The future of retail: Thinking small
Photo source: iStock.com
By Bill Ogle, CEO, Koupon Media
It is becoming increasingly clear to both consumers and marketers alike that the retail landscape is undergoing a transformation.
Until recently,"big-box retailers" were untouchable competitors within the retail industry. However, in 2015, small format retail categories — drug, dollar, and convenience stores — outgrew larger format stores by almost 400 percent.
In the face of an evolving environment, leading retailers are beginning to make sweeping changes to keep up with consumer demands. In the past six months alone, leading retailers like Amazon, Target and Kroger have taken public and deliberate steps to "think small" by focusing on online shopping and opening smaller brick and mortar stores. This monumental shift is the future of retail.
The growth in small format can be attributed to three factors — demographic shifts, online shopping and shifting consumer demands.
Demographic shifts: Urbanization
The percentage of Americans living in urban areas or urban agglomerations has grown steadily over the past century. Today almost 85 percent of Americans live in urban areas.
For retailers, urban areas present an environment with limited real estate and consumers who are demanding on-the-go and more convenient shopping experiences. These factors are helping small format retailers to grow and expand, while forcing large format retailers to slim down store footprints.
Online shopping: Ecommerce
Online shopping is easy, convenient, and becoming more and more expedient. Consumers' weekly routine shopping trips and monthly stock-up trips are now being replaced with online and delivery options.
This change in consumer behavior is evident across all sectors, specifically online grocery shopping, which saw sales top $48 billion worldwide in 2016. And this is just the tip of the iceberg — by 2025, it's projected grocery e-commerce will grow to $150 billion worldwide.
As online continues to address more of the routine and stock-up shopping trips, physical stores are focusing more on immediate consumption purchases, making small format stores more relevant and effective in the brick and mortar environment.
Shifting consumer demands: Convenience
As American consumers are increasingly leading on-the-go lifestyles, time is becoming a valuable commodity. While online shopping is one way of addressing this consumer need, it can’t address the need for immediate consumption purchases.
When going in-store to make these purchases, consumers are demanding convenient and speedy shopping experiences. These demands are evident in consumer retail traffic. In 2015, consumers spent six percent more time in convenience stores and five percent less time in grocery stores.
Expect smaller format stores to meet these changing demands by providing not only a convenient shopping experience but also items that support the on-the-go, convenient lifestyle.
In short: How can retailers ensure they are catering to the ever-changing consumer needs?
The answer: Convenience.
Consumers' utmost priority for convenience is a pervasive theme causing retailers to think small. Over the past few years, these demographic shifts paired with online shopping behavior and shifting consumer demands means consumers demand an easy "in-and-out" shopping experience when shopping in retail stores. With customers' need for convenience here to stay, the question for many retailers is whether or not they're ready to think small.