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3 Trends Holding Retailers Down

05/03/2013

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Retailers are facing another challenging year.

Factors such as a weak economy, weather and intense competition make for difficult odds. Toss a general lack of creativity, mis-guided marketing and me-too product, all of which are self-inflicted, and things get dicier still. For good-measure heap on showrooming and, well, things look pretty dismal for most retail brands.

Even for retail’s high-performance brands such as Walmart, Target and Home Depot gains made in 2012 were modest and hard-won.

It’s easy to blame tepid retail performance on the economy or weather. But are those the real reasons?

We believe there are three macro trends that are holding those retail brands down.

The cost of commodities is up — Retailers have to be more efficient while still maintaining quality levels, and so they’re figuring out new ways to cut costs. This means looking to labor, shipping, inventory management and more to keep costs low.

Consumer spending is constrained — Income growth is slow and consumer confidence still hasn’t fully returned, so people aren’t flocking to stores to buy – much of anything.

Power is shifting to the shopper — Social media is forcing retailers to be more transparent and engaging, and it’s “irreversible.” A dialogue between the brand and the customer has been created, and it’s no longer a one-way street.

What’s the solution for retailers?

Get creative – Creativity is what got them into business in the first place. Somewhere along the line they’ve become complacent, risk-adverse and me-too.

Get social – Consumers see retail as omni-channel. They want a seamless approach to their experience through all available shopping channels, i.e. mobile internet devices, computers, bricks-and-mortar, television, catalog, etc. Retailers who aren’t on board with omni-channel retailing will wither – fast.

Get distinctive – Unless brands give consumers a reason to buy from them, well…they won’t. Why go to the mall when 100% of what’s sold there at premium price can be bought at flash sales, outlet stores or discounters like TJMaxx?

If you’re a retailer it’s time to come to grips with the fact business will never be the same as it was in 2003. Ten years and a generations-worth of technology change has made the old model just plain old.

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