2012 – The end of retail as we know it?

the end of retail as we know it?

So if you are reading this, the world hasn’t yet come to an end. The end of the Mayan calendar hasn’t yet heralded Armageddon and yet another doomsday prophecy has hopefully been put to rest.

Since the world has not come to an end, I’ve been thinking about other prophecies that have been made in 2012. One such prophecy is that offline retail is dying. I most recently heard this from Piers Fawkes during the “2013 Trends Predictions via @PSFK” Hangout when he was heard to say “The big story is that retail is dead”

Really? Dead? Let’s see.

Plenty of developments in 2012 might suggest that traditional offline retailing is in crises. Over the last decade online retail has led to the decline and closure of traditional stores in travel, music and video and in 2011 in book selling. 2012 saw the consumer appliance retail sector rocked by competition from online. In the UK, Comet filed for bankruptcy and in China, the country’s largest retailer, Suning announced its existing business model of focusing just in consumer appliances was no longer sustainable. Around the world electronics retailers struggled with what to do about “show rooming” (where shoppers use a physical environment to check out a product before buying online) and the concept of multi-channel retailing (the strategy of creating coherent links between physical and virtual environments as a way to secure greater loyalty) became common parlance in the industry.

In the US, 2012 saw the biggest daily sales online in history with Cyber Monday delivering US$1.25 billion. But the real online story was in China where TaoBao’s singles’ day promotion on 11/11 set the world record for online sales in one day at US3.06 billion through one portal, nearly three times as much. In China we also saw the greatest evidence that the next battleground between bricks and clicks will be in Grocery retail as global behemoth Walmart acquired online retailer Yihoadian. When retailers like Walmart start acquiring in this space, we should take this as a clear sign that grocery retail is about to change.

Indeed grocery retailing has changed in other ways during 2012. Speaking at the Asia Shopper Marketing & Insights 2012 conference early in the year Anson Dichaves of Nielsen suggested that Hypermarkets are in decline with fewer trips being made less often in Asia. He also signaled that the more proximate offers of conveniences stores and local supermarkets were gaining ground. A major casualty of the this was Carrefour who completed their exit from South East Asia. With their offer struggling in China too, it may be a matter of time before Carrefour, that once claimed that it was the most global retailer in the world, might be again constrained to markets closer to home.

Certainly 2012 did not see any major expansionary steps by the big global grocery retailers, but with fashion players like Zara and H&M continuing their global march it’s hard to say retail globalization has stopped.

So do all the changes in 2012 really indicate the death of retail?

Like the Mayan’s prediction, this is probably a false prophecy. Extrapolating Nielsen’s data on “Asia Pacific Shopper Trends” in 2011, there may be more than 60 million shops across the world. These employ a vast workforce – a report in the Economist showed Walmart to be the number 3 employer in the world. Deloitte’s “Global Powers of Retail, 2012” report showed that the top 250 retailers have grown faster than their major manufacturing partners over the last four years. It also showed that the top 10 retailers have nearly doubled in size in a decade.

Earlier this year new data from POPAI claimed that more purchase decisions that ever are made in retail stores, fully 76% of the decisions appear to be made in actual shops. And very recently online retailers like Bonobos.com and Yihoadian have created their own showrooms for shoppers to have a offline experience of their online offer. So to declare this industry ‘dead’ is naïve, but to deny the facts that indicate retail is changing dramatically is equally wrong-headed.

There should be no doubt that in the next year, online will pick up greater pace and we should probably expect further casualties in offline electronics retail. It’s likely that grocery retail will be the next sector to feel the effects of e-tail and this will probably start to have significant impacts on sales in 2013. Whilst this will be truer in key western markets, the huge success of China’s online retailers in 2012 is likely to drive the expansion of internet shopping in Asia in 2013.

In all probability, physical stores will be forced to innovate more in 2013 to keep shoppers engaged, and whilst this has been an imperative in the west over the last few years, it will start to impact on developing economies very soon. This will mean that retailers will seek more creative input from manufacturers and demand greater support for in-store initiatives too.

So 2013 is likely to be a year of challenge for manufacturers serving the retail industry. As shopping behaviors change, brands will have to be more aware of the way their shoppers engage within and across channels. Manufactures will need clearer retail channel strategies, based on a better understanding of which shopper segments to prioritize. These strategies will also depend on more granular channel segmentations, if anything 2012 should signal the end of ‘modern trade’ and ‘general trade’ thinking. Finally these strategies will need to specify creative ways of getting shoppers to buy regardless of whether they are online or in stores.

Featured image: Flickr – Kim-Bodia


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s