Today’s retailing trends is a powerful mix of technology-adaptability and consumer-knowledge. Noted retail and marketing speaker Tom de Leon identifies emerging consumer and technology trends to help retailers position themselves in the new century.
High Tech, High Touch
The exciting world of retailing is really going “high tech, high touch”. What does this mean? Well, traditional retailers have seen the power of technology, particularly its contribution to bottom line results. Yet almost intuitively, these same retailers know that getting close and personal to their customers must likewise be given priority.
Read on about the top 10 global retail trends and learn how we can capitalize on them.
1 Content and context – speaking the customer’s language
The success of some of the star retailers on the Global 100 list, such as Wal-Mart, Carrefour, Tesco, The Home Depot and Seven Eleven Japan is best understood in terms of a new market mode: customer relevance.
These companies ascended into the top ranks because they positioned their products and services against the “human values” of target customers. They understand clearly the standards of the consumers and they consciously build relationships and provide offerings that resonate with these needs and wants. Instead of focusing primarily on the content of a sale, they strike a more balanced and appropriate view of content and context, that is the manner in which the transaction is carried out and how it fits into a customer’s life.
For instance, retailers that successfully addresses the market’s need for convenience and/or competitive pricing will have the edge. Hongkong’s popular supermarket chain Park and Shop is a good example. In this fast-paced era, we see stores paying more attention to cross-merchandising, speedy payment counters, and checkout areas. We also see the emergence of superstores and malls like the country’s SM Supermalls that offer food, entertainment, products, and services all under one roof. Shoppers shop for “items” and no longer purchase from any vendor exclusively. That’s why retailers such as Saks Fifth Avenue focus on filling their shops with new merchandises – representing goods from all vendors.
A research study conducted by Ernst and Young proved that this successful balancing of content and context explains Wal-Mart’s continued dominance in the world’s top retailers, Carrefour’s move into the No. 2 spot, Tesco’s phenomenal growth, and Seven-Eleven Japan’s meteoric rise from the 67th position in 1996 to the 29th position in 1999. This was contrary to common belief that these superstores’ prowess stem from the introduction of the hypermarket concept, domination of the supply chain and even by acquisition.
The study also found that failures in global retailing result when a company misses a key perspective on the market and speaks a different language than its customers.
In essence, the customer’s definition of seemingly obvious terms such as “price”, “service”, and “experience” should correlate with the retailer’s.
2 Creating personalities in store design
Closely linked with customer relevance is retailers’ continuous search for store designs that would appeal to their target market. Two years ago, the Tommy Hilfiger men’s department in Bloomie’s Manhattan measured 2,400 sq. ft. complete with an interactive kiosk, a wall of video monitors and custom fixtures. Today, the shop has been relocated and downsized to 1,500 sq. ft. While Hilfiger’s custom signage and fixtures are still there, the videos are history.
Retailers are using multi-dimensional storefronts that create a distinct identity and unique appeal that will stand-out inside malls. Department store and mall owners are using merchandise themes to create a coherent and exciting personality for their stores. Maritime Square in Tsing Yi, Hongkong uses the “marine” concept in dressing up the entire shopping center.
Retailers are also discovering that changing merchandise displays more often will attract consumer attention.
3 What’s in a name? branding and co-branding
What’s in a name? These days it’s everything. Retailers are discovering that branding not only adds value to their products, but also helps to differentiate them from the competition. Disney leveraged its well-known name to create a successful branded line of retail products including clothing, toys, key chains, jewelry, and videos.
Co-branding happens when two businesses or brands form a strategic alliance to produce/market products jointly. Co-branding not only creates added value for their products, it also means higher marketing efficiency by attracting more customers at lesser costs. Co-branding is also believed to be the solution to generate new dynamics to individual brands in difficult or emerging markets.
Also a popular innovation in franchising today, co-branding was designed to reduce franchise marketing costs, optimize operational and administrative costs to increase profit. Examples include Taco Bell and KFC, Burger King and TCBY, and Baskin Robbins and Dunkin Donuts.
4 Growth in lifestyle products – the promise of a better life!
Lifestyle has been defined as “a way of life”. Lifestyle also encompasses the way we live or want to live our lives, the things that we want and aspire for. It has also been dubbed as the “dream factor in selling, the promise of something better” said Professor Martin M. Pegler who teachers visual merchandising at the Fashion Institute of Technology in New York, USA.
It’s true that while shoppers seek convenience, quality, and value-for-their money in purchasing goods, they are also seeking “personal satisfaction”. That’s why from store designs, product brands and logos to merchandise, retailers make sure they tickle the hearts and minds of their market with the message: “We know what you want and who you want to be and we’re here to help you realize your dreams”.
The country’s first interactive sports superstore – TOBY’s Sports Arena located in Ayala Mall believes in providing customers an “experience” that is rich and rewarding as much as selling merchandise on the floor.
The multi-level sports superstore is designed as a sleek arena environment, with a track oval, a 30-foot high ceiling with exposed steel trusses, and a stylized bleachers section. As customers enter the store, they are greeted by a nine-bank video wall featuring highlights from different sports events. A realistic, 20-meter long mural of a cheering crowd competes the stadium look and feel. According to Toby Claudio, the company’s Operations Manager, the Arena gives customers a “sensory experience”, with authentic arena music, video entertainment, and various interactive features that make people feel they are in more than just a sports store.
Using this lifestyle concept to tickle the imagination of the athlete, sports enthusiast, or avid fan, the Arena hopes to engage them in a buying spree.
5 Managing costs – increasing profits
Cost-effective technology that will reduce energy consumption is on top of the wish list of every store operations and facilities manager. Managers agree on the need for control systems that can manage equipments, lights, and other building functions. The use of energy efficient lighting such as light-emitting diode (LED) technology is effective in lowering store-lighting and energy costs.
Retail facilities managers who participated in a round table discussion expressed interest in increased on-line capabilities that will monitor energy-management systems in their stores. “It would be great if those systems could communicate utility-data information on what the current rates are so that we could make real-time decisions as to where we can shed load,” says Brian Schadrie, facilities management engineer-HVAC, ShopKo Stores, Green Bay, Wisconsin, USA.
6 Selecting the right partner – outsourcing
Outsourcing has been gaining popularity in energy and facilities maintenance for some time for major retailers. Chain stores have outsourced many of its key functions. The Limited, a high-end clothing shop, with roughly 5,000 stores nationwide in the United States, discussed its philosophy in a recent survey conducted by Chain Store Magazine. “The Limited is very good at marketing and selling clothes but that is less true for facilities management, maintenance and things like that,” explains Jonathan Swann, Senior Manager for Energy Services. “For us, outsourcing has everything to do with an organization’s core competence.” Selecting the right partner is the key to The Limited’s strategy. It considers whether the outside company has the technology and infrastructure to do the job more easily and better than it could be done in-house.
7 Maximizing turnover – using technology in inventory management
Since merchandise inventory tops the list of valuable physical assets in almost every retail company, it is not surprising to find today’s merchants devote substantial time and money in finding new ways to make these huge investments work harder.
Retailers have long understood that by streamlining their ordering and replenishing processes, they can maximize turnover and improve in-stock positions. In the process, they enhance customer service levels—as well as their own bottom lines. It is the role of technology to drive this effort. The more quickly and accurately retailers can capture, analyze and act on inventory movement and sales data, the better they can respond to customer needs and preferences and at the same time improve cash flow.
A survey conducted last December 2000 by leading retail consultancy Kurt Salmon Associates (KSA) analyzes the frequency with which retailers monitor inventory movement to evaluate performance – one clear sign of the importance retailers place on tracking inventory movement.
Forty percent of the retailers surveyed said they track changes on a weekly basis; another 30 percent monitor inventory movement once a month. Discounters (50 percent) and specialty apparel stores (56 percent) were most likely to analyze inventory movement on a weekly basis, hoping to find in small variations the opportunities and exceptions that will help them respond more quickly to market and fashion trends.
8 The Internet – inexpensive way to link with vendors
Retailers likewise recognize the need for supply-chain improvements. More and more retailers are turning to the Internet, finding it an inexpensive way to share information with vendor/business partners.
Among those surveyed, 44 percent say they now use the Internet to link directly with suppliers. This move towards Internet utilization will only intensify, as will the move to integrated electronic communications and on-line B2B (business-to-business) exchanges. Newspaper headlines attest to this accelerating trend of electronic exchanges. These developments hold out special promise for companies with smaller stores.
For example, convenience chains and mall operators which have been unable to rationalize the high costs associated with installing dedicated lines, will now be able to take advantage of these lower-cost links, and may ultimately use them for everything from transmitting sales and order data to relaying payroll and other Human Resource related information.
9 Information sharing – promoting joint responsibility and accountability
Sharing information is another definite trend in the retail industry. This year’s survey by KSA reveals that retailers’ long held reluctance to share internal information with vendors is still pervasive. However, large retailers like Carrefour, Wal-Mart, Kruger, and K Mart have started the move towards sharing data such as sales forecasts and margin figures.
“Sharing data does not mean giving up competitive advantage,” explains Steve Nevill, principal in KSA’s Merchandising Services practice, noting that few retailers have the strength to run the race alone. “Sharing data with your partners allows for more ideas, analysis and leverage to occur. It promotes a sense of responsibility and accountability, which ultimately may be the biggest motivator for rallying toward better results.”
Furthermore, results indicate those areas where retailers are most willing to share information tend to center around unit sales, inventory count, and revenue figures, with about half of the survey group reporting they share this information with suppliers.
10 Stricter internal controls – rapidly becoming a competitive advantage
The Internet has also given rise to the retail industry’s push for collaborative planning, forecasting and replenishment (CPFR). Plus the emergence of B2B exchanges offer retailers a growing number of opportunities that will strengthen inventory management controls. With too many stores, catalogs, and Web sites competing for shopper money – and the economy showing signs of slowing – these exchanges come at the right time.
CPFR is rapidly becoming a competitive advantage for the larger retailers, and small retailers should take notice. “There is a big difference between the leaders in this area and others just hanging back and waiting,” according to KSA’s Nevill. “The leaders have been experimenting. They are learning and they are seeing real results. I fear this is one area where the rich will get richer at the expense of the smaller retailers.
Moreover, these opportunities bring with them certain technological challenges, including finding ways to extract the right data out of information systems. Even more critically, retailers need to be able to rely on the data they do collect and as the survey points out, the majority of chains have far to go on this front especially as manual entry and human intervention in semi-automated systems are widely prevalent practices in most retail companies.
ABOUT THE AUTHOR
With over 30 years of experience in retailing, Tomas “Tom” De Leon, Jr. shares with us his sharp insights into worldwide retailing movements. De Leon, who is currently the Program Director for the Ateneo Graduate School of Business – Center for Continuing Education and the Ateneo Bankers Association of the Philippines (BAP) Institute of Banking, pioneered the development of relevant, work-place based and applications oriented training seminars geared specifically for the retail and banking sector.
Among the programs he initiated included: Retail Store Wars, Retail Executive Development Program, Retail Supply Chain Management and Effective Supervision of Retail Operations.