Five Trends to Follow in Retail
While it is true that powerful forces are at work in retail today, a new report from McKinsey & Company takes a different stance than that of the general population, stating that the full impact won’t be felt for years. For instance, despite the e-commerce boom, brick-and-mortar stores should still account for approximately 85 percent of US retail sales in 2025.
That said, incumbent retailers can’t expect to stay successful by going about business as usual. In this article, McKinsey discusses five major trends reshaping the retail landscape. Here is an excerpt from the report. Consumer goods execs take heed — these facts and figures apply to your company too in the common quest to gain market share over the next decade.
The rise of boomers, Hispanics and millennials: Within a tepid overall market, however, there will be several pockets of strong growth. These three customer segments will make disproportionate contributions to spending growth. Each is unique and will require retailers to adapt their strategies to target the segments individually. For example, some 47 million households headed by people over the age of 55 will account for the bulk of spending growth in major categories such as food, housewares and apparel. The retail spending of Hispanic consumers will nearly double over the next ten years and account for almost one-fifth of total retail spending. Similarly, millennials will account for nearly one-third of total spending by 2020.
The world’s largest store in every pocket: Over the past decade, U.S. e-commerce has grown at an impressive clip of almost 18 percent a year. It now accounts for 8 percent of total retail sales. With the accelerating adoption of mobile — U.S. smartphone penetration exceeds 40 percent today and is projected to reach nearly 60 percent in three years — digital commerce is poised to explode, bringing shopping quite literally into the palms of many consumers’ hands.
Highly personalized marketing: Habits of consuming content have changed dramatically. U.S. consumers doubled their spending on digital newspapers in the past seven years, for example, while halving their spending on print newspapers. As more consumers abandon print media for digital media, marketers follow: 44 percent of them now allocate at least half of their marketing budgets to digital media, up from only 31 percent in 2009.
A distribution revolution: Amazon already offers same-day delivery in 10 cities and guarantees one- to two-day ground delivery in the continental United States. It is not unreasonable to think that consumers will expect comparable shipping speeds from all retailers — we expect same-day delivery to become available soon in at least the top 150 metropolitan statistical areas, which hold nearly 75 percent of the population.
New retail business models: No doubt, retail competition just keeps getting tougher. Consider the ongoing blurring of lines between formats and sectors as retailers try to steal shopping trips and share from one another (for instance, fresh food is no longer the dominion of supermarkets alone but is also increasingly found in warehouse clubs, convenience stores, pharmacies, and even dollar stores). Furthermore, players across the value chain are encroaching on what used to be the exclusive turf of retailers. More manufacturers are selling directly to consumers; tech players are also fighting for consumer retail dollars; and companies such as craigslist, eBay and Etsy (home to almost a million small businesses) are creating marketplaces where individuals and entrepreneurs can sell their wares to the masses.
Click here to read this report in its entirety.
Related Articles:
Inside the Omnichannel Shopper’s Head
Walmart Pinpoints Economic and Customer Insights
The Nation's Fastest-Growing Retailers
That said, incumbent retailers can’t expect to stay successful by going about business as usual. In this article, McKinsey discusses five major trends reshaping the retail landscape. Here is an excerpt from the report. Consumer goods execs take heed — these facts and figures apply to your company too in the common quest to gain market share over the next decade.
The rise of boomers, Hispanics and millennials: Within a tepid overall market, however, there will be several pockets of strong growth. These three customer segments will make disproportionate contributions to spending growth. Each is unique and will require retailers to adapt their strategies to target the segments individually. For example, some 47 million households headed by people over the age of 55 will account for the bulk of spending growth in major categories such as food, housewares and apparel. The retail spending of Hispanic consumers will nearly double over the next ten years and account for almost one-fifth of total retail spending. Similarly, millennials will account for nearly one-third of total spending by 2020.
The world’s largest store in every pocket: Over the past decade, U.S. e-commerce has grown at an impressive clip of almost 18 percent a year. It now accounts for 8 percent of total retail sales. With the accelerating adoption of mobile — U.S. smartphone penetration exceeds 40 percent today and is projected to reach nearly 60 percent in three years — digital commerce is poised to explode, bringing shopping quite literally into the palms of many consumers’ hands.
Highly personalized marketing: Habits of consuming content have changed dramatically. U.S. consumers doubled their spending on digital newspapers in the past seven years, for example, while halving their spending on print newspapers. As more consumers abandon print media for digital media, marketers follow: 44 percent of them now allocate at least half of their marketing budgets to digital media, up from only 31 percent in 2009.
A distribution revolution: Amazon already offers same-day delivery in 10 cities and guarantees one- to two-day ground delivery in the continental United States. It is not unreasonable to think that consumers will expect comparable shipping speeds from all retailers — we expect same-day delivery to become available soon in at least the top 150 metropolitan statistical areas, which hold nearly 75 percent of the population.
New retail business models: No doubt, retail competition just keeps getting tougher. Consider the ongoing blurring of lines between formats and sectors as retailers try to steal shopping trips and share from one another (for instance, fresh food is no longer the dominion of supermarkets alone but is also increasingly found in warehouse clubs, convenience stores, pharmacies, and even dollar stores). Furthermore, players across the value chain are encroaching on what used to be the exclusive turf of retailers. More manufacturers are selling directly to consumers; tech players are also fighting for consumer retail dollars; and companies such as craigslist, eBay and Etsy (home to almost a million small businesses) are creating marketplaces where individuals and entrepreneurs can sell their wares to the masses.
Click here to read this report in its entirety.
Related Articles:
Inside the Omnichannel Shopper’s Head
Walmart Pinpoints Economic and Customer Insights
The Nation's Fastest-Growing Retailers