Guest speaker at the Home Fashion Product Association’s annual meeting on Nov. 9, 2017, was Robin Lewis, founder and ceo of “The Robin Report,” who addressed future directions in retail detailed in the book Retail’s Seismic Shift by Michael Dart with Robin Lewis, published by St. Martin’s Press in October 2017. Here are highlights of Lewis’ presentation.
Robin Lewis believes that we are on the verge of a “seismic shift” in retail. Retailers not adapting to significant changes to come should be prepared for wipeout. Several factors impact this shift.
Topping the list is the imbalance of supply and demand. Lewis states that in the U.S. we have too much stuff, citing that there is approximately 46 square feet of retail for every person in the country. Going forward, demand is unlikely to keep up with supply. In fact, we are in for a period of low productivity with no real income growth and less consumption. The Millennials and Gen Zers don’t have the money to spend that Baby Boomers had.
Additionally, shifts in mindset toward dematerialization, efficiency in costs to create products and greater consumer interest in experiences over stuff are forging a retail environment in which goods are necessarily discounted and moving toward “free.” There is price deflation across almost every physical product category. Price promoting is the basis of most competition, which is a downward vortex that kills.
The key to succeeding in retail will be to appeal to the tech-armed Millennials and Gen Zers, who are reassessing value and values, and evaluating goods beyond their price tags. Those generations are interested in how and where goods are produced and with what ingredients. Presentation matters to them as well as personalization and a frictionless buying experience. That is creating a new basis of competition beyond price.
These new values also are leading to fragmentation in retail, with mass market shattering into individual marketplaces. The economy began polarizing almost 50 years ago. Today, the middle class is down to 40 percent of people in the U.S., compared to 65 percent in the 1970s. Large companies have shrinking bottom lines not because they are losing business to rival large-volume brands, but because small brands are nipping away at their heels.
Tech software is contributing to fragmentation as artificial intelligence enables the collection of information on individual consumers and increased personalized service, which is prized by consumers.
The generations driving new mindsets to which retail needs to respond have traits in common. Both Millennials and Gen Zers embrace diversity, concern for the well-being of the environment and social values. They are fiscally conservative and look to peer recommendations and influencers over advertising in making product purchase decisions. Technology is a tool for them, not a game, with 94 percent of them online every day.
A new, winning retail landscape will revolve around these factors:
• The existence of liquidity, flexibility, fluidity with consumer as point of sale.
• Platforming is key. Each business is a platform capable of creating new modes of interaction, transacting and products using its assets in innovative ways. Businesses need to look for new opportunities to connect assets.
• Eventually, retail will evolve into a post-platform world shifting from buyers and sellers working through the platform into a situation in which there will be no platform—in which buyers, makers, sellers and distribution/delivery channels will interact with no platform, and in which consumers will be part of product creation.
• Small businesses will flourish as strategic de-scaling increases to meet personalization demands.
• The focus needs to be on the seven “Cs”: community, customization, connectivity, convenience, content, curation/choice and control.