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NRF: Panel considers what retailing will look like in 2020

Changing demographics, emerging markets among the seismic changes retail is facing in the coming decade.

January 9, 2011 by James Bickers — Editor, Networld Alliance

NEW YORK – At the Monday morning NRF session titled "Consumer 2020: What Lies Ahead for the Retail Industry," two executives from Deloitte Research shared the stage with three high-level retail executives to turn a trained set of eyes on the coming decade.

Alison Paul, vice chairman and U.S. retail leader for Deloitte, began the session with an overview of the history of retail so far.

"For many years, the concept of the store has not changed," she said. "When we think back on the beginnings of this country and how people went to a general store for their needs, the person that waited on them was typically the store owner. All of his merchandising decisions were made by getting direct feedback from the customer. The most advanced technology was most likely the cash register."

All of that changed, she said, in the post-World War II years, as large chain stores proliferated, mass retailing became the focus – and merchandising and inventory decisions started being made after the fact.

"We were a homogenous country then - or so we thought – so we weren't doing a lot of analysis about who the consumer was and what she wanted to buy."

Today, she said, retailers are "multi-store, multichannel, multi-geography, and multi-challenged." Those challenges include shifting demographics, sustainability, corporate responsibility, and the fast pace of change in technology.

She then introduced her colleague, Dr. Ira Kalish, who began with an overview of the past decade, which he said was characterized by a global economy that saw a massive growth in consumer spending – followed by a housing crisis and a near collapse of the global financial system.

Looking toward 2020

The global economy over the coming decade will be characterized by disproportionate growth of consumer activity in the emerging world, Kalish said. There will be a rapid rise of the middle class in those countries, he said, and if governments fail to support those transitions, economic crises could follow.

An aging population in the affluent world will create a higher dependency ratio, he said. As the working population starts to decline, there will be a larger tax burden to pay for the retirees, as well as the need for people to work longer. "And older people tend to spend less on goods and more on services, and that has clear implications for retailers," he said.

The hot markets for growth in the coming years, he said, include India, the Middle East and Africa. He noted that India may be a tough market for retailers to break into, but it is worth it, as its consumer activity might outpace China's in the coming decade.

In the global food market, the challenge of obesity continues. "It possibly leads to a decline in life expectancy, it leads to an increase in diabetes, and it increases the cost of health care. In the end, it may lead to government regulations about what things companies can sell." Food retailers are also facing the challenges of increasing commodity prices, as well as the issue of sustainability, he said.

As far as technology and social media, Kalish said that he could say, with certainty, that "the way consumers interact with you and each other is permanently changed. The social revolution has taken place and it's not going to go away. It means the ultimate power for consumers. They can vet information and share information in a way that they never could before. For companies, it's a huge challenge. It means that traditional marketing methods don't work anymore – the trust and authenticity of social trumps traditional marketing.

"2020 will be very different from 2010," he concluded. "We'll have an environment in which retailers will have to directly engage with consumers in a way they haven't before. They'll have to go where the money is – the big emerging markets. They'll have to lead and build brands, and do that by listening to their customers."

Retail panelists look to the future

Paul and Kalish then brought out their panelists for the second half of the discussion: Peter Sachse, CEO and chairman of Macy's; Cathy Green Burns, president of Food Lion Family; and Andrew Higginson, chief executive of retailing services for Tesco PLC.

Paul asked the panel to weigh in with their view on new retail technology, and how they've been implementing it.

"It's been discussed that we need a 360-degree view of the customer," said Sachse. "I can tell you that that's a wonderful thing to say, and a very difficult thing to get done."

Difficult, but they've done it: in November, the retailer sent out a direct mail piece to four million people – a campaign that included 30,000 unique versions of the piece.

"We in marketing used to get nervous when it got above ten versions," he said. "So 30,000 unique versions of that direct mail piece – it's much more relevant to the customer."

Green said Food Lion "expanded our technology beyond using it just for efficiency inside our four walls." For example, the company expanded its loyalty card program to involve a scan of the card when the customer enters the store, for which they are given relevant coupons to use on that visit.

"Technology is creating a discontinuity in the market," said Higginson. "We always say that discontinuity gives opportunity – that's a chance for people to step in. While it offers us a lot of challenges, it also offers the consumer a lot of challenges, and the opportunity for the retailer is to step in and help the customer make the kind of choices they would like to make, by offering them relevant and interesting information and ways of shopping."

Sachse weighed in with the success of his company's MyMacy's program, which has been in place for two years now. Five years ago, the retailer consolidated from five regional companies into one holistic one, but the MyMacy's program has prevented that from causing a rift between the retailer and its customers.

"I will tell you that today, two years (after the launch), we are closer to our customer than we ever were running separate companies around the country, because we actually are listening. With all of that technology, it ends up being grass roots, and it's working."

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