Article

GlobalShop: Paco Underhill discusses recession realities and lessons

Retail guru says the U.S. is 'over-stored' by 15 to 20 percent.

March 28, 2011 by Kim Williams — Reporter, NetWorld Alliance

LAS VEGAS — GlobalShop keynote speaker Paco Underhill, CEO of Envirosell, a retail consultancy firm, told a large crowd during the session "Lessons from the Recession," that U.S. consumers have realized that moving forward means spending within their limits.

"On the other side of the aisle, we in the industry also realize that, in North America, we are probably 'over-stored' by somewhere between 15 and 20 percent. As retailers, that means our dirty little secret is we could close that number of stores tomorrow, and be better off for it," said Underhill.

He acknowledged that this doesn't mean that some markets aren't strong, citing vacation spending versus spending at home and online buying. In a study of American shoppers purchasing items in retail stores, 80 percent had done online research and comparison pricing before buying in a brick-and-mortar store, said Underhill.

"The transparency of pricing is one of the ongoing challenges of our present generation. The impact of the web-enabled phone is the start of convergence," said Underhill. "The painful truth for retailers is that the silos between the online world and the bricks-and-mortar world may exist in the mind of the merchant but don't exist in the mind of the consumer."

With retailers' traditional focuses on discounting and being cutting-edge, Underhill pointed to convenience as the fundamental drive pushing consumers. The concept of shopping locally plays a significant role in a shopper's value equation, weighing the savings on a discounted item versus the process of getting it.

Consumers take non-negotiable costs, such as their mortgage payments, cable bills, phone bills and internet access into consideration, which is driving the increase in locality. Negotiable costs, such as food, apparel and routine weekly purchases, items that can't be paid for from home by writing a check, weigh more heavily when the consumer must factor in paying for gas and other expenses to obtain these items.

Another lesson retailers need to learn, according to Underhill, is that the female shopper cannot be ignored. As the numbers from the 2010 consensus indicate, the percent of households in which the primary breadwinner is female is rising each month.

"We live in a retail world that tends to be owned, managed and designed by men, but expect women to participate. We are constantly asking the question, ‘what makes this (store) female friendly?'" said Underhill.

He cited convenience store designs shifting to "light, bright and white" to convey organization and cleanliness to draw in the female shopper.

Even in the economic downturn, Underhill said consumers still put a high value on time, and mobile convergence and the ability to manage daily lives is increasing. "Connectivity has probably joined Maslow's hierarchy of needs somewhere between sex and shelter. Marketers must pay attention to social media as a tool, but also keep in mind that the tool of today may be significantly different a year from now," said Underhill.

Underhill hypothesized that even though social media is an important avenue for reaching potential shoppers, the face of it may change because of increasing evolution, changes in rules and privacy concerns.