The Evolution Of Marketing & The Future Retail Model

Recently, some companies have said some intriguing things about the omnichannel and the relationship between brick and mortar and online (for the record, when I say “online” I’m including mobile devices). I’ve also read some interesting things about generational behavior that made me think about the future of brands and retail structure.

It’s no surprise that buying patterns are different for the millennials (born 1982-2000) than they are for the baby boomer (born 1946-1964). Millennials have faced (and will continue to face) different and more difficult economic circumstances than boomers. And of course, they take technology for granted. They shop differently, have different priorities, and are less likely to be brand loyal.

I’ve written about brands that were originally focused on the boomers aging out, and the complexity around maintaining the loyalty of your original customer base while trying to appeal to younger customers. The first thing to note is that right now, boomers spend way more than the millennials. But, for obvious reasons, that’s going to change. If you’re a company that likes customers with money to spend, it’s hard, right now, to ignore the boomers.

It’s like you need to have two companies. Though obviously there’s some overlap, you probably can’t sell exactly the same product line to both groups. Again, with some overlap, there are differences in distribution. The groups shop in difference places. You reach customers differently.   Millennials are more likely to trust new brands. Boomers may stick with what they know.  Millennials are more connected than boomers.   They get their information differently.

But right now, there are two things going on that maybe make this a bit more intriguing (Difficult? Mystical? Pain in the ass?) First, we’re facing tougher social, political and economic conditions as a country than we’ve faced since the Great Depression and the Second World War.

Second, the pace of change is unprecedented. We as marketers interested in selling product to people are particularly focused on the omnichannel. I hasten to add that while I use that term, I don’t completely know what it means yet. Neither do any of you. We’re finding out together.

I’ve started to wonder about the value of the so called strategic planning process in companies, at least as it’s traditionally carried out. I’m not sure I have any idea what will happen a year from now, let alone five years.

Before I stop gripping and say something potentially useful, I want to tell you that the last numbers I saw suggested we had 50 square feet of retail space in this country for every man, women and child. England, with 10 square feet per person, is second.

What do I think is going to happen?

Retail space is going to contract.

Malls (with the exception of the high end ones I’m told) will be in trouble.  Fewer people are visiting them. They will spend less. This is a slippery slope. Lower traffic means fewer sales which mean some stores close, which means lower traffic which means more stores close, etc.

Advances in robotics and technologies like 3D printing means that more product can be customized in a short time scale.

Online/mobile generated sales will continue to grow (duh) energized by our logistics capabilities that get product to (and from) consumers quicker.

Inventory requirements for retailers will decline as will the square feet needed for physical stores.

Real product differentiation will continue to be hard to achieve. Making a product at least occasionally hard to find will matter.

Decisions about where and how to distribute will need to be made on a case by case basis. That is, unless you do your omnichannel connection with your consumer so well that it doesn’t matter as much where you’re distributed as long as your merchandising is well done.

In my consulting business, I find that companies are cautious about change. But that caution is often what gets them in trouble. The best companies recognize the need for some changes early on and implement it in a way that’s invigorating and positive.

But many companies don’t manage to change early and well, or maybe just don’t have a way to compete. As they flounder, it creates opportunities for new brands and retailers. Here’s how, in what I think our environment is going to look like, I’d take advantage of that.

I don’t think I’d characterize myself as a brand or a retailer. As you will see, I don’t think it matters. You are kind of going to be both or neither.

Let’s assume we have a product we think people want to buy and that they are millennials. The first focus will be on characterizing the customer you want to sell to. The second will be reaching them. Both are easier to do with a much higher level of specificity than they used to be.

Next, you’re going to develop the best web sites and mobile aps you can. I don’t see any print advertising in your immediate future. That’s because you’re not going to tell customers why they should buy your product. You are going to solicit their opinion as to what they think of your product and how you can improve it. You will tell your story and ask them to participate.

Now the plot thickens. Retail presence might be in pop up tents, in vans or trucks, on blankets at beaches, in a lift at a ski resort, in stores, in people’s houses. No location would be permanent. You might end up with 400 stores, but none of them would be in the same place for more than, maybe, a week. Your “stores” would be wherever your customers wanted them to be.  Maybe you announce where the stores are going to be. Maybe not. Maybe there are clues online.

The “inventory” at each store would depend on the product and the size of the “store.” Physical product would be limited and next day delivery critical.

I know pop ups and products in vans, etc. isn’t a new concept. But I’m not aware of any brand/retailer that has their entire retail presence either online or physically mobile.

Oops. Actually, I am. Amway, Mary Kay, Tupperware. Okay, not precisely our industry or target customers, but their models would probably tell us a lot about how to manage this kind of retail operation.

As brands and retailers get a more nuanced understanding of the relationship between physical stores, online and customer behavior I can imagine a dynamic model which might involve no permanent locations or perhaps a flagship store in one location reaching out to customers in a defined geographic area through temporary retail oasis in various forms, locations, and durations.

What I want to suggest is that this concept addresses most of the emerging market conditions I describe above. Existing retailers aren’t going to try it, and I guess brands depending on existing brick and mortar retail channels might not either. But if you’re a new brand thinking about your retail presence, is this something you might think about?

15 replies
  1. Kel
    Kel says:

    Hey Jeff, interesting article. Maybe one reason the Boomers are spending more then the Millennials is that Boomers are still funding them in one form or another. I know plenty of parents who are still paying for a few things in their kids lives. Would not have happened to in our generation. Everyone I knew was bought up to work hard to earn your own money to support yourself. Cheers Kel

    • jeff
      jeff says:

      Hi Kel,
      Absolutely correct. Latest numbers I’ve seen is that 30.6% of 18-34 year olds are living at home. That’s down from a peak of 31.6% at the height of the recession, but still way above the level of around 27% when things went south. I would not be too hard on this generation however, They have been whacked upside the head with the worst economic conditions since the Great Depression.

      Thanks,
      J.

  2. Carlos R
    Carlos R says:

    Great article Jeff It’s so interesting to hear you speak about the reduction in retail space and pop up shop idea as much more tailored and nimble shop experience. I am building a web tool/app in the action sports space to allow millennial to connect with user feedback, product reviews and mobile interaction with a very similar premise. This is very useful information specially coming from a trusted source like yourself. Have fun at SIA and hope to meet you at some point in Denver!

    • jeff
      jeff says:

      Thanks Carlos,
      It’s a fascinating topic, though I don’t claim to know how it’s going to all work out. I like how you characterized what I said- “more tailored and nimble” is exactly right.

      Let me know when I can preview your tool.

      Thanks for the comment,
      J.

  3. Jeff_Fan
    Jeff_Fan says:

    Another insightful, thought provoking post. So just wanted to chime in and say thanks. Have a nice trip.

    • jeff
      jeff says:

      Thank you! I enjoyed writing that one. Maybe a little far off, but should get people thinking about possibilities.
      J.

  4. Nelson
    Nelson says:

    Great article, I learn a lot about the industry from your blog! Regarding the decrease in retail space, I was very intrigued. I think REI and VF Outdoors are making a bet in the other way – they are continuing to expand the number of stores and right now it seems to be translating to increased revenues. REI funded a survey of ‘outdoor enthusiasts’ (http://blog.rei.com/snowsports/infographic-unwrap-joy-outdoor-gifts/) that stated that 60% of customers visited a physical store rather than shop online and ‘nearly half’ wanted the advice of experienced staff. I would be curious to see how those numbers change if you broke it out by age demographic…I would expect to see the numbers become a little more skewed one way or the other.

    • jeff
      jeff says:

      Hi Nelson,

      Obviously, not all brick and mortar is going away. It depends on each brand’s market position, customer base, and strategy. But I bet that even with brands like REI, there is some consideration being given to the size that stores need to be, where and how inventory needs to be positioned (which impacts how many square feet you need), and how online/mobile impacts where and what kind of stores you open. I am sure that the total amount of retail in this country will decline. That doesns’t mean some brands won’t grow in total retail brick and mortar space.

      Thanks for the comment,
      J.

  5. David Grant
    David Grant says:

    Good article Jeff! One issue is the fact that many vendors will no longer support online only or stores without a bricks and mortar location, obviously to ensure a secure relationship. Bricks and mortar shows commitment, a sign they are in it for the long haul. In our business we see online stores unable to provide services essential in satisfying a customers needs – fixing, repairing and maintaining equipment. This leads to serious customer dissatisfaction. I believe this is where B&M stores need to differentiate themselves – offer more than just order fulfillment. These are the stores that will survive. At least this what I tell myself! Keep up the good work.

    Dave

    • jeff
      jeff says:

      Hi Dave,
      Obviously if there are service requirements that can’t be managed without brick and mortar, then the brick and mortar will continue to exist and perhaps even prosper. I am not suggesting that brick and mortar is going away, but I am suggesting that for various reasons there is going to be less of it. As to whether or not brick and mortar shows commitment and being in it for the long haul- maybe. I understand you feel that way. I have no idea if your customers do.

      The issue of brands that won’t support online only retail is interesting. I can imagine it might make sense on a brand by brand basis. What brands did you have in mind?

      Thanks for the comment,

      J.

  6. Tyler Breuer
    Tyler Breuer says:

    Hey Jeff,
    I love reading your insight and thoughts not he industry. I find your perspective to be refreshing and challenging at the same time. Thank you for challenging us as retailers to be bold and evolve. One slight note about mobile retail. Check The Sunstruck. They opened for business this past year and were very successful as a fully mobile sunglass retail truck in NYC. http://thesunstruck.com
    Take a look. I’m curious to hear what you think about an operation like this?
    Cheers,
    Tyler

    • jeff
      jeff says:

      Hi Tyler,
      Thanks. I think the sun stuck is a great idea. Probably because I suggested something like it in the article I wrote. I will be particularly interested to follow them and see how they coordinate their social media traffic with where their vans show up.

      J.

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