RAPAPORT... The country is probably in the early stages of a very serious, if not severe, economic downturn,” declared Robin Lewis, vice president, head of retail vertical for retail consulting service Vantage Marketplace LLC. Lewis’ strong statement started off a discussion among a quartet of retailing pros brought together for a Fashion Group International (FGI) seminar: “Retail’s Moment of Redefinition.” The recent seminar focused on ways retailers need to adapt to meet the demands of today’s marketplace.
Continuing in his economic overview, Lewis compared the economy to a perfect storm scenario where three weather fronts collide for total devastation — namely, the subprime mortgage market meltdown, the decelerating gross domestic product (GDP) and, partly as a result of those factors, decelerating income growth and rising unemployment. “Many consumers, over their head in debt for years, are now losing their homes,” Lewis added. At the very least, their home’s value has gone down, and “as a result, so does the equity value that they used to borrow. On top of that, consumers are finding little access to any borrowing or lending facility because of banks tightening their credit requirements. All of this is interfacing with rising gas, food, healthcare costs — life’s necessities are going through the roof with no end in sight.”
The effect on the retail sector, Lewis said, is that “mid-market aspirational shoppers are going to be pulling back from the likes of Nordstrom, Saks, etc. Even at the very highest end of the luxury market, shoppers are tightening their belts and frequenting the designer luxury outlet stores more than the full-price stores.”
Another factor retailers need to deal with, Lewis pointed out, is the “total accessibility” empowering consumers. If retailers don’t have want they want, he explained, “they’ll just walk out the front door, cross the street, tap into another website to access thousands of competitors. The consumer is using this power and raising the ante big time.”
NEW RETAILING REALITIES
According to Lewis, traditional retailers up and down in all sectors “are in hot pursuit of private and exclusive brands.” This allows retailers to provide exclusivity to their customers, because if they control the brand, they can better provide the experience, explained Lewis.
Fellow panelist Rick Darling, president of Li & Fung, a supplier to retailers around the world and in the U.S., agreed. “The idea of having exclusive brands, particularly in the big box retailers, has become a critical part of their business model. The proprietary brands are probably the last bastion of driving a customer to a particular location.” The way for retailers to differentiate, Darling said, is to offer consumers a particular brand that they can only get in their stores.
Chris Lee, senior vice president of the retail chain Forever 21, pointed out that his company has had success by focusing their efforts on “trying to get the right merchandise to our stores as quickly as possible. …Our concept is Rodeo-looking stores with Wal-Mart prices.”
It is important for retailers to understand the necessity of controlling their brands and their supply chains, cautioned Lewis, and to be able to get product to their consumer more quickly and directly in order to deliver the experience, the brand’s DNA. If they control the supply chain, they can also turn out more lines more often and customize by door.
GOING GLOBALBrazil, Russia, India and China, Lewis pointed out, “are all growing at double-digit rates. Many of our brands are desired there.” “International is probably our biggest growth opportunity out there today,” said Diane Hamilton, president and chief operating officer (COO) of Brooks Brothers. “We continue to look to expand there. We have 140 points of sale in 15 countries outside the U.S. and we see an opportunity to double or triple our international presence over the next five to seven years and to establish a significant presence in
Europe, Asia, Latin America and in the Far East.”Presenting Li & Fung’s viewpoint, Darling said: “The one thing that’s very clear to us is that there is certainly a greater desire for successful retailers to position their brands and themselves for international expansion. And how they do that will shake out during the next few years.”
Profile of the New CustomerThere are four major consumer behavior shifts in the twenty-first century, stated Robin Lewis of Vantage Marketplace, to which retailers and wholesalers are going to have to respond.
• From needing stuff to demanding the experience.“From buying a lot of stuff in a great big store to the
intimate experience of a boutique in your neighborhood.”
• From Conformity to Customization.
“From needing to be included to wanting to be exclusive. It is bye-bye to megabrands shared by all and hello to thousands of brands, one for each person. Ubiquity is antiquity today. It is an environment that is an infinite number of finite market segments with an infinite number of brands serving each one of those segments.”
• Plutocracy to Democracy.“From accepting the notion that luxury is reserved only for the rich to demanding democracy and affordable luxury for all”— it’s upscale designers at stores likeTarget, Wal-Mart, Kohl’s and JCPenney.
“It isn’t just designers reaching down to grow, it’s consumers saving and reaching up for some luxury.”
• New to New and Now.“We are in a 24/7 world; whatever you create new today is cloned tomorrow morning. …It’s an internet world that’s a key tab away from now. It’s brand knocking on your front door now. It’s the boutique across the street from where you live now. It’s a world of new products and services in our faces when we want them now.”
Another trend Lewis predicts is “smaller lifestyle neighborhood shopping villages versus the big malls.” What he refers to as the “hybrid specialty chain store” will be growing, along with “the explosive growth of internet catalogs, in-home marketing, door-to-door pop-up stores, etc., all based on multiple distribution platforms” to reach consumers.
Article from the Rapaport Magazine - August 2008. To subscribe click here.