Retailing 2015: New Frontiers
PricewaterhouseCoopers and TNS Retail Forward are pleased to
PricewaterhouseCoopers and TNS Retail Forward are pleased to
collaborate in bringing you this overview of the retail industry through
collaborate in bringing you this overview of the retail industry through
2015.
2015.
Retailing 2015
Retailing 2015 confirms that the retail industry is becoming more complex confirms that the retail industry is becoming more complex and changing at an ever
and changing at an ever-increasing speed. -increasing speed. Shifting demographics, householdShifting demographics, household downsizing, more educated consumers, new channel formats—among other downsizing, more educated consumers, new channel formats—among other trends—requir
trends—require that the industry quie that the industry quickly adjust and modify existent ckly adjust and modify existent models,models, approaches and processes to satisfy the needs of future customers in approaches and processes to satisfy the needs of future customers in orderorder to be successful
to be successful and profitable. and profitable. Retailing will become aRetailing will become an industry thatn industry that realizes, more and more, that it must tailor
realizes, more and more, that it must tailor its offerings to select customers,its offerings to select customers, as opposed to the mass appeal approach of the 1980s, in order to win over as opposed to the mass appeal approach of the 1980s, in order to win over customers and foster
customers and foster greater customer loyalty.greater customer loyalty.
·· Changing Demographics:Changing Demographics: The Baby Boomers have always been aThe Baby Boomers have always been a defining generation and will continue to be so.
defining generation and will continue to be so. We We believe that the Babybelieve that the Baby Boomer generation will age
Boomer generation will age with increased financial resources and withwith increased financial resources and with a greater
a greater emphasis on youth and emphasis on youth and vitality than previous vitality than previous generations. generations. AsAs a result, they not only will tax manufacturers to adapt products to their a result, they not only will tax manufacturers to adapt products to their specific post-retirement needs, but also will require retailers to respond to specific post-retirement needs, but also will require retailers to respond to their evolving needs as they approach the age of 70 in 2015.
their evolving needs as they approach the age of 70 in 2015. Challenging
Challenging this this older older generation generation will will be be Generation Generation Y Y (Gen (Gen Y) Y) households,households, reaching their prime household formation years and attempting to emulate reaching their prime household formation years and attempting to emulate the lifestyle that their Baby
the lifestyle that their Baby Boomer parents have and to which tBoomer parents have and to which t hey arehey are accustomed.
accustomed. Gen Y is a more diveGen Y is a more diverse group in how they shop, wrse group in how they shop, where theyhere they shop and how they spend their money.
shop and how they spend their money. As a result, Gen Y will represeAs a result, Gen Y will represent ant a challenge to traditional retailing.
challenge to traditional retailing. Overlaying
Overlaying these these changing changing demographic demographic patterns patterns will will be be an an even even greatergreater shift to multi-culturalism throughout the
shift to multi-culturalism throughout the countrycountry. . Retailers will need Retailers will need toto respond to the tastes, customs, interests, and spending habits
respond to the tastes, customs, interests, and spending habits of anof an increasingly diverse
increasingly diverse population with money to spepopulation with money to spend. nd. Look for manyLook for many diverse cultural offerings to become mainstream in the
diverse cultural offerings to become mainstream in the future.future.
·· The New Consumer:The New Consumer: The evolving consumer in the near future will not beThe evolving consumer in the near future will not be easy for retailers
easy for retailers to understand or masterto understand or master. . The value proposition guidingThe value proposition guiding their product purchases is changing; consumers will put
their product purchases is changing; consumers will put heightenedheightened emphasis on personalization, look for opportunities where their input emphasis on personalization, look for opportunities where their input matters, and value
matters, and value product and sproduct and service solutions. ervice solutions. Consumers areConsumers are
increasingly proactive in their purchase decisions and selective about with increasingly proactive in their purchase decisions and selective about with whom they want to do business.
whom they want to do business. Additionally, Additionally, consumers will increaseconsumers will increase their focus on purchasing products from socially responsible and their focus on purchasing products from socially responsible and “green-friendly” manufacturers and retailers.
friendly” manufacturers and retailers.
Foreword
·· Retail Outlets:Retail Outlets: Retailing, at one time, Retailing, at one time, might have been might have been all about “location,all about “location, location, location,” but the 2015 retail industry will be significantly different location, location,” but the 2015 retail industry will be significantly different from that of today
from that of today. . The U.S. shakeout in conventional malls will continueThe U.S. shakeout in conventional malls will continue with a throwback to neighborhood shopping centers catering to very with a throwback to neighborhood shopping centers catering to very specific tastes.
specific tastes. Shopping will become morShopping will become more experiential; eae experiential; eating, beingting, being entertained and “living” the shopping
entertained and “living” the shopping experience will take on prominence.experience will take on prominence. The global market will grow rapidly in our flat world, with markets such as The global market will grow rapidly in our flat world, with markets such as China and India granting access to the w
China and India granting access to the world’orld’s best retailers. s best retailers. By 2015, theBy 2015, the retail landscape by country will be dramatically differ
retail landscape by country will be dramatically different from todayent from today. . WeWe envision a knowledge revolution in
envision a knowledge revolution in global markets where the successfulglobal markets where the successful retailers will be transferring their best retail practices from one t
retailers will be transferring their best retail practices from one t erritory toerritory to another.
another.
·· Strategic Outsourcing:Strategic Outsourcing: Adapting to the changing retail environment Adapting to the changing retail environment anticipated by 2015 will require more flexibility than
anticipated by 2015 will require more flexibility than ever by industryever by industry players.
players. While the outsourcing While the outsourcing of basic goods is of basic goods is projected to grow projected to grow inin the global economy, companies also are adopting approaches for the the global economy, companies also are adopting approaches for the outsourcing of non-core competencies—e.g., new product development, outsourcing of non-core competencies—e.g., new product development, software development, business process outsourcing and talent sourcing software development, business process outsourcing and talent sourcing across national boundaries.
across national boundaries. Cost efficiencies aren’Cost efficiencies aren’t the only benefits oft the only benefits of pursuing strategic outsourcing—management’
pursuing strategic outsourcing—management’s attention is fos attention is fo cused oncused on key business issues, time-to-market may be collapsed, new alli
key business issues, time-to-market may be collapsed, new alli ances mayances may be formed, and an understanding of the inner workings of developing and be formed, and an understanding of the inner workings of developing and emerging market culture
emerging market cultures may be learned. s may be learned. We We believe that leading retailbelieve that leading retail companies will be embracing this approach as we
companies will be embracing this approach as we move toward 2015.move toward 2015. ·· TTargeted argeted Collaboration:Collaboration: In order to reduce the many obstacles thatIn order to reduce the many obstacles that
naturally occur between retailers and suppliers, and to overcome a lack naturally occur between retailers and suppliers, and to overcome a lack ofof partnership between the two, the retail industry
partnership between the two, the retail industry is moving toward creatingis moving toward creating greater beneficial value
greater beneficial value through targeted collaboration. through targeted collaboration. TTo achieve bettero achieve better alignment of
alignment of goals and drive goals and drive greater efficiencygreater efficiency, retailers and suppliers are, retailers and suppliers are becoming trading partners, sharing details and
becoming trading partners, sharing details and processes on such thingsprocesses on such things as product launches, trade promotions, inventory management and supply as product launches, trade promotions, inventory management and supply chain operations.
chain operations. As collaborative strategic As collaborative strategic efforts have efforts have been provenbeen proven to deliver joint value, we
to deliver joint value, we believe this trend will continue and believe this trend will continue and increase inincrease in importance during the next
importance during the next several years.several years.
·· The Importance The Importance of Technology:of Technology: TTechnology is greatly contechnology is greatly contributing toributing to improved operational efficiency for retailers, but the importance of improved operational efficiency for retailers, but the importance of technology to future business success will become greater
technology to future business success will become greater. . There is, andThere is, and will be, an overwhelming need to
will be, an overwhelming need to effectively manage the business througheffectively manage the business through business intelligence.
business intelligence. Demand-based manaDemand-based management can succeegement can succeed onlyd only with real-time data information delivered through increasingly newer forms with real-time data information delivered through increasingly newer forms of technology delivery systems.
of technology delivery systems. As a result, rAs a result, retailing will become moreetailing will become more personal, and customer data and relationships will become
personal, and customer data and relationships will become a key asset fora key asset for retailers.
·· Security and Privacy:Security and Privacy: Information sharing will reach new levels in Information sharing will reach new levels in thethe industry
industry. . As the retail industry moves to implement As the retail industry moves to implement an “intelligent”an “intelligent” value chain based on the exchange of
value chain based on the exchange of data across the entire supplydata across the entire supply chain—resulting in greater efficiencies and just-in-time inventory chain—resulting in greater efficiencies and just-in-time inventory management—the need for retailers to protect and provide security management—the need for retailers to protect and provide security around customer informa
around customer information will be paramount. tion will be paramount. Should personal data Should personal data onon product purchases, preferenc
product purchases, preferences, styles, etc., be es, styles, etc., be used without permission,used without permission, customers will deny retailers the use of this data by disallowing the
customers will deny retailers the use of this data by disallowing the sharing of personal informa
sharing of personal information. tion. The security of pThe security of personal purchase ersonal purchase datadata will become a critical retail issue going
will become a critical retail issue going forward.forward. With the accelerating pace of change and
With the accelerating pace of change and transformation expected fortransformation expected for the retail industry through 2015, we are excited about
the retail industry through 2015, we are excited about the prospectsthe prospects for the future retail
for the future retail marketplace. marketplace. Perhaps, more than in paPerhaps, more than in past years, thest years, the convergence of a number of anticipated drivers will fashion
convergence of a number of anticipated drivers will fashion a new retaila new retail environment that will build upon
environment that will build upon the strengths of the retail industry, yetthe strengths of the retail industry, yet encompass new approaches, models, processes and technologies.
encompass new approaches, models, processes and technologies. TheseThese advances will change the retail landscape and add more excitement
advances will change the retail landscape and add more excitement to a business that thrives on enticing customers, through innovation to a business that thrives on enticing customers, through innovation and personal appeal, to pur
and personal appeal, to purchase goods and services. chase goods and services. Branding one’Branding one’ss business to deliver a unique selling
business to deliver a unique selling experience will continue to remain aexperience will continue to remain a highly important ingredient for long-term success.
highly important ingredient for long-term success.
We hope you find this report informative and insight We hope you find this report informative and insight ful.ful.
John G. Maxwell John G. Maxwell
Americas Retail & Consumer Americas Retail & Consumer
Industry Leader Industry Leader
PricewaterhouseCoopers, LLP PricewaterhouseCoopers, LLP
Lisa Feigen Dugal Lisa Feigen Dugal
North American Retail & Consumer North American Retail & Consumer Advisory Leader Advisory Leader PricewaterhouseCoopers, LLP PricewaterhouseCoopers, LLP Tom Rubel Tom Rubel President President TNS Retail Forward TNS Retail Forward
Retailing
Retailing 2015 2015 11
15
15 Facts Facts of of Retail Retail Life Life for for 2015—The 2015—The Evolving Evolving Retail Retail Landscape Landscape 33
15
15 TTrends rends for for 2015 2015 1717
Managing
Managing Complexity Complexity in in 2015 2015 2323
Retailing
Retailing 2015—The 2015—The Outlook Outlook 3131
Biographies 33
Biographies 33
Contact
Contact Information Information 3535
Table of Contents
Between now and 2015 will be a time of transition for retailing.
Between now and 2015 will be a time of transition for retailing.
Long-term cycles are coming to a c
Long-term cycles are coming to a close. lose. New market forces New market forces are becomingare becoming more prevalent.
more prevalent. As these trajectories converAs these trajectories converge between now and 2015, theyge between now and 2015, they will change the retail business environment—and the ways we do
will change the retail business environment—and the ways we do business—business— forever:
forever: ·
· The The Baby Baby Boom—which Boom—which has has dominated dominated retail retail thinking thinking for for decades—willdecades—will stand on the precipice of age 70—and will start turning over the keys to stand on the precipice of age 70—and will start turning over the keys to younger generations.
younger generations. ·
· Interconnectivity will Interconnectivity will be be a a part part of of life—and life—and also also a a way way of of life. life. It It willwill impact the way people get
impact the way people get and share information, communicate, transactand share information, communicate, transact business, even the way they socialize.
business, even the way they socialize. ·
· Many Many existing rexisting retail etail concepts concepts will rwill reach each the the end end of their of their expansion expansion runwayrunway.. ·
· Spending on Spending on services services will will grow grow at at the the expense expense of of spending spending on on goods.goods. ·
· The The prevailing prevailing belief belief that that bigger bigger is is better better will will break break down—aggregation down—aggregation ofof small will be the
small will be the new big. new big. Leading companies will Leading companies will combine global scalecombine global scale with excellence at local execution.
with excellence at local execution. ·
· Global scope Global scope has has been been an an option. option. In In 2015, 2015, it it will will be be a a requirement requirement toto support large-scale growth and sound business economics.
support large-scale growth and sound business economics. ·
· Consolidation of Consolidation of retailing retailing into into a a global global oligopoly oligopoly will will continue, continue, as as majormajor players seek expansion in emerging markets experiencing rapid growth of players seek expansion in emerging markets experiencing rapid growth of the middle class and rapid modernization of retailing.
the middle class and rapid modernization of retailing. ·
· “Point of “Point of purchase” purchase” will will be be the the battlefield battlefield for for consumer consumer dollars—replacingdollars—replacing the confines of “shelf space” and “selling floor”.
the confines of “shelf space” and “selling floor”. ·
· TTechnology echnology will will be be pervasive—driven pervasive—driven by by falling falling costs, costs, widespread widespread accessaccess and adoption, a working
and adoption, a working infrastructure and increased standardization.infrastructure and increased standardization. ·
· Retailing will Retailing will evolve evolve toward toward true true demand—replacing demand—replacing the the artificial artificial demanddemand dictated by the limitations
dictated by the limitations of shelf space—in an increasingly digital retailof shelf space—in an increasingly digital retail environment where shoppers will have almost infinite visibility
environment where shoppers will have almost infinite visibility into productinto product choice and increasing input into product creation.
choice and increasing input into product creation. ·
· Digital and Digital and personal personal media media will will continue continue to to grow grow exponentially exponentially and and createcreate new channels for customer insight, interaction and engagement.
new channels for customer insight, interaction and engagement. ·
· The The value value chain chain will will become become more more intimate: intimate: Consumers Consumers will will share share moremore information with retailers and suppliers but expect to get more value in information with retailers and suppliers but expect to get more value in return.
return.
Retailing 2015
·
· Just-in-time Just-in-time supply supply chain chain and and the the technology technology to to support support it it will will nono longer be the gold
longer be the gold standard; extremely reducstandard; extremely reduced cycle times will requireed cycle times will require accelerated trend identification, entry and exit.
accelerated trend identification, entry and exit. ·
· Consumers Consumers won’t won’t be be able able to to take take resources resources for for granted granted anymore.anymore. Resources will be scarcer
Resources will be scarcer, in greater demand , in greater demand and hence moreand hence more expensive—raising the bar on expectations for corporate
expensive—raising the bar on expectations for corporate responsibilityresponsibility and product
and product sustainabilitysustainability.. The goal of this report is to: The goal of this report is to: ·
· Explore Explore the cthe change hange drivers—the drivers—the assumptions assumptions that drthat drive ive this outlook this outlook andand the trend lines that will merge to form the new facts of life for retailing in the trend lines that will merge to form the new facts of life for retailing in 2015.
2015. ·
· Describe Describe the the trends trends that that will will dominate dominate the the future.future. ·
· Identify Identify the the critical critical success success factors factors retailers retailers and and suppliers suppliers must must address address toto manage the complexity and diversity of retailing in 2015.
manage the complexity and diversity of retailing in 2015. T
To succeed in 2015, retailers and suppliers must o succeed in 2015, retailers and suppliers must remember what got themremember what got them there—and also
there—and also embrace new embrace new assumptions that drive the assumptions that drive the new outlook. new outlook. PastPast business drivers will wane but won’t entirely disappear
business drivers will wane but won’t entirely disappear. . New business driversNew business drivers will become more prevalent.
As existing patterns play out during the next decade, the
As existing patterns play out during the next decade, the retail marketplaceretail marketplace will face a very different landscape in 2015.
will face a very different landscape in 2015. Here are the top 15 facts of retailHere are the top 15 facts of retail life in 2015 as we see them:
life in 2015 as we see them:
1.
1. Demographic Demographic DichotomiesDichotomies
The period between now and 2015 will be one of demographic dichotomies. The period between now and 2015 will be one of demographic dichotomies. Many demographic dichotomies
Many demographic dichotomies already are under wayalready are under way, but the , but the gaps betweengaps between shopper segments will widen during the next dec
shopper segments will widen during the next decade. ade. It will be much moreIt will be much more difficult for retailers to bridge these ga
difficult for retailers to bridge these gaps in 2015. ps in 2015. TTo find growth, retailerso find growth, retailers will need to
will need to look at the look at the poles. poles. There will There will be no sbe no safe middle afe middle ground. ground. DifferentDifferent ends of the shopper spectrum will
ends of the shopper spectrum will require differrequire different products, shoppingent products, shopping environments and br
environments and brand strategies. and strategies. Even if customers Even if customers at opposite poles wantat opposite poles want to buy the same things, retailers will not be able to sell to them in the same to buy the same things, retailers will not be able to sell to them in the same way
way, in the same place o, in the same place o r with the same message.r with the same message. Demographic dichotomies will dominate
Demographic dichotomies will dominate several scales:several scales:
·· Older vs. Younger—Older vs. Younger—Society will hourglass rapidly along thSociety will hourglass rapidly along th e age spectrum,e age spectrum, with all of the growth between now and 2015 happening in the older
with all of the growth between now and 2015 happening in the older generations or the younger generations (Figures 1 and 2).
generations or the younger generations (Figures 1 and 2). Reflecting
Reflecting the the path path of of the the Baby Baby Boom Boom bulge, bulge, the the most most rapidly rapidly growing growing ageage segment in the United
segment in the United States will be States will be 55+. 55+. By 2015, leading-edge BaBy 2015, leading-edge Babyby Boomers will be staring age 70 head on; trailing-edge Boomers will be Boomers will be staring age 70 head on; trailing-edge Boomers will be looking at 50 in the rearview mirr
looking at 50 in the rearview mirroror. . If 50 was the new 30, wIf 50 was the new 30, will 70 be theill 70 be the new 50?
new 50? Do not expect Baby Boomers to go conventionally into maturityDo not expect Baby Boomers to go conventionally into maturity.. Expect them to redefine older age
Expect them to redefine older age and retirement, remaining active andand retirement, remaining active and involved.
involved.
15 Facts of Retail Life for 2015—The Evolving Retail Landscape
15 Facts of Retail Life for 2015—The Evolving Retail Landscape
Figure 1 Figure 1
U.S.
U.S. Population GPopulation Growth by rowth by AgeAge –– 2005-2010F, 2005-2010F, 2010-2015F2010-2015F
Source:
Source: U.S. Census U.S. Census BureauBureau
(% change) (% change) < <2255 2255--3344 3355--4444 4455--5544 5555--6644 65+65+ 2% 2% 5% 5% -8% -8% 5% 5% 19% 19% 9% 9% 2% 2% 6% 6% -2% -2% -5% -5% 13% 13% 16% 16% 2005-2010F 2005-2010F 2010-2015F 2010-2015F
There
There will will also also be be growth growth at at the the younger younger end end of of the the ageage
spectrum, among customers younger than age 35—the Gen Y spectrum, among customers younger than age 35—the Gen Y and Millennial cohorts.
and Millennial cohorts. Gen Y will rGen Y will reach its prime each its prime householdhousehold formation years.
formation years. Like their Like their Baby Boomer Baby Boomer parents, parents, members members ofof Gen Y are shoppers, but they are more diverse, less enamored Gen Y are shoppers, but they are more diverse, less enamored of large conglomerates and chain stores, more interested in of large conglomerates and chain stores, more interested in entertainment and recreation, and more likely to be entertainment and recreation, and more likely to be multi-channel shoppers.
channel shoppers. The
The Millennials Millennials will will traverse traverse the the teen teen years. years. This This generation’generation’ss mindset and approaches to the marketplace will be
mindset and approaches to the marketplace will be radicallyradically different fr
different from preceding generations. om preceding generations. Diversity is just a part ofDiversity is just a part of who they are.
who they are. TTechnology is part of their DNA.echnology is part of their DNA.
·· Multi-Cultural vs. Mainstream—Multi-Cultural vs. Mainstream— Another key demographic Another key demographic dichotomy is the growth of multi-cultural America compared dichotomy is the growth of multi-cultural America compared with mainstream Ame
with mainstream America. rica. The U.S. population will The U.S. population will be morebe more diverse by 2015, as the population tilts towards younger diverse by 2015, as the population tilts towards younger cohorts, which are more diverse than older cohorts cohorts, which are more diverse than older cohorts (Figures 3 and 4).
(Figures 3 and 4).
Figure 2 Figure 2
Generations as a Percent of the
Generations as a Percent of the U.S. Population, 2015FU.S. Population, 2015F
Source: U.S. Census Bureau Source: U.S. Census Bureau
Millenials Millenials Age 0-20 Age 0-20 28% 28% Gen Y Gen Y Age 21-38 Age 21-38 24% 24% Gen X Gen X Age 39-50 Age 39-50 15% 15% Boomers Boomers Age 51-69 Age 51-69 23% 23% Matures Matures Age 70+ Age 70+ 10% 10% Figure 3 Figure 3
Percent of U.S. Population by
Percent of U.S. Population by Race/Ethnicity, Race/Ethnicity, 2005 and 2015F2005 and 2015F
*
* Non-Hispanic Non-Hispanic populationpopulation
** Non-Hispanic population; includes Asian, Pacific Islander, American Indian, Eskimo, Aleut ** Non-Hispanic population; includes Asian, Pacific Islander, American Indian, Eskimo, Aleut Source:
Source: U.S. Census U.S. Census BureauBureau
African- American* American* 13% 13% Hispanic Hispanic 16% 16% Asian-American** Asian-American** 6% 6% White* White* 65% 65% 2015F 2015F 2005 2005 White* White* 70% 70% African- American* American* 12% 12% Hispanic Hispanic 13% 13% Asian-American** Asian-American** 5% 5% Figure 4 Figure 4
Distribution of Age Ranges in the United States by Race/Ethnicity, 2015F Distribution of Age Ranges in the United States by Race/Ethnicity, 2015F
*
* Non-Hispanic Non-Hispanic populationpopulation **
** Non-Hispanic population; includes AsiaNon-Hispanic population; includes Asian, Pacific Islander, American Indian, Eskimo, Aleutn, Pacific Islander, American Indian, Eskimo, Aleut Source:
Source: U.S. Census U.S. Census BureauBureau
57% 57% 59%59% 62%62% 63%63% 68%68% 74% 74% 79%79% 22% 22% 20%20% 17%17% 16%16% 13%13% 10% 10% 8%8% 1 144%% 1144%% 1144%% 14%14% 12%12% 11%11% 9%9% 6 6%% 66%% 66%% 6%6% 5%5% 4%4% 4%4% 1 1%% 11%% 11%% 11%% 11%% 11%% 11%% < <1155 1155--2244 2255--3344 3355--4444 4455--5544 5555--6644 6655++ Other* Other* As-Am** As-Am** Af-Am* Af-Am* Hispanic Hispanic White* White*
The
The population population explosion explosion and and geographic geographic dispersiondispersion of Hispanics is a key driver of diversity in younger of Hispanics is a key driver of diversity in younger generations.
generations. While less While less than one-fourth of than one-fourth of the populationthe population age 55+ will be non-white in 2015, nearly half of the
age 55+ will be non-white in 2015, nearly half of the Hispanic population will be younger than 25 (Figure 5). Hispanic population will be younger than 25 (Figure 5). Among younger generations, diversity itself becomes Among younger generations, diversity itself becomes thethe
mainstream—part of the definition of who
mainstream—part of the definition of who they are.they are. ·· Families vs. Households—Families vs. Households—By 2015, there will be moreBy 2015, there will be more
smaller households of one or two persons, and fewer smaller households of one or two persons, and fewer traditional family households due to the aging population, traditional family households due to the aging population, empty nesters, and singles young and
empty nesters, and singles young and old (Figures 6,old (Figures 6, 7 and 8).
7 and 8). Opportunities will abound for smallerOpportunities will abound for smaller, more, more personalized products and living spaces, and for personalized products and living spaces, and for experiences that are fun for one.
experiences that are fun for one. Figure 5
Figure 5
U.S. Hispanic Population by Age, 2015F U.S. Hispanic Population by Age, 2015F
Source:
Source: U.S. Census U.S. Census BureauBureau
26% 26% 19% 19% Under 14 Under 14 14-24 14-24 45%45% 15% 15% 13% 13% 11% 11% 8% 8% 8% 8% 25-34 25-34 35-44 35-44 45-54 45-54 55-64 55-64 65+ 65+ Figure 6 Figure 6
Average Number of Persons per Household Average Number of Persons per Household in the United States, 1995-2015F
in the United States, 1995-2015F
Sources:
Sources: U.S. Census Bureau U.S. Census Bureau and The Brookinand The Brookings Institutegs Institute
2.35 2.35 2.40 2.40 2.45 2.45 2.50 2.50 2.55 2.55 2.60 2.60 2.65 2.65 ‘‘9977 ‘‘9999 ‘‘0011 ‘‘0033 ‘‘0055 ’’0077 ’’0099 ’’1111 ’’1133 ’’1155 ‘95 ‘95 Forecast Forecast Figure 7 Figure 7
Family Households as a Percent Family Households as a Percent of Total U.S. Households, 1995-2015F of Total U.S. Households, 1995-2015F
Sources:
Sources: U.S. Census Bureau anU.S. Census Bureau and The Brookings Instituted The Brookings Institute
67.0% 67.0% 67.5% 67.5% 68.0% 68.0% 68.5% 68.5% 69.0% 69.0% 69.5% 69.5% 70.0% 70.0% 70.5% 70.5% ‘‘997 7 ‘‘999 9 ‘‘001 1 ‘‘003 3 ‘‘005 5 ’’007 7 ’’009 9 ’’111 1 ’’113 3 ’’1155 ‘95 ‘95 Forecast Forecast Figure 8 Figure 8
Percent of U.S. Household by Type Percent of U.S. Household by Type
61% 61% 56%56% 53%53% 51% 51% 13% 13% 15%15% 16% 16% 17%17% 26% 26% 29%29% 31%31% 32%32% 1 1998800 11999900 20002000 20062006 Non-family Households Non-family Households
Families w/Non-married Household Head Families w/Non-married Household Head Families w/Married Household Head Families w/Married Household Head Sources:
·· Redeploying vs. Shouldering—Redeploying vs. Shouldering—During the next decade, BabyDuring the next decade, Baby Boomers will begin to exit the work force and redeploy their Boomers will begin to exit the work force and redeploy their vast energies and
vast energies and spending powerspending power. . In their stead, youngerIn their stead, younger generations will shoulder the burden in the work force and in generations will shoulder the burden in the work force and in the retail marketplace.
the retail marketplace. Growth
Growth of of the the labor labor force force will will slow slow as as Baby Baby Boomers Boomers exit exit andand the smaller generations that follow cannot make up the gap. the smaller generations that follow cannot make up the gap. The loss of workers will be particularly acute in the middle The loss of workers will be particularly acute in the middle management ranks, as the overall number of
management ranks, as the overall number of workers agedworkers aged 35-54 contracts (Figure 9).
35-54 contracts (Figure 9).
Some of this loss will be offset by the large younger Some of this loss will be offset by the large younger generation entering the workforce.
generation entering the workforce. HoweverHowever, most of these, most of these employees will be “early-curve” workers who have not employees will be “early-curve” workers who have not yetyet developed the skills and experience base to
developed the skills and experience base to fortify the ranksfortify the ranks of midlife workers.
of midlife workers.
Some of the loss will be offset by Baby Boomers who remain Some of the loss will be offset by Baby Boomers who remain in the labor force either by
in the labor force either by economic necessity or by choice.economic necessity or by choice. However
However, many Baby , many Baby Boomers will be Boomers will be “late-curve” workers“late-curve” workers who are either too expensive or too highly skilled for mid-career who are either too expensive or too highly skilled for mid-career roles.
roles. Others will opt out of Others will opt out of traditional work roles, traditional work roles, preferring topreferring to pursue their own business interests or to
pursue their own business interests or to cycle between periodscycle between periods of work and leisure on an
of work and leisure on an as needed or as desired basis.as needed or as desired basis. ·· Thriving vs. Surviving—Thriving vs. Surviving—The coming decade will also witness aThe coming decade will also witness a
widening gap between haves and have-nots in
widening gap between haves and have-nots in terms of wealth,terms of wealth, education and techno-literacy
education and techno-literacy. . The top 10% of The top 10% of households willhouseholds will account for a gr
account for a growing share owing share of total income (Figure of total income (Figure 10). 10). BabyBaby Boomers will represent a microcosm of have vs. have-not in Boomers will represent a microcosm of have vs. have-not in the form of prepare
the form of prepared vs. unprepard vs. unprepared for retiremeed for retirement. nt. The BabyThe Baby Boom will be the first generation to retire with 401Ks instead Boom will be the first generation to retire with 401Ks instead of pensions.
of pensions. Some will work becaSome will work because they want use they want to; some willto; some will work because they have to.
work because they have to.
Figure 9 Figure 9
Numeric Change in U.S. Labor Force by Age (000s), Numeric Change in U.S. Labor Force by Age (000s), 2004-2014F
2004-2014F
Source: U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics
4,548 4,548 7,616 7,616 3,689 3,689 25-34 25-34 55-64 55-64 65 and older 65 and older -110 -110 -2,813 -2,813 1,769 1,769 16-24 16-24 35-44 35-44 45-54 45-54 Figure 10 Figure 10 Top Decile
Top Decile Share of Household IncomShare of Household Income, 1980-2005e, 1980-2005
Source:
Source: March 200March 2007 Saez7 Saez and Piand Pikettyketty analysis analysis of tax return of tax return statistics,statistics, University of California, Berkeley
University of California, Berkeley
30% 30% 32% 32% 34% 34% 36% 36% 38% 38% 40% 40% 42% 42% 44% 44% 46% 46% 1 1 9 9 8 8 0 0 1 1 9 9 8 8 2 2 1 1 9 9 8 8 4 4 1 1 9 9 8 8 6 6 1 1 9 9 8 8 8 8 1 1 9 9 9 9 0 0 1 1 9 9 9 9 2 2 1 1 9 9 9 9 4 4 1 1 9 9 9 9 6 6 1 1 9 9 9 9 8 8 2 2 0 0 0 0 0 0 2 2 0 0 0 0 2 2 2 2 0 0 0 0 4 4
2.
2. Disruptive Disruptive WavesWaves
Between now and 2015, the biggest consumer causes of disruption in the Between now and 2015, the biggest consumer causes of disruption in the retail marketplace will be First-Wave Boomers and the Digital
retail marketplace will be First-Wave Boomers and the Digital GenerationGeneration (Second-Wave Ge
(Second-Wave Gen Y and First-Wave n Y and First-Wave Millennials, collectively). Millennials, collectively). The aging ofThe aging of the Baby Boom will
the Baby Boom will affect the ability of many retailers to affect the ability of many retailers to grow and prospergrow and prosper.. The coming of age of the Digital Generation will affect how retailers can grow The coming of age of the Digital Generation will affect how retailers can grow and prosper.
and prosper.
·· First-Wave Boomers—First-Wave Boomers— As they approach age As they approach age 70, First-Wave Ba70, First-Wave Babyby Boomers will be reaching a lifestage where spending on
Boomers will be reaching a lifestage where spending on many goodsmany goods begins to decline (Figure 11).
begins to decline (Figure 11). They will have new needs, They will have new needs, driven bydriven by smaller households, increased emphasis on health and general welfare, smaller households, increased emphasis on health and general welfare, and increased service dema
and increased service demands as “help me” replaces “DIYnds as “help me” replaces “DIY.” .” They willThey will have new requirements—sm
have new requirements—smaller, aller, closer, closer, easier. easier. And they will have newAnd they will have new desires, such as quality of life, experiences, entertainment, enrichment, desires, such as quality of life, experiences, entertainment, enrichment, leisure and legacies.
leisure and legacies. Compared with prevCompared with previous generations of retirement-ious generations of retirement-age consumers, First-Wave Boomers will be more highly educated, more age consumers, First-Wave Boomers will be more highly educated, more economically empowered and
economically empowered and more self-focused. more self-focused. The biggest differenceThe biggest difference will be among female Boo
will be among female Boomers, as the first retirement generation ofmers, as the first retirement generation of women who have had significant
women who have had significant careers, strong earning power andcareers, strong earning power and confidence in their abilities—driving high
confidence in their abilities—driving high expectations for a productiveexpectations for a productive senior lifestage.
senior lifestage.
As consumers ag
As consumers age:e:
·
· Softgoods take Softgoods take the earliest the earliest andand
biggest hits
biggest hits
·
· Homegoods Homegoods and and consumablesconsumables
soon follow
soon follow
·
· Healthcare iHealthcare is the only bs the only bright spotright spot
Figure 11 Figure 11
Percent Change in Spending by Category vs. Prior Age Group, 2005
Percent Change in Spending by Category vs. Prior Age Group, 2005 As consumers age:
As consumers age:
Source: U.S. Bureau of Labor Statistics
Source: U.S. Bureau of Labor Statistics
-80% -80% -60% -60% -40% -40% -20% -20% 0% 0% 20% 20% 40% 40% 60% 60% 3 355- 4- 44 4 4455- 5- 54 4 5555- 6- 64 4 6655- 7- 74 4 7 57 5++
Women's and girls Women's and girls apparel
apparel Men's and boys Men's and boys apparel apparel Footwear Footwear -80% -80% -60% -60% -40% -40% -20% -20% 0% 0% 20% 20% 40% 40% 60% 60% 3 355- 4- 44 4 4455- 5- 54 4 555 -5 -6 4 6 4 665 -5 -7 4 7 4 7755++ Furniture/home Furniture/home furnishings furnishings Consumer Electronics Consumer Electronics Pets, toys, Pets, toys, hobbies, etc. hobbies, etc. -80% -80% -60% -60% -40% -40% -20% -20% 0% 0% 20% 20% 40% 40% 60% 60% 3 355--444 4 4455--554 4 5555--664 4 6655--774 4 7755++ Food at home Food at home Food away from home Food away from home
-80% -80% -60% -60% -40% -40% -20% -20% 0% 0% 20% 20% 40% 40% 60% 60% 35 35-4-44 4 4545-5-54 4 5555-6-64 4 6565-7-74 4 7575++
Personal care products Personal care products Healthcare
Retailers
Retailers and and suppliers suppliers will will need need to to respond respond with with offers offers that that are are age- age- andand attitude-appropriate, but take into account the inevitable changes in attitude-appropriate, but take into account the inevitable changes in priorities that occur with
priorities that occur with maturity—focusing on products, services andmaturity—focusing on products, services and experiences that help Boomers defy, deal with or enjoy age.
experiences that help Boomers defy, deal with or enjoy age. First-Wave Boomers will also have a new credo as “I
First-Wave Boomers will also have a new credo as “I don’t get anyonedon’t get anyone under 30” replaces youth’s rallying cry of “I don’t trust anyone over 30.” under 30” replaces youth’s rallying cry of “I don’t trust anyone over 30.” ·· The Digital Generation—The Digital Generation—It has been about 50 It has been about 50 years since rock ‘n’ rollyears since rock ‘n’ roll
ignited a generation gap between young people and their parents.
ignited a generation gap between young people and their parents. TTodayoday,, there is a new generation gap looming, driven by the digital “divide”
there is a new generation gap looming, driven by the digital “divide” (Figure 12).
(Figure 12). Growing up in a world wherGrowing up in a world where there are there are very few physicale very few physical or psychological barriers to trying new ways to do things, the Digital or psychological barriers to trying new ways to do things, the Digital Generation will epitomize the new mindset of the decade: everything is Generation will epitomize the new mindset of the decade: everything is interconnected, anything goes, everything is available, and nothing interconnected, anything goes, everything is available, and nothing isis private.
private. They will be savvyThey will be savvy, skilled shoppers, who place , skilled shoppers, who place a high level ofa high level of importance on individualism, self-fulfillment and personal involvement importance on individualism, self-fulfillment and personal involvement in the creation proces
in the creation process. s. Retailers and suppliers will neeRetailers and suppliers will need to respond byd to respond by providing members of the Digital Generation with the tools they need providing members of the Digital Generation with the tools they need create, co-create or re-create to suit themselves.
create, co-create or re-create to suit themselves.
These two disruptive waves will represent a challenge for many
These two disruptive waves will represent a challenge for many retailersretailers and suppliers.
and suppliers. Compared with Compared with the big-spending Baby Boom genethe big-spending Baby Boom generation,ration, new spenders will be less
new spenders will be less attractive. attractive. Fewer will have reaFewer will have reached their big-ched their big-spending lifestages.
spending lifestages. They will havThey will have less e less buying powerbuying power. . They will beThey will be more fragmented into
more fragmented into niche interest maniche interest markets. rkets. They will demand morThey will demand moree personalization.
personalization. They will be haThey will be harder to rrder to reach with conventional each with conventional media,media, marketing and formats.
marketing and formats.
Figure 12 Figure 12
Communication Shorthand Epitomizes the Digital Divide Communication Shorthand Epitomizes the Digital Divide
Translation: Translation:
Don’t quote me on this, but Don’t quote me on this, but in my not so humble in my not so humble opinion, face-to-face talk is opinion, face-to-face talk is no big deal
no big deal becausbecause AOLe AOL Instant Messenger is the Instant Messenger is the best way to keep
best way to keep in touch.in touch. But you kn
But you knew thatew that. . GottaGotta go now.
go now. The bosThe boss iss is liste
listening. ning. Have a nice day.Have a nice day. DQMOT, but IMNSHO F2F
DQMOT, but IMNSHO F2F talk is NBD BC AIM is the talk is NBD BC AIM is the
best way to K
best way to KIT. IT. BYKT.BYKT. GGN. BIL.
GGN. BIL. HANDHAND..
Translation: Translation:
Don’t quote me on this, but Don’t quote me on this, but in my not so humble in my not so humble opinion, face-to-face talk is opinion, face-to-face talk is no big deal
no big deal becausbecause AOLe AOL Instant Messenger is the Instant Messenger is the best way to keep
best way to keep in touch.in touch. But you kn
But you knew thatew that. . GottaGotta go now.
go now. The bosThe boss iss is liste
listening. ning. Have a nice day.Have a nice day. DQMOT, but IMNSHO F2F
DQMOT, but IMNSHO F2F talk is NBD BC AIM is the talk is NBD BC AIM is the
best way to K
best way to KIT. IT. BYKT.BYKT. GGN. BIL.
3.
3. New New Consumer Consumer MindsetMindset
A new set of underlying drivers will pe
A new set of underlying drivers will permeate our society and our shoppingrmeate our society and our shopping behavior
behavior. . Four mindset mega-trends will have farFour mindset mega-trends will have far-reaching implications for the-reaching implications for the retail marketplace of 2015:
retail marketplace of 2015:
·· Interconnected—Interconnected—By the middle of tBy the middle of t he next decade, interconnectivity willhe next decade, interconnectivity will be a part of life.
be a part of life. Consumers will expect to connect to anyone, aConsumers will expect to connect to anyone, at any time,t any time, about anything, from anywher
about anything, from anywhere. e. Interconnectivity will also be a wInterconnectivity will also be a way ofay of life—the way people get and share information, communi
life—the way people get and share information, communi cate, transactcate, transact business, even the way
business, even the way they socialize. they socialize. Social status in the next decadeSocial status in the next decade will become much more about who you connect to and who wants to will become much more about who you connect to and who wants to connect to you.
connect to you. Expect an explosion of Expect an explosion of social networking sites dessocial networking sites designedigned to expand the
to expand the individual’individual’s reach.s reach.
·· In Control—In Control—With interconnectivity as a base assumption, consumers alsoWith interconnectivity as a base assumption, consumers also will become more adept at controlling
will become more adept at controlling the ways in which they intthe ways in which they interact.eract. Control will take three forms:
Control will take three forms: —
— Clout control—Clout control—Consumers will find there is strength by Consumers will find there is strength by association toassociation to drive change.
drive change. Crowd clout will Crowd clout will help consumers demand help consumers demand the productsthe products they want, via the shopping
they want, via the shopping experience they want, from companiesexperience they want, from companies that do business in the ways they want.
that do business in the ways they want. —
— Context control—Context control—TTools and technologies tools and technologies that enable time-shifting andhat enable time-shifting and place-shifting increasingly will allow consumers to capture information, place-shifting increasingly will allow consumers to capture information, communicate and conduct transactions regardless of the time or communicate and conduct transactions regardless of the time or thethe place.
place. —
— Contacts control—Contacts control—Consumers also are gaining more control of whomConsumers also are gaining more control of whom they let into their
they let into their interconnected “world.” interconnected “world.” They are They are increasing theirincreasing their use of filtering mechanisms to
use of filtering mechanisms to create a “closed loop society,” wherecreate a “closed loop society,” where connectivity is limited to
connectivity is limited to the contacts they athe contacts they allow in. llow in. Such filteringSuch filtering mechanisms today include spam filters, permission-based marketing, mechanisms today include spam filters, permission-based marketing, cell phone as primary phone, caller ID and
cell phone as primary phone, caller ID and sites where consumerssites where consumers can “rejec
can “reject” unwanted contacts. t” unwanted contacts. Expect to see a Expect to see a proliferation inproliferation in social networks that are more finely focused and, in
social networks that are more finely focused and, in some cases,some cases, more exclusive in the w
more exclusive in the ways people find and join them. ays people find and join them. Unlike mega-Unlike mega-networks designed to extend reach, the goal
networks designed to extend reach, the goal of these micro-networksof these micro-networks is to narrow reach to specific niches of
is to narrow reach to specific niches of similar interests.similar interests.
·· Indulgent—Indulgent—In 2015, consumer indulgence will be focused on the “nextIn 2015, consumer indulgence will be focused on the “next new thing” and the
new thing” and the “next best thing.” “next best thing.” Interconnected shoppers Interconnected shoppers will havewill have the tools to
the tools to easily discovereasily discover, find, filter and try , find, filter and try the next new thing—atthe next new thing—at ever more af
ever more affordable prices—and fordable prices—and then quickly move on. then quickly move on. Given virtuallyGiven virtually unlimited accessibility to the next new thing, consumer indulgence will unlimited accessibility to the next new thing, consumer indulgence will shift to the next
shift to the next best thing—niche products, experiences and servicesbest thing—niche products, experiences and services uniquely suited to their
·· Individualized—Individualized—Shoppers will gravitate toward products and experiences that offerShoppers will gravitate toward products and experiences that offer individual focus, interaction and involvement in the e
individual focus, interaction and involvement in the entire value chain prntire value chain process. ocess. TheyThey will desire products and experiences they perceive as meeting their unique needs. will desire products and experiences they perceive as meeting their unique needs. They will want the opportunity to interact at the individual level with retailers and They will want the opportunity to interact at the individual level with retailers and suppliers.
suppliers. TTaken to the extreme, they waken to the extreme, they will seek out opportunities for involvement inill seek out opportunities for involvement in the entire chain of activities that
the entire chain of activities that brings a product to market—from conception, designbrings a product to market—from conception, design and creation, to marketing and retailing, even to
and creation, to marketing and retailing, even to funding and rewarding.funding and rewarding.
4.
4. Retail Retail Runway Runs Runway Runs OutOut
Most major retailers will be out of expansion room in the United States for their core Most major retailers will be out of expansion room in the United States for their core concepts by 2015.
concepts by 2015. Very few formats will grow at a rate exceVery few formats will grow at a rate exceeding the overall retail saleseding the overall retail sales growth forecast—and virtually all of those will
growth forecast—and virtually all of those will grow at a slower rate than earlier grow at a slower rate than earlier in thein the millennium (Figures 13 and 14).
millennium (Figures 13 and 14). Players will need to turn elsewherPlayers will need to turn elsewhere for growth—newe for growth—new concepts, new customer segments,
concepts, new customer segments, new geography, new categories.new geography, new categories.
Figure 13 Figure 13
Formats with Above Average Sales Growth Outlook Formats with Above Average Sales Growth Outlook
Sources: U.S. Department of Commerce and TNS Retail Forward Sources: U.S. Department of Commerce and TNS Retail Forward
33.2% 33.2% 15.7% 15.7% 5.9% 5.9% 9.2% 9.2% 12.3% 12.3% 27.7% 27.7% 10.2% 10.2% 6 6..55%% 66..44%% 5.5%5.5% E
E--ccoommmmeerrccee SSuuppeerrcceenntteerrss CCE E &&
Appliance Appliance Stores Stores Warehouse Warehouse Clubs Clubs Convenience Convenience Stores Stores Drug Stores Drug Stores 2001-2006 2001-2006 2006-2011F2006-2011F 5.8% 5.8% 5.4%5.4% Non-auto Non-auto Retail Sales Retail Sales Growth Forecast Growth Forecast 5.2% 5.2% Figure 14 Figure 14
Formats with Below Average Sales Growth Outlook Formats with Below Average Sales Growth Outlook
Sources: U.S. Department of Commerce and TNS Retail Forward Sources: U.S. Department of Commerce and TNS Retail Forward
20 200101-2-200006 6 20200606-2-201011F1F 8.2% 8.2% 6.5% 6.5% 5.9% 5.9% 4.9% 4.9% 5.5% 5.5% 4.2% 4.2% 2.6% 2.6% 3.9% 3.9% 2.6% 2.6% 2.9%2.9% -0.9% -0.9% 1.3% 1.3% -2.2% -2.2% 4 4..77% % 44..77%% 4.6% 4.6% 4.4%4.4% 44..33% % 44..33%% 3.5% 3.5% 3.5%3.5% 3.1% 3.1% 2.3% 2.3% 1.9% 1.9% 1.7%1.7% -0.4% -0.4% Building Building Materials Materials Hardware Hardware & Garden & Garden Supply Supply Home Home Furnishings Furnishings Stores Stores Sporting Sporting Goods Goods Stores Stores Jewelry Jewelry Stores Stores Apparel & Apparel & Accessories Accessories Stores Stores Furniture Furniture Stores Stores Office Office Supply Supply Stores Stores Small-Format Format Value Value Stores Stores Shoe Shoe Stores Stores Super-markets markets Discount Discount Department Department Stores Stores Book Book Stores Stores Department Department Stores Stores Non-auto Non-auto Retail Sales Retail Sales Growth Forecast Growth Forecast 5.2% 5.2%
5.
5. Growth in Growth in Spending on Spending on ServicesServices
Spending on goods will continue to lose ground to spending on services
Spending on goods will continue to lose ground to spending on services (Figure 15). (Figure 15). OlderOlder generations are becoming more service, “do it for me”, and experience oriented.
generations are becoming more service, “do it for me”, and experience oriented. YYoungerounger generations are more likely to approach goods, services and experiences as an int
generations are more likely to approach goods, services and experiences as an int egratedegrated continuum.
continuum. TTo satisfy customer needs, retailers will need to incorporate services ando satisfy customer needs, retailers will need to incorporate services and experiences into their concepts.
experiences into their concepts.
6.
6. Growth in Growth in Nontraditional SpacesNontraditional Spaces
Between now and 2015, the r
Between now and 2015, the retail landscape will evolve. etail landscape will evolve. The shakeout of marginal mallsThe shakeout of marginal malls will continue, fewer conventional malls will be built, fewer existing malls will perform well, will continue, fewer conventional malls will be built, fewer existing malls will perform well, fewer shoppers will traffic malls with
fewer shoppers will traffic malls with high frequencyhigh frequency, and there will be fewer conventional, and there will be fewer conventional department stores to go around
department stores to go around as mall anchors (Figure 16). as mall anchors (Figure 16). More lifestyle and neighborhoodMore lifestyle and neighborhood
Figure 15 Figure 15
Personal Consumption Expenditures: Goods vs. Services, 1980-2005 Personal Consumption Expenditures: Goods vs. Services, 1980-2005
Source: Bureau of
Source: Bureau of Economic AnalysisEconomic Analysis
0% 0% 10% 10% 20% 20% 30% 30% 40% 40% 50% 50% 60% 60% 1 9 1 98 0 8 0 1 91 98 2 8 2 1 91 98 4 8 4 1 91 98 6 8 6 1 91 98 8 8 8 1 91 99 0 9 0 1 91 99 2 9 2 1 91 99 4 1 9 99 4 1 9 96 6 1 91 99 8 9 8 2 02 00 0 0 0 2 02 00 2 0 2 2 02 00 40 4 Services Services Goods Goods Figure 16 Figure 16
Number of New Regional/Super-regional Malls Opened per Year, 1998-2008P Number of New Regional/Super-regional Malls Opened per Year, 1998-2008P
Source: International Council of Shopping Centers Source: International Council of Shopping Centers
6 6 4 4 6 6 77 4 4 44 2 2 12 12 9 9 19 19 16 16 10 10 5 5 3 3 8 8 99 88 1 1 6 6 5 5 2 2 1 199888 8 1199990 0 1199992 2 1199994 4 1199996 6 1199998 8 2200000 0 2200002 2 2200004 4 2200006 6 22000088PP
centers will come on board, where retailing mingles with
centers will come on board, where retailing mingles with nontraditionalnontraditional traffic drivers.
traffic drivers. These will be places wherThese will be places where people can go to eat, entertaine people can go to eat, entertain and live—not just shop.
and live—not just shop. High-performance malls will High-performance malls will continue to reinventcontinue to reinvent and reinvigorate—many by taking a lesson from li
and reinvigorate—many by taking a lesson from li festyle-driven formats.festyle-driven formats. The Internet will exert more influence—continuing to grow rapidly as a retail The Internet will exert more influence—continuing to grow rapidly as a retail channel, but, even more importantly, continuing to grow exponentially as the channel, but, even more importantly, continuing to grow exponentially as the conduit to the vast marketplace outside traditional space.
conduit to the vast marketplace outside traditional space.
7.
7. Growth in Growth in Nontraditional PlaNontraditional Placesces
Growth in most developed re
Growth in most developed retail markets will be slowtail markets will be slow. . The fastestThe fastest growth will take place in developing retail markets, including growth will take place in developing retail markets, including the huge markets of
the huge markets of China and India China and India (Figure 17). (Figure 17). Retail issuesRetail issues in developed markets around the globe
in developed markets around the globe basically will be abasically will be a mirror image of issues confronted by the
mirror image of issues confronted by the U.S. economy—agingU.S. economy—aging populations, shrinking share of retail spending and
populations, shrinking share of retail spending and increasedincreased spending on healthca
spending on healthcare. re. In contrast, In contrast, populations in developingpopulations in developing markets will remain relatively young and will
markets will remain relatively young and will increase share ofincrease share of retail spending.
retail spending. Developing markets will cDeveloping markets will continue to build a bigontinue to build a big pool of university-educated labor and talent, shifting the nucleus pool of university-educated labor and talent, shifting the nucleus of knowledge workers.
of knowledge workers. TTrend-spotters will want to set up carend-spotters will want to set up campmp in developing markets, especially Asia, which will begin to eclipse in developing markets, especially Asia, which will begin to eclipse developed markets as a hotbed of
developed markets as a hotbed of cultural and retail marketcultural and retail market influence.
influence.
8.
8. TTrue Global rue Global EconomyEconomy
In 2015, retailers will do business in a true global economy—global In 2015, retailers will do business in a true global economy—global customer base, global sourcing, global outsourcing pool, global customer base, global sourcing, global outsourcing pool, global reach.
reach. Barriers to global trade Barriers to global trade will continue to come dwill continue to come down.own. Impediments to global
Impediments to global sourcing will sourcing will continue to ease. continue to ease. DevelopingDeveloping markets will continue to phase out restrictions on foreign retailer markets will continue to phase out restrictions on foreign retailer operations and liberalize regulation of
operations and liberalize regulation of direct foreign investment.direct foreign investment. Global scope will be a
Global scope will be a necessitynecessity, not an option, not an option , to grow the top, to grow the top line and bolster the
line and bolster the bottom line. bottom line. Global expansion will be Global expansion will be aa key avenue for retailers in developed markets to
key avenue for retailers in developed markets to generate newgenerate new sources of reve
sources of revenue to offset slower sales grnue to offset slower sales growth at home. owth at home. TheThe Internet will provide global
Internet will provide global customer reach even in the absencecustomer reach even in the absence of a global footprint.
of a global footprint. Global sourcing will be Global sourcing will be a critical componenta critical component of differentiated
of differentiated assortments at competitive assortments at competitive price points. price points. GlobalGlobal outsourcing will be vital to reining in expenses while keeping the outsourcing will be vital to reining in expenses while keeping the business focused on
business focused on core differentiating capabilities.core differentiating capabilities.
waterhouseCoopers
waterhouseCoopers Figure 17
Figure 17
Non-auto Retail Sales Growth Ou
Non-auto Retail Sales Growth Ou tlook, 2006-2011Ftlook, 2006-2011F
Sources: National statistics offices, OECD
Sources: National statistics offices, OECD and TNS Retail Forwardand TNS Retail Forward
0.8% 0.8% 1.3% 1.3% 2.2% 2.2% 2.8% 2.8% 2.9% 2.9% 3.0% 3.0% 3.6% 3.6% 3.6% 3.6% 4.0% 4.0% 4.1% 4.1% 4.6% 4.6% 4.7% 4.7% 5.1% 5.1% 5.2% 5.2% 5.7% 5.7% 6.0% 6.0% 6.6% 6.6% 7.1% 7.1% 7.2% 7.2% 7.7% 7.7% 7.9% 7.9% 8.9% 8.9% 9.6% 9.6% 9.7% 9.7% 10.4% 10.4% 10.4% 10.4% 10.6% 10.6% 11.2% 11.2% 12.8% 12.8% 15.4% 15.4% Japan Japan Switzerland Switzerland Germany Germany Sweden Sweden France France Italy Italy Taiwan Taiwan Netherlands Netherlands Belgium Belgium United Kingdom United Kingdom Poland Poland Canada Canada South Korea South Korea United States United States Australia Australia Spain Spain Brazil Brazil Malaysia Malaysia Mexico Mexico Thailand Thailand South Africa South Africa China China Argentina Argentina Philippines Philippines India India Vietnam Vietnam Indonesia Indonesia Turkey Turkey Nigeria Nigeria Russia Russia
Compound average annual growth rates Compound average annual growth rates
9.
9. American ReAmerican Retailers Platailers Play Catch-uy Catch-upp
T
To support o support growth projections, more American retailers will growth projections, more American retailers will need to expandneed to expand globally.
globally. They will be late to the game, eThey will be late to the game, especially compared with larspecially compared with largege European retailers, which have long operated on an i
European retailers, which have long operated on an i nternational scale, andnternational scale, and local retailers in developing markets, which have been riding
local retailers in developing markets, which have been riding the coattails ofthe coattails of grassroots opportunity
grassroots opportunity. . American retailers will haAmerican retailers will have a harder time ve a harder time getting agetting a foothold in global soil.
foothold in global soil. In many places, In many places, American products American products will no longer bewill no longer be the status symbols they o
the status symbols they once were, especially as local and developing marketnce were, especially as local and developing market influences gain popularity
influences gain popularity. . As middle-class consumers emerAs middle-class consumers emerge around thege around the globe, the United States will no longer be the main customer for goods and globe, the United States will no longer be the main customer for goods and resources.
resources. Global expansion will require Global expansion will require local partners, personnel, prlocal partners, personnel, products,oducts, and perception into
and perception into local customers and local customers and cultures. cultures. American companies willAmerican companies will have to play by glo
have to play by glo bal standards.bal standards.
10.
10. Retail Retail Battleground Battleground RedefinedRedefined
In 2015, the battleground for
In 2015, the battleground for retail sales is broader—point of purchase, notretail sales is broader—point of purchase, not just retail shelf or sales floor
just retail shelf or sales floor. . The power shifts again. The power shifts again. Suppliers dominatedSuppliers dominated the 1980-90s as they pushed product and thrived on national brand
the 1980-90s as they pushed product and thrived on national brand pre-eminence.
pre-eminence. Retailers dominated the Retailers dominated the 2000s with SKU rationalization,2000s with SKU rationalization, increased private brand penetration and
increased private brand penetration and fact-based merchandising decisions.fact-based merchandising decisions. Consumers will dominate in
Consumers will dominate in 2015 as they increase demands for interactivity,2015 as they increase demands for interactivity, segmentation, localization and customizatio
segmentation, localization and customizatio n, and as they leverage greatern, and as they leverage greater visibility into product availability and pricing.
visibility into product availability and pricing. This will require unprThis will require unprecedentedecedented levels of value chain collaboration.
levels of value chain collaboration. The assumption guiding
The assumption guiding recent decades has been that suppliers will dorecent decades has been that suppliers will do business with fewer retailers who will carry fewer (inter)national
business with fewer retailers who will carry fewer (inter)national brands.brands. The driving assumption for suppliers in 2015 must be that their large retail The driving assumption for suppliers in 2015 must be that their large retail customers will operate more but smaller concepts
customers will operate more but smaller concepts to meet the needs of to meet the needs of moremore diverse consumer s
diverse consumer segments. egments. They will want the They will want the suppliers they do suppliers they do businessbusiness with to be just as versatile.
with to be just as versatile. They will demand the SKUs they cThey will demand the SKUs they carry conveyarry convey differentiation and
differentiation and credibility while credibility while delivering profitable sadelivering profitable sales. les. With theWith the decreasing gains from new store openings, retailer and supplier profitability decreasing gains from new store openings, retailer and supplier profitability will be achieved by driving g
will be achieved by driving greater productivity within existing stores.reater productivity within existing stores.
11.
11. Almost PerfecAlmost Perfect Product t Product AccessAccess
Through much of the
Through much of the history of product distribution, a history of product distribution, a large part of a product’slarge part of a product’s value has been added at the factory
value has been added at the factory (in the production stage) and (in the production stage) and at the storeat the store (by making the product access
(by making the product accessible). ible). In 2015, we will have almost peIn 2015, we will have almost perfectrfect product access—availability of the right product, at the
product access—availability of the right product, at the right place, at theright place, at the right price.
right price. The economics of scarcity wThe economics of scarcity will give way to the economics ofill give way to the economics of abundance.