwanted items in a professional retail environment and others are buying those items at half the price with a six-month guarantee. The idea of “value shopping” is increasingly mainstream, fast-forwarded as a consequence of Covid, a re-evaluation of priorities and financial spend, and the sad reality of change in employment status.”

Morar is looking forward to the continued progress of retail innovation in multi-channel retail strategy. “We are optimising our operations using revolutionary technology. The end goal is to offer a better service to our final customers. It does not sound like a big deal, but the detail behind it is substantial. The faster and the better that we do this, both us and the retailers, the more we will be able to provide the adequate experience and bring products to the end customers via multiple channels, not just physical or just online.”

Mathibela added that her team is excited about proving that traditional retail is still alive and kicking. “Because South Africa still struggles with high data costs and people not wanting to share their personal details online, they are frequenting shopping centres. We are going to continue to expand our footprint and conduct research into other engaging features to put into these stores. Our biggest goal for 2021 is become even more accessible by tapping into the smaller communities that other retailers don’t think about.”

Majija reiterated that the shopping centre industry in South Africa accounts for about 72% of all retail. “That’s approximately R780 billion per year. It is an important industry and employer. We must keep growing and expanding the retail industry. It is a massive contributor to service delivery and to the provision of services and products in South Africa. All we need now, is the economic recovery and growth to improve so that we can see the retailers opening more stores and consumers get what they want and need too.”

 

The death of retail as we now know it is greatly exaggerated. Retail isn’t dying; it’s evolving. Just like it has done before. There has always been disruption in the retail sector. A major disruption occurred in the late 1800s when Sears introduced the catalog and brought the entire store into the homes of U.S. consumers. This gave Sears the same advantage over brick and mortar stores that ecommerce sites have today. Sears was simply responding to the needs of its customer since 60 percent of the U.S. population lived in rural areas at the time and didn’t have convenient access to stores. Sears would bring the store right to them.

The same principle of meeting customer needs holds true for the current retail evolution, which is being driven by a confluence of change. Changing consumer attitudes, behaviors, and demographics; ongoing channel and digital disruptions; and increasing competition for consumer mindshare and dollars are forcing a shift in long-held paradigms – continuing the status quo is no longer an option.

It’s now about customer engagement, not customer acquisition. Rather than a multichannel strategy, the strategy now needs to focus on the customer and finding new ways to deliver the products they want, when they want them, whether online or at a physical location. It’s no longer about brands, big logos, and price promotions, it’s about engaging consumers with experiences, personalization, quality, service, and value.

The traditional retail business model that has stood the test of time over the decades is now transforming at the speed of light. Retailers competing to stay in the game are turning their ecosystems on end, breaking down old-school beliefs, and reinventing themselves. Amidst all of this change, however, is one constant that has been a guiding principle of retail since it began and that is: know thy customer. Those retailers and brands that survive and thrive are those that base their decisions on the needs and wants of their customers; those that know their customers best and act on that knowledge.

Knowing Thy Retail Customer

Consumer Economy:

More than eight years after the Great Recession, the U.S. economy is improving at a slow and steady pace, but the consumer landscape has been fundamentally reshaped. Consumers entered 2017 with more confidence in their financial situation than they have had in years, but their attitudes and behaviors around spending have changed.

Even though incomes are improving, real income is still comparable to where it was in 2007, and that is impacting consumer spending decisions. The growth in single-person households has also decreased the number of dual-income households. Healthcare costs are growing exponentially and will continue to erode disposable income. National student loan debt is at an all-time high-and is expected to double in 10 years, causing Millennials to delay marrying, purchasing cars, buying homes, and making other major purchases. Retail sales and overall consumer spending, key drivers of economic growth, are suffering as a result of lackluster income growth and increased expenses. Looking at sales across the broad set of industries tracked by NPD, we see spending slowing in many categories, particularly in traditional bricks-and-mortar channels.

When consumers do spend, they have a variety of options vying for their dollars, including many that are not tangible products. Consumers are exhibiting an interesting shift in spending to the experiential, demonstrating their desire for something more, and something different – like activities, travel, and entertainment. For example, the U.S. government reports that from 2010 to 2015 consumer spending on sports and recreational vehicles increased by 45 percent, spending on foreign travel by 36 percent, and on hotels and motels by 43 percent. Spending outside of measured consumer goods categories is typically increasing faster than total consumer spending on average.

A Multicultural/Multigenerational Mosaic:

Today’s retail consumers collectively represent a multicultural, multigenerational mosaic. By 2044, the U.S. Census Bureau projects that more than half of all Americans will belong to a minority group, which is any group other than non-Hispanic White alone. By 2060, nearly one in five of the nation’s total population is projected to be foreign born. Overall, Millennials are more diverse than the generations that preceded them, with 44.2 percent being part of a minority race or ethnic group. Even more diverse than Millennials are the youngest Americans: those younger than 5 years old. In 2014, this group became majority-minority for the first time, with 50.2 percent being part of a minority race or ethnic group.

Millennials and Boomers are still the sweet spot demos for many retailers. Millennials have now surpassed Baby Boomers as the nation’s largest living generation and they are coming of age, working, developing careers, and raising families. Some 1.3 million Millennial women gave birth for the first time in 2015, and they now account for the vast majority of annual U.S. births, according to the U.S. Census Bureau.

Baby Boomers are refusing to be pushed aside by the younger generation or ignored by retail, and still account for the bulk of consumer spending growth in major products and goods categories. As Boomers age, over the next 10 years we will see dramatic growth in the population of consumers over age 65, influencing spending in new ways. As consumers retire, they have less disposable income and spend less. More than half of households over the age of 65 are in the bottom 40 percent of income. Also, older consumers tend to spend disproportionally more on services and experiences instead of products.

To know thy consumer is to also understand that within each of these demographic groups are sub- segments that think and behave differently from others in the same group. The needs and wants also vary. Fortunately with the use of data, insights, and analytic solutions, like consumer segmentations, retailers can get to know their customers up close and personal.

Onward and Forward

Whether driven by want or need, consumers will always be in the market for goods and services. Retail, in whatever format —physical or virtual — will continue to exist. Retailers and brands that are in it to win it will recognize the need to rethink the retail experience they provide. They will build business models that offer experience, service, and value to their customers and reflect the diversity of generations, life stages, and other influences that make up our world today.

By Marshal Cohen, Chief Industry Analyst – Retail, The NPD Group

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My Office News Ⓒ 2017 - Designed by A Collective


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