Guess What, Retailers? 'Staying The Course' Not An Option
"The recovery will not be driven by consumer spending; it'll be driven by businesses coming back to the U.S., increases in exports and, most of all, increases in government spending," said Carl Steidtmann, chief economist of consumer business at Deloitte Resarch. "The consumer is no longer in a position to spend. Retailers are in a no-growth environment."
"Standing still is not an option," added Stacy Janiak, Deloitte's vice chairman and U.S. retail leader.
Steidtmann, Janiak and other big names at the NRF convention offered the following trends all retailers need to understand as they tweak their business models:
1. The Big Spenders Are Disappearing
"The 90s were great because the baby boomers were at their peak earning period and at peak ownership of housing—all of which created a dynamic, fast-growing economy," Steidtmann explained. "The key generation in terms of high spenders. That segment of the population is going to be shrinking."
"Fundamentally, things have changed in peoples' spending habits," said H. Lee Scott Jr. the outgoing chairman and CEO of Wal-Mart Stores. "No matter what it is -- going to the movies, shopping, eating out -- everyone seems to be giving up something. I don't think we're going to have the same immediate desire to go back to consumption and debt [once things recover]. The first half of 2009 is going to be extraordinarily challenging. We all hope that by next Christmas things haven't gotten worse. If it's better, it's going to be moderately better."
2. You're Competing Against Everyone -- Including Macroecononomic Factors
"You will be competing with companies who are in bankruptcy, and that's going to make for a really difficult pricing environment," Steidtmann said. "You're also not going to see the expansion of stores like we've seen in the past. A lot of malls will go dark. Some will go away altogether. A lot less new retail space is being built."
Steidtmann also suggested that a slowing of retail employment since 1999 has made for a "lost decade." "You're losing a whole generation of future retail managers," he said. A devalued dollar, a slow loosening of the credit crunch and "growing animosity toward free trade" will stall recovery at the macro level.
3. Technology Guides Your Future
Janiak cited strategic IT investing, customer centricity and focusing on brand relevance as three essentials for keeping retailers afloat in unsteady times.
"A direction that is needed maximizes technology and enhances the retail brand," Janiak said. "As General Patton said, 'A good battle plan acted on today is better than a perfect one acted on tomorrow.' Stay the course is not the answer for the future."
"The reality is that success for the retailer tomorrow is highly dependent on making the right IT investments today," she continued. "RFID, mobile technology, social networking -- these are all areas where retailers should consider investing today."
"Retailers have historically underinvested in IT," said Julie Arnette, vice president of global retail business enablement and emerging markets at IBM. "Our conclusion, based upon what we've heard from CEOs from different industries, is that the enterprise that will survive is the one that's disruptive by nature. You have to be able to change."
4. You Have To Know Exactly Who Your Customer Is
Understanding the needs, wants, buying habits and demographics of your customers means getting even more specific -- with clearer targets.
In a business climate like the current one, said Scott, "If you're off target by a 32nd of an inch, you've lost."
"The balance of power in the 60s and 70s was very firmly with the manufacturers," said Bob Willett, CEO of Best Buy, in a videotaped interview. "The Web has made a tremendous difference. The customer is king."
Best Buy employs business analytics provided by Web analytics firm Omniture to minimize what David Scamehorn, Best Buy's director of customer insight R&D, called "a loss of information at every handoff." Scamehorn referred to the lengthy and costly older models of meeting with businesses and workshopping how to better engage customers through a series of meetings, test runs and action items.
"Solve it in the room," Scamehorn preached. "Evolution requires a 360-degree view of the customer."
And above all, listen.
"It can take decades to build a brand, and you can lose a brand overnight," Willett cautioned. "Don't compromise the quality of the relationship."
5. In Three Years, Nearly Half Of Retail Sales Will Be Online Or Cross-Channel
Janiak couldn't stress enough "the importance of having in place a seamless, multichannel experience for your customers. Having a network of touchpoints where consumers can access your product, company, services and brand."
According to Forrester Research, by 2012 nearly 49 percent of all retail sales will happen online or cross-channel. Janiak also said the online channel had a 1-to-3 influence factor, meaning that for every dollar of merchandise sold online, a retailer's online channel has influenced as much as three dollars in the store.
"Consumers are accessing retailers across multiple channels with a level of transparency that makes that consumer smarter, less brand loyal and more aware of their options," she said.
6. Go Mobile
People want access. And they want it anywhere.
"Time is their most precious commodity. The mobile space will become so much more important, especially with younger customers," said Mike Boylson, executive vice president and chief marketing officer at JC Penney. "3G and 4G technology -- the ability to send messaging over a handheld device. It's a lot more than just a handheld; it's truly a computer."
7. There's A Growing Amount Of Pent-Up Demand
"Sooner or later, that dam will break," Janiak said. "Innovative thinking is needed because of an increasing battle for market share. Consumers want solutions and services, not just products. Consumer-centric retailers understand this. The more relevant your brand, and the more clearly you communicate, the more likely you get chosen over your competitor."