RSR Research: Are We Beginning the Next Golden Age of Retail?

Discussion
Aug 19, 2010
Diana McHenry

By Paula Rosenblum, Managing Partner

Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research’s weekly analysis on emerging issues facing retailers.

We sit today, in the second half of the first year of the 21st century’s second decade, and I’m wondering if we aren’t on the cusp of a new golden age of retail. Consider the past five years as notable for at least three things: 1) customers’ demand for better service, 2) the meteoric rise of blogs, social networks and other forms of user-generated or interactive content, and 3) the Great Recession, with plummeting stock and housing prices dissolving discretionary spending and thinning the over-large retail herd.

It seems as though surviving retailers are starting to pick up the customer’s cadence and picking and choosing the best from retailing’s finest hours. As examples:

Retailers Meeting Consumers on Their Turf: For many it has been a grudging journey, while others have embraced it wholeheartedly, but most retailers have established beachheads on social networks, created mobile web sites and apps, and solicited reviews and feedback from their customers.

The Return of the Iconic Brand: Most recently I have been fascinated by Macy’s best exclusive label offering yet – the Material Girl line. There are few pre-teens who even know Madonna has a daughter, but their moms probably wore a lot of those wanna-be fashions in the 80’s and will happily take their daughters shopping to buy these cool clothes. The “face” of the brand, Taylor Momsen of “Gossip Girl” insures that the teen demographic will be drawn into the offering. We’re watching Madonna passing the face-of-the-brand torch to the next generation. And Macy’s representatives report “…it has been flying off shelves since the launch.” On the flip side, us older, wider folks were happy to learn that Saks has worked with name designers like Fendi, Dolce and Gabbana and Yves Saint Laurent to create an “upscale line of plus sized fashions.”

Retailers Catering to Consumers’ Need to “Be Part of Something Bigger than Themselves:” In her article, “Re-imagining Retail” in this month’s issue of Stores Magazine, Diana McHenry of SAS argues customers notice and appreciate initiatives like Pepsi eschewing Super Bowl ads in exchange for fostering local service grants, and other retailers supporting initiatives like RetailROI, the Retail Orphan Initiative spearheaded by IHL’s Greg Buzek and the late Paul Singer. We seem to have moved just a little bit past the “all me, all the time” decade into the “Man, things can get tough out there, let’s help each other out” era. It’s an era of community or so we hope.

When you put these pieces together, catering to consumers, a return of fashion and reinforcing a sense of shared community you start to see a larger picture. This picture takes us beyond a sea of sameness, poor service and lackluster, disconnected experiences to a world of relevancy and interest. If we can make good on that brand promise, we’ll find ourselves in the next Golden Era of Retail… one where supply chain, sourcing, marketing and technology combine to support retail’s integral place in the twenty-first century global community.

Discussion Questions: Are you encouraged that retail is heading in a healthier direction? What newer factors (social media, brand creation, recession-impact, etc.) do you see playing the largest role in driving any progress?

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24 Comments on "RSR Research: Are We Beginning the Next Golden Age of Retail?"


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Al McClain
Guest
Al McClain
10 years 8 months ago

The herd of retail has certainly been thinned out by the Great Recession and pressure from consumers via social media has improved customer service. The question is whether service levels will stay this high once the economy improves. I imagine retailers that remain will eventually all get fat and happy again, until the next economic crisis comes along. But, for now and the near-term, consumers have got to be ecstatic about how much retailers value their business. And, retailers haven’t had to work this hard in a long time.

Max Goldberg
Guest
10 years 8 months ago

Consumers have dragged retailers (many kicking and screaming) into the 21st century. Without consumers demanding it, many retailers would not seamlessly integrate their online and offline operations. Without consumers demanding better customer service through social media, blogs and in-store encounters, many retailers would just pay lip service to customers.

I’m encouraged by the direction where retail is headed, but believe that there is still much work to do. Retail management needs to be on the sales floor and online looking at how consumers are shopping their stores and what consumers have to say. New ways should be found to encourage positive interaction with consumers from how a store is physically shopped to how a website is navigated.

There still is too much disconnect between consumers and retailers. And this gap needs to be closed.

Peter Fader
Guest
10 years 8 months ago

The good news is that retailers can control their own destiny in a way that wasn’t possible until recently.

The bad news is that they won’t properly exploit this opportunity. The examples mentioned above are exceptions to the rule. The vast majority of retailers will stick with the formula that got them in trouble in the first place: short-term thinking + lack of sustained innovativeness + inability to leverage the rich data sources at their fingertips + excessive obsession with competition.

I would love to see retailers boldly lead the way into this promising new decade, but I’m afraid that things will get much worse for the industry as a whole before they get better…

Gene Hoffman
Guest
Gene Hoffman
10 years 8 months ago

I’m always encouraged when retailers are headed in a “healthier” direction, which is what this column presumes is happening. But with so much diversity emerging in the marketplace there may be several roads to improved results in future retailing.

Retailers, to be successful, must always march in lock step with the prevailing and emerging customer cadence. I don’t know what the best steps will be for most retailers to take on that road but the dye is cast, times are changing and retailing must change also.

Dick Seesel
Guest
10 years 8 months ago

There is no doubt that the recession (and years of retail consolidation preceding it) have thinned the ranks of weak retailers, leaving fewer but financially stronger survivors. And there is also clear evidence that the remaining retailers are focused on new strategies to appeal to consumers, such as social networking tools and the development of exclusive brands.

Innovations like this are healthy for the retail industry, but do they point to a “golden age”? And how, exactly, do we define the “golden age”? I would describe it as a consistent, well-executed merchandise offering — priced appropriately for the store’s target customer — with service and ambiance appropriate to the store brand.

At this point the “golden age” still looks like it’s beyond the horizon; in fact, e-commerce may be closer to the goal than most brick-and-mortar retailers. Long-term aspirations to greatness may require less short-term focus on costs and margins.

Jesse Rooney
Guest
Jesse Rooney
10 years 8 months ago

Whenever there is a downturn we are bombarded with stories about how this is the end of retail as we know it. Whenever the economic thermometer ticks up, we hear about how this is dawn of a new golden age of retail. These simplistic overreactions distract us from the reality of the cyclical nature of retail and economics in general. That having been said, things are looking up, so you might as well make hay while the sun shines.

Jeff Hall
Guest
10 years 8 months ago

We are seeing some pockets of retail heading in a healthier, more customer-centric direction. The more enlightened brands are recognizing there’s a fundamental shift taking place; one from conspicuous consumption to thoughtful consumption.

Within these new dynamics, brands and retailers are understanding the value in providing a meaningful reason for customers to choose them–very often this is based in consistent and intentional customer experience delivery.

Marge Laney
Guest
10 years 8 months ago
I do think retail is paying more attention to the customer experience as a direct result of social media and reduced traffic. It’s no longer acceptable to promise one thing and deliver another. A bad experience is easy to Tweet or Facebook and people do it. On the traffic side, with fewer potential customers crossing their thresholds on or offline, conversion and EBITDA improvement is on the lips of every retailer. That brings us to the front-line sales associate whose job it is to deliver the brand promise with great service and keep the boat afloat with their selling skills. Most retailers are still trying to sidestep this issue with self-service and other technology that seems cheaper and more easily controlled and measured. I agree that we are on the cusp on a new golden age of retail, and it’s being driven by the consumer who’s saying, ‘What exactly am I paying for? Why is it worth it?’ The winners will deliver a seamless ‘oneline’ brand experience that will answer both these questions clearly, honestly,… Read more »
David Biernbaum
Guest
10 years 8 months ago

I would love to be on the bandwagon believing that retailers are entering into a new golden age, and that retailers are doing things better, but my bandwagon keeps losing its wheels based on three factors that, in my opinion, are turning “gold” into “mud.”

1. Over SKU rationalization 2. Consolidation and lack of competition 3. Too many retailers look alike, carry the same assortment of items, sell them at the same prices, and have identical promotions.

Even colors and design schemes are too similar from one retailer to the next. I don’t know anymore if I’m standing inside a CVS or Walgreens? Kroger or Safeway?

Doug Stephens
Guest
Doug Stephens
10 years 8 months ago

I think Paula has done a great job in hitting on some of the significant changes ahead. We are clearly at the end of an era in retail that was a bit like a reckless frat house kegger.

I think we’re entering into a new era of thoughtful consumption underpinned by more genuine connection to the brands we buy and the retail we shop.

It’s a shift from mass to meaning with the consumer increasingly calling the tune.

Jonathan Marek
Guest
10 years 8 months ago

I agree with Jesse. There have been continuous innovations in retail for the past 100 years, at least. I don’t buy the “golden age” language any more than the idea that the Great Recession (or the late ’90s internet boom before it) will “kill” retail as we know it.

Confident consumer spending and booming home prices? That’s the recipe for Pottery Barn growth. An economic downturn? It’s time for dollar stores and for own-brand innovation. Innovation in mobile devices that could change the store landscape? Enter Best Buy (and others).

Changes in the retail landscape are constant, permanent, and never stop building a better world for consumers.

Veronica Kraushaar
Guest
Veronica Kraushaar
10 years 8 months ago

It’s interesting to think of the topic of this discussion: “The Golden Age of RETAILING” and consider what the term really means. It used to mean only bricks-and-mortar emporiums, but now it’s so much more.

We’ve posted in our blog that with growth of the internet and social media customers are sourcing directly, building their own private relationships with their favorite brands, using peer influence to make decisions (instead of “trusting” advertising…and possibly never stepping outside their homes to shop. This has changed the face of retailing. Conversely, many retailers are posting sales drops, cutbacks and ever-changing strategies to steal share.(Except those “in the know” which we also discuss on the blog…)

In short, the term retailing may not even be relevant any longer as consumers control the channels and the delivery…and demand ever so much from retailers. The better topic might be: “The Golden Age of The Consumer”….

Steve Montgomery
Guest
10 years 8 months ago
I think the timing of this article and the “Retailers Are Sold On Frugality” article that appeared yesterday in the Wall Street Journal are interesting. In the WSJ article the writers reported on how retailers are cutting expenses to be able to maintain profitability. This does not sound like the beginning of the next golden age of retailing. I do agree with some of the tenets of the outlined in the article. Retailers are getting more feedback from customers via electronic media, but I have to ask is that really better than gathering by face-to-face interaction? Yes, retailers have more information about their customers but are they really using it to guide decision-making? We used to advise clients that if they were not going to use the information they secured they should simply hook their printers to the shredders. Retailers have long supported various foundations, charities, etc. I am not sure that this occurs any more today than it did before–especially since the companies have less profits to share. I could be wrong but I… Read more »
Jeff Weidauer
Guest
Jeff Weidauer
10 years 8 months ago

I agree that we are entering a new age, but rather than the Golden Age of Retail,” I think it’s really about the shopper. Shoppers have taken control of the relationship with retailers, and those stores not willing to engage with them on their terms are — or soon will be — gone.

Earlier comments about how consumers are driving the change, but retailers are loathe to change in response, are dead on.

Case in point: A&P is suing Stop & Shop over price claims. What a waste of time, because neither side’s shoppers care about those claims; they can check prices at the shelf and see for themselves. Transparency and connectivity trump all.

Gene Detroyer
Guest
10 years 8 months ago
It depends on what we define as retailing. If we define retailing as the activity that sells goods to customers, we have one answer. If we define retailing as what is sold in stores we have another. Let me relate a discussion we had in my class this Monday. The discussion was about why companies don’t change. The topic of retail came up. These are MBA students. Age range 25 to 30. Student One said, “Why do we need stores?” Student Two said, “Well, I like to see and try out what I might buy.”Student Three, “For example?”Student Two, “If I am buying a computer, I want to see all the options, the screen, how the keyboard works…”Student One, “Then what do you do when you find the computer you want?”Student Two, with a big smile, “Go home and search the model on the internet for the best price and buy it.” (Perhaps, that is an indication of what the future store is to be.) The Golden Age of Retailing is noted by the growth… Read more »
Herb Sorensen
Guest
10 years 8 months ago
I often say that retailing is at the cutting edge of social evolution, but I have never thought of them as moving the edge forward. As an industry it is reactive, responding slowly to changes that occur in society, but some retailer is always out there on the edge. Someone has said civilization in the American West began when some guy rode up to a crossroads with his mule in tow, got the two barrels off the mule, put a plank across the barrels, and began to sell drinks under a sign that said “Joe’s Saloon.” This was a REACTION to the growing number of miners, cowboys, congregating at a river crossing–or whatever. It was the needs of those miners and cowboys that virtually forced the creation of a retail establishment. Retailing is always at the cutting edge. 🙂 With that perspective, we are beginning the next golden age of retail, forced upon us by the movement of society. After our temporary “adjustment,” the inexorable growth of the world towards prosperity and plenty for all… Read more »
Karen McNeely
Guest
10 years 8 months ago

Unfortunately, I think the Golden Age of Retail is long over. Even with some thinning of the herds, we are still over-stored in this country. There is also too large a gap between the size of independent retailers and national chains. I’d love to see the growth of medium sized regional retailers that still enjoy some economy of scale but also have a good pulse on the community they serve and add some local flavor to the sea of blandness that currently exists, with only a small peppering of mom and pop stores that teeter on the edge of survival.

Matt Hahn
Guest
Matt Hahn
10 years 8 months ago

Retail has certainly been reshaped during this economic downturn. Companies are more willing to meet consumers on “their turf” and cater more to the local community.

However, how long this will last when the economy starts to fire on all cylinders (whenever that is), will determine if this is any kind of golden age. Cutting inventory and being more agile are great effects of the recession, but will stock levels rise again; more than likely. As a mentor once wisely shared, revenue covers a lot of sins. And when revenues are up, the task of meeting the consumer’s needs once again becomes less personalized as volume drives sales. The fact that retailers have been able to adapt to consumer demands is in correlation to the fact that those merchants are scraping for every sale.

So the true test of the carat weight of this “golden age” will be revealed when same store sales are skyrocketing.

Lee Peterson
Guest
10 years 8 months ago
I think this is the most exciting time in modern retail history and I am personally very jazzed by the possibilities and the challenges we’ve got to figure out in the next few years. We are now digital and physical, but how does that really work? Who is this new “Gen Y” consumer and why are they rejecting “old” retail notions? Then what, in heaven’s name is a ‘Gen Z’? How global are we? Do our ideas work everywhere or not? How small will physical retail become and how interesting does it need to be? Or, are what we used to call stores just outlets for the digital purchase? What is the strategy around formats? How many, how big? For whom? Now, I’m not sure the process of figuring out the multitude of conundrums ahead will produce “Golden” sales…but this period of change is definitely going to produce some incredible new ideas and execution of those ideas. Retail as we know it today is quickly becoming a “remember when” the more the retail path to… Read more »
Craig Sundstrom
Guest
10 years 8 months ago

Actually we’re in the last year of the first decade, a fact I bring up not just to quibble, but because, unfortunately, I believe it rather symbolizes Paula’s whole argument: full of exciting ideas, but ultimately untrue. It’s nice to read a bright-eyed paean like this–especially with all the gloom still present–but, alas, the future will be pretty much like the past: the good (relatively lower prices, more channels, greater information availability) will be better, but the bad (shoddy workmanship, poor service, information overload) will be worse…more of a “Silver Age,” and with considerable tarnish.

Mark Burr
Guest
10 years 8 months ago
I agree with Mr. Detroyer’s comments. Any discussion about this topic without the mention of the impact and future implications of ‘web retailing’ is missing likely the major component. It touches all parts of retailing including the ‘experience’ factor, consumer factors, and interaction. It’s far more than just the blog and tweet. The consumer has reached an extreme level of power today, more than they have ever had before. While it seems that it may be cliche to say that the ‘world is at their fingertips’–it truly is right there. The blur of retailing separation between bricks and mortar and the web has reached a collision point. I believe that it’s at the point where even a large majority of bricks and mortar sales are web influenced sales. The experience factor is far more broad than our imaginations conceived or evaluate presently. How it is characterized, formulated, and executed is merely in its infancy, if that. It may be only in its conception in so far as how retailers are considering it as part of… Read more »
Ed Rosenbaum
Guest
10 years 8 months ago

It is true that the “Great Recession of the 2000s” has weeded out some of the poorer performers. It is also true those that are surviving are coming through with a different attention to service and performance. The social media piece will continue to make retailers focus strongly on how to get more customers in the stores that remain after the culling of their weak performing locations.

Ritz Camera comes to mind. They were forced into Chapter 11 and came out the other side with fewer locations, fewer employees, less overhead and a new performance model. They are now opening some previously closed locations because the new model and landlord concessions make profitability possible. It is this type of management thinking that will continue to make the new retailers better equipped to reach and maintain profitability.

Mark Burr
Guest
10 years 8 months ago
It’s mentioned in many of the discussions of late–the term ‘Great Recession’. I was just wondering as that curious mind of mine has a tendency to do. If this is the ‘Great Recession’ what was 1978-1983/4? If this one is so great, what was that? Interest rates were over 20%, unemployment nearly as high, Inflation was double digit, the market was stalled, gasoline took its first skyrocket, etc. I’m just wondering if it’s age, matter of perspective, a tendency to exaggerate on the present, or simply something else. I seem to remember a much more severe impact then versus now. Maybe it’s just a time I lived through that others who consider this one the ‘Great’ didn’t, or they weren’t old enough to know any different. Just seems to me the label is exaggerated. I’ve been wrong before and it would be nothing new. This is nothing like then, the circumstances are different. I simply think we throw labels and terms to events out there too easily. But then again….
Mark Price
Guest
Mark Price
10 years 8 months ago

Retail is moving toward a Golden Age, but in another direction entirely–that of customer connection and relationships. More and more, data is available that will permit retailers to personalize their experiences with customers and build products and stores to meet their needs. That data will also be used to extent the store outside of itself, more and more into a “bricks and clicks” environment, linking and unifying a customer relationship across store, web and mobile.

More and more retailers are bringing multi-channel marketers on to their leadership team, who are developing new approaches on the leading edge.

What an exciting time to be alive.

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