Recently, I had the opportunity to attend the Kohl’s Center for Retail Excellence annual symposium on the University of Wisconsin-Madison Campus. The Center is underwritten by Kohl’s Department Store and many of the country’s leading retailers (Target, Macy’s, Sears, Walgreens, Crate and Barrel, Shopko, just to mention a few). The goal of the Center is to develop undergraduates for retail careers across three campus colleges, Engineering, Business, and Human Ecology. Each spring, this symposium draws on member retailers, UW faculty, and outside experts to address a subject that impacts all the retail disciplines.
This year the subject was “The New Rules of Retail”, and how retailers will look in 2020. Three general themes that came out of that meeting:
1. Despite all buzz, only 5% of the money spent at retail was spent online in 2011. Another 6% came from using online capabilities to source or qualify a product or service before purchasing in a brick and mortar store. The challenge for the brick and mortar stores is to integrate an online capability into their brick and mortar operations to be a factor in the expansion of online retailing … Hence the multi-channel label. (Example: Macy’s is asking their associates to look at their retail locations as “regional distribution centers” as well as traditional brick and mortar stores.) Both models will be shaped by the “delivery on demand” consumer expectation, and retailers who can do both will win. And, there are still some things such as groceries, paint, fabrics etc. that aren’t good fits for the online medium.
2. Consumers expect an exceptional shopping experience in person and online … “More New, More Often”. At brick and mortar locations, they are looking for unique experiences from the Apple Store (high tech) to Costco ($1.50 large hot dog and unlimited soft drink lunch) to Home Depot (DIY “Hands-On” clinics.). In the online world, one example was a sporting goods chain sponsoring a face painting contest that asked participants to submit photos to a web site where visitors to the site could vote for the winner. The whole approach across all channels is to make both the product and experience exceptional, creating perceived value for the consumer.
3. 70 – 80% of retailers will create and promote their own proprietary brands. 50% of current consumer brands will disappear by 2020 as retailers develop a superior value chain model where they can control product quality, delivery, and price. Globalization and technology have given consumers the “Power of Total Access”, and retailers need to have more control of the products they sell, where their customers buy them, and how quickly they can be delivered. As part of that strategy, major retailers such as the large department stores and big box home centers, will become virtual mini-malls because they will rent space in their bricks and mortar locations to their brand suppliers.
What does this mean? The obvious answer is that now more than ever before, retailers will more involved in product development and supply chain marketing. Add to that, more retailers will be aggressively pursuing multi-channel business models, and FMA is in a great position to provide the multi-channel merchandising support these retailers need to succeed.
As one of the retailers at the symposium said at the end of the day, “Our biggest retail threat is not Walmart, it’s Amazon. We need to learn to play on their field before they dominate ours.”
Published 5/16/2012 – by Dave Zoerb
