The familiar, changing state of retail

These revolutions have indeed disrupted the status quo – but how are the changes we’re observing now different or similar to the major revolutions Australia has seen over the last +200 years?

Well, the participants, changes and themes are different but because being great in retail is about selling products, services and experiences to consumers in a way and at a price that meets or exceeds the expectations of the average consumer – a lot of it is more of the same.

The substance may change but the fundamental structure is pretty similar.  

The next round of winners and losers are also likely to be heavily influenced by technology with AI, data and analytics, virtual reality/augmented reality and sensor based technologies likely to aid participants in gaining a much needed edge in a hyper competitive market.

In all of the aforementioned revolutions the customer has been the big winner via a mix of improved service, better convenience, an increased product offering and lower prices. That is one theme that is set to continue.

Drivers

Technology and data is rapidly becoming one of the biggest drivers of consumer behaviour and its effect on traditional retail is clear.

According to TIME, US department stores have lost 448,000 jobs since 2002 - a 25 per cent decline – and some estimates suggest one out of every four malls in the US could be closed by just 2022. 

The outlook isn’t as stark in Australia where online retailing lags global peers. Perhaps due to geographic isolation and resultant expectations around the timing and pricing of shipping, only 7.6 per cent of total retail sales are expected to be made online by 2018. 

The implications nevertheless are large, particularly around Data. ANZ expects significant changes in approach to retail mainstays such as store locations, product optimisation and marketing on the back of data and analytics in the near to medium term.

The six biggest retail data themes we’re seeing at ANZ

Rising energy costs are also expected to eat into household budgets in the following years, which may have an effect on retail spending. Offsetting those headwinds is the likelihood of a higher Australian dollar, which would prove to be a major tailwind for retailers.

Another concern – and one perhaps not acknowledged as much as the others – is the notion of ‘peak stuff’. A peculiar idea at first, the peak stuff theory is the idea consumers can – and have - reached the limit of possessions they want to own and instead will look to invest in experiences.

It’s an idea supported by data suggesting people value experiences over things, according to Forbes. It has dire implications for the retail sector.

Same same

For retailers, the situation is pretty simple. Offline is going online – except for when online goes offline, like Alibaba’s storefronts. And everyone – everyone – is going mobile.

Distribution models are changing, with manufacturers and brands now doubling as retailers. And data is changing the game for everyone.

Businesses which hope to thrive must stay on top – or ahead = of these trends.

Mark Ganz is Director Client Insights at ANZ

Phil Ruthven of Ibis World contributed data and analysis for this article