The key to retail today: flexibility
Ever notice how the truth is timeless?
That thought hit me in the head as I paid for this week’s groceries, a painful transaction that hit me obscenely hard in the wallet. As I looked at the total for my lousy two bags of groceries — $110.54 — I was transported back to a 1992 newscast when political analyst James Carville quipped. “It’s the economy, stupid.”
You know what, James? When I spend $5.20 for a dozen eggs and more than $15 for a pound of Bay scallops, you’re damn right it is the economy, right along with prices that I find not only stupid but outrageous.
Maybe the cost of living is a nonissue for the uber-rich like the late, let-them-eat-cake Queen of France Mary Antoinette, but wow, have you bought a high-quality cake from your local bakery lately?
Take a quick peek at some price increases provided by the U.S. Bureau of Labor Statistics. If you use fuel oil to heat your castle, you are paying 65.7% more. Want an omelet? The cost of eggs is up 49.1%. Want some butter on your toast? That will cost you 34.2% more.
You get the picture and it’s not pretty.
So, with a growing fear of continued inflation and a looming recession, is it any surprise that The Conference Board reported that its Consumer Confidence Index dipped in January?
The group also said that its Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — fell to 77.8 (1985=100) from 83.4, partially reversing its December gain.
The Expectations Index is below 80, which often signals a recession within the next year. Both the present situation and expectations indexes were revised slightly in December. Consumer confidence declined in January, but it remains above the level seen last July, lowest in 2022,” said Ataman Ozyildirim, senior director of economics at The Conference Board.
He went on to report that consumer confidence fell the most for households ages 35 and under and for households earning less than $15,000. Ozyildirim also warned that consumers appear to be less upbeat about the short-term employment outlook. And they also believe that overall business conditions will deteriorate further in the near term.
The monthly Consumer Confidence Survey, based on an online sample, is conducted for The Conference Board by Toluna, a technology company that delivers real-time consumer insights and market research through its innovative technology, expertise and a panel of over 36 million consumers.
So, is this the end of the world? By no means. However, it may be more a case of a shift in the retail world as we knew it.
I just read an interesting paper written by Placer.ai, a San Jose, California-based firm that refers to itself as the leader in location analytics and foot traffic data.
In the study, which examines retail trends in 2023, the company observed that several leading retailers are scoring and scoring soundly with a host of initiatives that include improving their retail footprints with better use of space, reconsidering the size of the store, adding new categories, introducing a shop-within-a-shop format and more.
The report went on to conclude that, “The push by retailers across segments to improve their retail footprint – and optimizing the actual number of locations — is a major piece of this puzzle. Equally significant is the push to maximize the potential of each location with a greater emphasis on the usage of the internal space and the size of the store in general.”
The study pointed to the success that key retailers including Target, Kohl’s and Lowe’s have already enjoyed by maximizing selling space and by jumping headfirst into the world of shop-in-shop concepts.
As a result, those retailers have been able to drive visits, increase basket size and create engagement with new audiences.
These tactics have applicability for retailers, regardless of size. The study says, “The rationale behind these partnerships is relatively straightforward. The larger retailer fills a gap in its product assortment, differentiates itself from competitors, improves engagement and increases basket size. The smaller retailer gets a capital-efficient way to broaden its target audience and, in many cases, leverages the larger retailer’s online ordering and distribution platform.”
The results so far are incredibly promising, with many retailers seeing locations with shops-in-shop benefit from greater year-over-year and year-over-three-year visit boosts than those without.
The company went on to say that the concept also has a unique level of staying power in that it dovetails with a rising interest in finding better ways of engaging in physical retail on the part of different digitally native brands, product-oriented companies or even struggling retailers.
The report concluded that this concept emphasizes a significant, but often overlooked, element of physical locations — retailers can serve as a platform for brands to maximize their reach. In a digital age that has been heavily influenced by the ability to cross-sell online, leading brick-and-mortar retailers are now bringing that same capability to the physical store.
Rethinking store size
Another important aspect of the experimentation with new store formats centers around shifts in store size.
Whether it be embracing small-format stores or making stores even larger, format flexibility is a key component of maximizing a company’s retail footprint. Small locations can enable retailers to maximize impact in a given market, identify the ideal locations to reach core audiences, and improve the marketing value of a store — all with a focus on keeping costs down.
Larger locations can create space for more experiential concepts and even advanced distribution capabilities.
The critical idea, though, is that retailers have many ways to optimize their physical presence beyond just choosing an appropriate site for their store.
This flexibility empowers companies to focus more on bringing the right products to the right audiences and maximizing the impact of each location — a process that will ultimately drive greater success.
The white paper offered a series of takeaways, but I think the one that can help us the most was this one: “Retail is being defined by a push to flexibility – in the overall size of stores, in the things being sold within them, and in the places where they are located. From shop-in-shop concepts to adjusting store footprints to drive more exciting innovations and/or to reach different audiences in premium locations — the shift is on and its impact will be significant. This is especially true because it empowers retailers to maximize the impact of each store and to identify the ideal path to market penetration less limited by traditional constraints.”
To download the full report, visit Go.Placer.ai/WP/Retail-Trends-Forecast-2023.
With you, or without you, shift happens.
Ray Allegrezza, a furniture industry veteran and executive director of the International Home Furnishings Representatives Association, is editor-at-large for sister publication Home News Now. He draws on his more than 35 years in the industry and 40 years as a trade journalist to cover key issues, companies and people.