This article appeared in the 1999 Spring edition of The Strategic Solution, the newsletter of The Strategic Edge.
RETAIL TRENDS
How will change affect your business? Distilling current trends and predicting new ones can be very difficult, but very useful to retail and real estate executives. To a research analyst, keeping abreast of trends is an important part of the job. Trend analysis can generate new ideas and capitalize on old. To the retailer and developer, the accurate prediction of long term trends can be translated into smart investments.
Demographic Change. An obvious and very basic change is the increase in the size of the overall population. According to Claritas, Inc., the United States had an increase of 8.3% or nearly 21 million people from 1990 – 1998. Some of this increase is a result of better technology and healthcare, especially for both the newborn and the elderly. Migration is also a contributing factor to the increase in population.
Aging is a fact of life and the marketer needs to be conscious of this. The largest group on the population pyramid currently is the baby boomer bulge. In 1999, the leading edge of the boomers will turn 53 and the group will comprise approximately 78 million people.
Boomers are not the only segment of the population being watched. According to Claritas, Inc., in 1998, African Americans comprised 12.4% and Hispanic Americans represented 11.2% of the total population. The oft-ignored expanding minority segment in America may represent the area of greatest potential for the retail industry.
CBD Retail. The revitalization of major-market central business districts is a trend that will continue. Large city development seems to be emulating the 1920s "grand plan" mentality, with large civic projects as their centerpiece. Where cities have completed stadium projects, convention centers, and revitalization plans… hotels, entertainment, and retail has followed.
Small-market central business districts are more difficult to generalize about. Tim Dempsey, Executive Director of Pennsylvania Downtown Center, comments that, "on average, small cities typically don’t exhibit strong retail but many look for a niche to capitalize on… The city of Jim Thorpe, PA, near the Poconos has capitalized on tourism. Other cities try to attract corporations to their downtowns. One interesting trend matches technology companies with a need for large call centers (for technical support) to small markets where there is a captive labor audience because of fleeing industry." Strong retail in small-market central business districts is a byproduct of a strong overall economy.
Small Box Retail. A trend that will be interesting to watch is the small box concept. The Wal-Mart Neighborhood Market is a great example. Wal-Mart, typically a 100,000+ square foot store unveiled its Neighborhood Market in Bentonville and Sherwood, AR with a 40,000 square foot layout. Will other Big Boxes experiment in similar fashion? As markets become saturated, look for the smaller store concept to reach untapped markets.
Branding Still Key. Branding will continue to be prevalent at many different levels. Retailers will brand their name. We believe that Value Retailers like Old Navy will continue to brand products; the average teen-age American would have no problem finding Performance Fleece or Track Pants. Mall developers and owners have also made efforts at branding; frequent shopper incentives from malls and credit card companies are an attempt at branding place.
Internet Retail. Technology has taken another giant leap in the retailing arena. Today the Internet is becoming an integral player in the marketplace and appears to have a promising future. As people become more at ease with the security and privacy issues, the Internet should continue its success. The downside (or upside) to shopping on the Internet is that it is a solo activity. It does not give the shopper the social interaction of a trip to the mall world. Shopping the Internet also lends itself to basic commodity purchases and not necessarily intensive personal items. Nevertheless, Internet sales are estimated to be $13 billion in 1998 and are predicted to reach $30 - $40 billion in 1999. (SCT Extra, 1999)
Customer Service. There has been a return to customer service by some value-oriented big box retailers. Perhaps some retailers are trying to capitalize on what sets them apart from catalog and Internet shopping. Toys R’ Us and Best Buy are implementing a new format in their stores. Each has made their stores more consumer-friendly by widening the aisles and regrouping the merchandise on shelves. Best Buy has located technicians on-site instead of having them at another location, speeding up repair time. Toys R’ Us associates lead a customer to the item and put it in their hand instead of pointing to an aisle. A new emphasis on customer service may become an increasingly important aspect of in-store shopping, to provide an unique shopping experience not available to catalog and Internet shoppers.
Data Mining. Major credit card companies and banks will start to more rigorously document spending habits of millions of consumers. This is good news for research departments and area research firms that utilize demographics and point of sale data. Mainstreaming this process will provide an enormous amount of information for the retail industry.
Shopping Patterns. The shopping patterns in malls around the nation who participated in surveys conducted recently by the International Council of Shopping Centers (ICSC) show little change. Sales have been stable with women doing two thirds of the shopping, but their contribution is even larger because their expenditures are at the 70% level. The average age of today’s shopper is steadily increasing which reflects the aging of the total population. The 45-54 age group (part of the baby boomer bulge) has increased from 12% in 1987 to 16% in 1997. The median income of couples is at $49,858 due to the aging of the dual-income baby boomer couples. These facts reinforce the idea that the baby boomers are a very important segment in today’s market and will be an even greater contribution in the future. Regardless of the origin of trends, they are inevitable. Trends are of great importance to the developer and the retailer. Each group must not avoid them, but must proceed with caution and optimism.
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