Retailers will have to adapt to changing markets
Updated: May 7, 2018
Recently, I facilitated a meeting of a group of over 100 retailers.
It turned out that 70 per cent of them were either fearful or concerned about the future of their retail stores. And so they should be! The times are changing in retail and one would have to be blind not to see that.
In the past, and when I started in retailing in the 1980s, retailing was quite simple. You would find products you wanted to sell, put them into your space and advertise in your local market via newspaper, TV or radio. If you got your marketing right, people would come in and buy things. The selection of available products was much smaller. Competition, what competition? Often if you were lucky, there might not be much competition for a retailer who was selling specialty products. Of course, you might have to educate customers on the proper use of the product, but that is what was expected.
Retailing has changed in the last couple decades. There are so many more products to sell and everyone is selling them. From big box stores to Amazon, from an individual in the basement of their house to the manufacturer in China, everyone now has access to the same customers that you do. The customers you educated on how to use the products you sell are coming into your stores and telling you and your staff what they are used for, how to use them and how much they should cost.
Online margins are averaging around nine per cent. If that isn't stressful enough, these elusive customers don't read the newspapers or watch TV as much. They are sitting on their computers and looking at ads from around the globe for the exact same product you sell in your store. So what do retailers have to do to compete?
If you want to survive in retail in the next couple decades, you are going to need to do things differently than you did in the past.
1. Exclusive products - To survive, retailers must have their own brands, brands that are not available everywhere. The future lies with private label products with sufficient margins for small business to survive. To have access to this, small retailers will need to be part of a buying group or have a supplier who is giving them brands of products that are not available in the mass market.
2. Niche markets - Retailers who survive will have to have specialty niches where they are able to identify their potential customers and offer them specific products to satisfy their needs. This may mean that the retailers will have to use strategies that were not necessary in the past such as offering services that are difficult to access or products that are hard to acquire. Retailing will be more difficult but the creative will thrive.
3. Human contact - Millennials, Generation Xers and upcoming generations are going to want the human aspect of retailing that baby boomers had, that now they can only dream of. While we all might be on the computer more, we all have a great longing to be touched, conversed with and humored.
Physical touch and real human presence is hard to experience over the computer. Brick and mortar stores will be around as long as they can offer this. Small business owners are going to have to encourage their staff to develop the art of communicating in meaningful ways because this is what customers want.
4. Experiences - It's true that 3D is coming to retailing online, but you can't taste food, or feel fabric, or smell scents online. Retailing is going to need to give customers even more experiences that fill these needs.
5. Business knowledge - It was once the case that you could open a retail store based on a passionate idea and have a chance of success. The chance of success now has been significantly reduced. In the past, small businesses would: spend money in advertising without measuring the results; set margins and price products upon a whim; look at financials once a year and rely on their accountant to interpret them.
Future retailers are going to need to be strategic, cunning and knowledgeable to thrive. Those who understand how business works and how they can create value for their customers are going to be successful.
Retailing is changing but those who can adapt will be able to feed their families, continue to employ staff and contribute to their communities for years to come.