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PRESS REVIEW : THE GREAT RETAIL BIFURCATION

500 260 POTLOC INSIGHTS

No one is fooled; the alleged “retail apocalypse” is under investigation.

 

We need to find that special something: that integral piece of information that will bring order to the ideas floating around in the retail sphere, so we can finally understand what is actually happening to it, and define the truths of its transformation.

 

Deloitte Insights took on this challenge in their analysis The Great Retail Bifurcation. This study is a foundation on which we can stand to propel ourselves into retail’s “renaissance.” It cross-references American macroeconomic data and consumer socio-demographic profiles, combing through retail’s numbers to decipher the trends that are going beyond this e-commerce vs. brick and mortar battle.

 

Since 2012, the American GDP has grown by 1.5-2.5% per year, and household net wealth has doubled since the 2008 financial crisis. When it comes to market reference point, sales are climbing ­— both online and in-store. In absolute terms, the growth of physical retail (brick and mortar) contributes to half of the market’s entire growth.

 

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Thus, if all of the economic indicators are increasing, the true riddle of today’s market is this: how did retail get its floundering reputation in a time when its ground is clearly so prolific? If we check under the hood, part of the explanation resides in the massive disparities between consumers. In the United States, the 1% received 82% of the wealth generated in 2017. Over the last decade, 80% of consumers have watched their economic situations deteriorate, causing irrevocable changes to their consumer habits. Shopping habits are intrinsically linked to income brackets and retail has been shifting as a reaction to America’s economic situation.

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Deloitte’s analysis separates retailers into three categories to glean a more detailed understanding of this phenomenon. First, discount stores that base their market value on low, attractive prices. Second, more “balanced” retailers that rely on promotions, product variety and shopper experience. Third, retailers that offer differentiated high value-added products. According to Deloitte, the rupture between weak and strong revenues can be found among retailers.

 

If we look at retail sales according to economic status, the richest are making their profile group skyrocket. On the other end of the spectrum, smaller income and middle-class households are rushing to discount stores to compensate for their loss of buying power, leaving our second category of retailers without a solid clientele reference point. If understanding the consumer is the key to gaining footing in this industry, the companies that forgot to are paying the price:

 

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Furthermore, today’s constant access to technology is transforming the habits and needs of consumers. Comparing products and prices is easier than ever before, and flow of access has opened the door to new competitors on the market. Consumers know more about retailers, but do they know more about them? In a market where offering a personalized shopping experience fosters customer loyalty, retailers cannot forgo understanding their clientele. Retail is exploding into smaller, niche markets where each type of client brings their own set of unique expectations. In this age steered by the technologically-keen, retailers must gain precision in their market analyses if they hope to remain on the same page as their clientele.

 

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Read the complete study