Robin Lewis states the 7 trends, that will shape the
future of retail as below;
From Needing Stuff
to Demanding Experiences: "The thrill of the hunt" offered to brand-savvy bargain hunters at T.J.Maxx and
Marshalls, and the Apple Store turning electronics shopping on its head.
From Conformity to
Customization: Specialized, personalized and localized niche brands like
Nike ID and Keurig single-serve coffee machines begin to gain share from large
megabrands, the continued growth of special sizes in apparel and footwear and
the rapid growth of 3-D printing
From Plutocracy to
Democracy: "Accessible luxury" for all: Missoni at Target, Vera Wang and Rock
& Republic at Kohl's, Karl Lager “Lagerfeld at Macy's, Isabel and Ruben
Toledo at Lane Bryant and the explosive growth of Michael Kors "affordable
luxury"
From Wanting New
to Demanding New and Now "What’s new today is cloned tomorrow", favoring
fast-fashion brands like Zara and Forever 21 that create two new lines every
week, the convenience of e-commerce, free delivery and neighborhood stores
From Self to
Community Proliferation of social media, social shopping, community
interests such as sustainability, global initiatives like human rights and
safety; all are trends, no longer simply commercial promotional gimmicks
From Technology for
Work to Technology for Life Technology enabling the blurring of lines
between “life” and “work,” people are working during their “off” hours
and playing during their “work” hours, getting what they need to
get done whenever and however they can, using technology to save time.
The creation of a
new consumer segment, Luxury aspirants, drove the launch of many brands to
cater to the up-market “yuppie” core of that segment. Brands such
as Coach, Lacoste, Bloomingdales, Cusp (a Neiman Marcus spin-off), Dooney &
Bourke, Michael Kors, Tumi, Tory Burch, Bonobos and others have successfully
captured the contemporary, young, almost-upscale consumer, called HENRY (having
enough, not rich yet).
With these trends in mind; he predicts that the
traditional definitions of “retail” and “wholesale” will be irrelevant in the future
because only those that transform their business models based on our three
strategic operating principles will survive in the future.
The 3 operating principles are;
Neurological Connectivity : Today, as consumers expect the moon and
stars "because they can" the retailer or
brand must far exceed their expectations. They must co-create, with the
customer, an experience that indelibly connects with their mind. It must be a
holistic experience, consisting of pre-shopping anticipation, shopping ecstasy
and consumption satisfaction, and it must be so emotionally compelling that the
customer wants to repeat it upon the mere mention of the brand or retailer’s
name.
Preemptive Distribution : This is the necessity of gaining access
to consumers in front of the multiplicity of equally compelling products or
services by existing precisely where, when and how the consumer wants you.
Preemptive distribution relies on speed, agility and the ability to reinforce
the neurological connection, or brand promise.
By definition, this requires an
integrated matrix of all possible distribution mediums, the most important ones
being those driven by the new, rapidly evolving technologies as well as
distribution into faster-growing international markets.
Value-Chain Control : No consumer-facing business can achieve the
highest levels of a neurological connection and preemptive distribution without
complete control of its value chain, from creation all the way to consumption.
This control is especially important in those parts of the chain that touch and
connect with the consumer: namely, market research, where knowledge about the
consumer and his or her dreams is determined; production and marketing, where
the dream experience is created; and finally, the point of sale, where the
experience must be competently delivered.
The retail or wholesale distinction will no longer be
meaningful to consumers. Distinct brand names will provide the only worthwhile
definition of value, whether it’s the nameplates of stores or the labels on the
products in the store. The new business models for retailers and wholesalers
alike will be those that can best implement the three imperative strategic
operating principles.
He predicts that 80 to 90 percent of strong brands’
revenues will come from their own retail outlets. Finally, retailers such as
Macy’s and others will have some form of leasing space to other strong retail
brands, as many European and Asian retailers currently do. Perhaps department
stores will invite powerful traffic-creating brands to operate “shops” in those
categories in which they have been underperforming. For example, Victoria’s
Secret, Soma and other brands might be more compelling in Macy’s historically
share-losing intimates space. Not only would the department store gain the
synergy of two go-to brands, they would also increase space productivity. And
of course, the branded retail “renters” would get immediate preemptive
distribution (department-store locations everywhere) for a relatively low
capital investment. This synergistic strategy is already being employed by
Nordstrom with Topshop, Brooks Brothers and “Bonobos shop-in-shops.
All new business entities will be strategically conceived
to provide maximum access to consumers and positioned to gain maximum access
for the business. Therefore, they will operate in a multitude of distribution
channels (mobile, clicks, bricks and catalogs), with a multitude of different
formats (from small, convenient and flexible to larger, all-inclusive
destinations), and all will compete in as many consumer, product and retail
sectors as the brand or service entity can credibly pursue. However, all
retailers will fit into one of our three newly defined sectors;
the Commoditization sector;
the Omni-Brand to Consumer sector; or
the Liquidation sector.
Also, the back-end functions’ operations, production,
logistics and distribution will be tightly centralized for maximum-scale
leverage and productivity synergies, as well as to support the enormously
complex and segmented front ends of their businesses.
Incidentally, this redefinition of retail favors what he
defines as the Omni-Brand to Consumer model. Because of its optimum alignment
with the New Rules, this model is best positioned among all sectors for
preemptive distribution and the delivery of a neurologically connecting
experience.
Finally, he predicts that e-retailing in all facets,
including mobile commerce and the linkage to stores through omni-channel
initiatives, will continue to grow. Every large chain will begin to see its
stores as either a distribution center or an experiential palace. There
will be no neutral ground. However the players that currently operate
exclusively in this space, such as Amazon and eBay, will eventually open
brick-and-mortar stores for the purposes of preemptive distribution and
enhanced delivery of the neurological experience. These competitors will also continue to
redefine the value chain with a set of capabilities and relationships that will
make the realization of same-day delivery a feature in every major metropolitan
market and will therefore further challenge those stores without any clear
point of differentiation.
He emphasizes the requirement of massive differentiation
for a retailer or brand to survive. This differentiation has to exist
throughout the entire business model, from sourcing to delivery, and most
importantly in the eyes of the consumer. If you are not clearly differentiated,
even unique, then you are vulnerable to extinction. The highlights below of the
transformed traditional models encapsulate all the foregoing, and essentially represent
the New Rules for successful change and the effective implementation of three strategic operating principles
Rules for
Transforming Traditional Retailers
Change the Retail
Value Proposition: Become a branded neurological experience, not a store.
Adopt a New
Structure: Reorganize around lifestyles.
Accelerate
Private/Exclusive Branding or Lease Space to Compatible Brands: Cede control to other powerful brands,
but exercise total control over your own.
Preemptively
Access Consumers with:
·
Larger urban “lifestyle experiential emporium”
·
Smaller freestanding neighborhood stores
·
Private branded specialty chains (e.g., INC and
Arizona Stores)
·
New channels of opportunity (pop-ups, in-home,
etc.)
·
Integration of all distribution platforms (clicks/bricks/catalogs)
·
Investment in new technological channels of
distribution.
Rules for
Transforming Traditional Wholesalers
Change the
Wholesale Value Proposition: Become a portfolio of lifestyle-branded retail
specialty chains providing neurologically connecting experiences.
Adopt a New
Structure: Reorganize around
preemptive distribution strategies through all possible platforms and mediums
(clicks, bricks, catalogs and more), including providing exclusive brands to
transformed retailers and selecting compatible transformed retailers to lease
space for total management and control of individual brands. Pursue cobranding joint ventures with compatible retail
specialty chain brands. Create a clear distribution strategy that has exclusive,
segmented product by retail partner and price point.
New Rule for
E-Commerce and Mobile Pure-Play Brands
This newest and fastest-growing retail sector, which
includes Amazon, Zappos, eBay, flash sites, social networks and the older QVC
and HSN, must also transform its models to embody the three operating
principles. The most successful brands, such as those just mentioned, are all
striving to create great experiences as opposed to simply providing
convenience. The newest rule for this sector will be driven by its need for
greater preemptive distribution. This will mean faster and faster access
through mobile purchasing and rapid delivery. He believes this will ultimately
lead to e-commerce expanding its distribution to include brick-and-mortar
stores, within which they can better provide the neurological experience,
particularly for those products requiring a more high-touch experience such as
apparel.
Regardless of operating on all distribution platforms,
all will attempt to control, if not own, as much of the value chain as
possible, from Amazon’s cloud to eBay’s PayPal payment system. All of this will
be further intensified as Google, Facebook and others begin to enter the retail
world at scale with even more diverse business models.
At the end of the day, those who succeed will be brand
managers whose sole responsibility is to manage and control the preemptive
distribution of their neurologically addictive and highly differentiated brand
from its creation all the way through to consumption.”
Source: Lewis, Robin. “The New Rules of Retail.” St. Martin's Press
