Retail experts predict 2013 and beyond
Through the glass darkly: Trade gurus scan the future horizon
At the end of each year (cf. 2012 & 2011), we ask international retail & fmcg experts for their take on the future of the trade.
Pundits from banking and private equity to design and advertising were invited to answer the question: "What do you see as the most exciting development in retailing/the fmcg industry and the most important challenge for the future?"
As their intriguing and sometimes unorthodox predictions are self-explanatory, we give them below without further commentary and in alphabetical order of surname.
Professor Joshua Bamfield, Director, Centre for Retail Research:
"The Centre for Retail Research sees consumer demand in 2013 as being characterised by continued low growth and occasional crises, but for those with a strong strategy these conditions will be opportunities as well.
The trends are increasingly about retailers becoming editors and advisors to consumers, using consumer data to make firm recommendations to customers, and particularly exploiting consumer excitement about smartphone-enabled retailing.
In the UK, retailers will be starting the process of re-imagining their businesses, based on authority in the marketplace, omnichannel, rethinking their cost structures and optimum store numbers (i.e. planned reductions in both), and developing new formats and approaches for the new disengaged and frankly cynical consumer."
David Bosshart, CEO, Gottlieb Duttweiler Institute:
"Marc Andreessen got it right: software is eating the world. Retailers will undergo the next step of Business Model transformation, and Amazon is the leader. It is at the same time the Good, the Bad, and the Ugly. Most are going to die before they take note."
Dagmar Bottenbruch, international financial services expert & online start-up operator:
"Online and ONLINE and ONLINE. The physical retailing of standard products has its years counted. You can already live a life where you never have to leave your house. You can order everything, and people do — their meals, groceries, clothes, movies, and financial services.
Many retailers with beautiful locations are turning into mere showrooms, and some don’t even realize it. The process started with electronics, but it is moving into every segment.
Physical locations will have to offer more than just products, i.e., something that you cannot order. These could include social contacts, events, and something which you can learn.
Super retail brands will be able to keep their presence in top locations because shopping there is an 'experience'. But the standard stuff will inevitably move online.
This is not just a huge challenge for classic retailers, it is also one for municipal administrators. Already you see more and more restaurants and other service providers (hair, nails, medical etc.). What will get people out of the house?"
Professor Simonetta Carbonaro, REAL_ISE Strategic Consultants:
"For decades we’ve been sailing on a sea of uncertainty, where our notion of the future has taken on eerie and blurred outlines.
Western societies are now increasingly affected by economic polarization and environmental emergencies; they are ageing, more feminine, multi-ethnic, urban, increasingly forced to geographical mobility and to frantic life style changes.
But in this very context food consumption (the most fundamental of all forms of consumption) is bound to be in the forefront of any attempt to bridge the rift between society and its search for meaning.
Thus, the food industry and retailing could become the key to giving our restless society new meaning. An authentically traditional local food as well as a truly multi-ethnic food offer (and not just products that pretend to be “typical” or “exotic”) could allay the many fears burdening mankind.
Such an offer would respond to our deep need for roots, physical and psychological boundaries, permanence, conviviality, culture, and the rediscovery of past flavours reinterpreted in a contemporary guise.
To answer such needs, we must abandon the persuasive, seductive and inconsistent marketing approach which has become so typical of our post-modern culture. We must also quit the low-cost-at-any-cost battlefield and re-integrate food values (intrinsic quality) into our codes of meaning.
This would mean, for example, forgetting the current star system or x-factor reality-show concept (or “food pornography” as Carlo Petrini, the founder of Slow Food, describes it) in order to link food production and assortment strategies to much more powerful arguments like the safeguarding of soil fertility, water quality, biodiversity, and the value of small production units, while waging all-out war on waste.
This new food culture would help to revise the relationship between food and society and between consumption lifestyles and ways of thought.
It would imply groundbreaking innovation and the redesign of our food production processes on the basis of economic policies oriented towards sustainable agriculture, animal husbandry, and respect for the landscape and environment.
It would also care for our health and nurture a culture of enjoying good food. This would be a new platform for growth and the path towards new meaning and a better future which we lost sight of a long time ago."
Pete Clifford, International Development Director, Limas Matkasse AB:
"I am of the opinion that a few of the players in the German market for 'traditional' online food delivery are starting to get the customer offer right (Rewe, Supermarket.de are good examples).
If they can continue to sustain investment in further improvements and market awareness for a few more years, then it could provide the chain-effect breakthrough everyone talks about/hopes for.
In the UK, it should be an interesting year for Ocado. As they open their second warehouse (with all its promises of unleashing pent-up demand from capacity issues), they will need to show growth and profitability improvements.
I look forward to seeing if Tesco.com can replicate the success of their business model from the UK with launches in the Czech Republic and Poland."
Professor Marcel Corstjens, Unilever Chaired Professor of Marketing, INSEAD:
"Key challenge: How can grocery retailers, in many countries, keep on increasing capacity (real and virtual) faster that the total value of the market is expanding, but without destroying economic value added?"
Professor Utho Creusen, Non-Executive Director at Dixons Retail and Mvideo, and owner of Positive Leadership Consulting:
What we need is a complete change of culture and attitude on both sides. As long as retailers do it just technically without a clear vision and passion it will fail. Many will disappear during this period of revolution."
Professor Rodney Fitch:
"What can we say other than that 'we live in uncertain times'. But this is no bad thing since the fundamental culture of retailing and the modern consumers' expectation of their shopping experience is change and innovation.
This innovation will be very apparent online and in omni-channel as retailers and vested interests clamber over themselves with digital upon digital, technology upon technology, app upon app. Some of this will genuinely help consumers navigate the emerging landscape, much of it will be just wallpaper.
Where I do look forward with some excitement is the role for retail design. I say this on the basis that no matter how much shopping goes online, the majority of purchases will be transacted in store. But not any old store — only the very best will survive.
Apple is, I suppose, the benchmark and primus inter pares for look and feel, service, customer experience and revenue per square metre.
But not only Apple. Look at some of the new stores like Uniqlo, Zara and Joe Fresh on New York's 5th Avenue; or Burberry on Regent Street in London; or Loblaws in Toronto to name just a few. These are wonderful, immersive mixed-media experiences raised above the ordinary by design.
Everyone responds to good or bad design — we are genetically hard-wired to do so, and I predict a design renaissance from which customers, the built environment, and smart retailers will benefit."
Michael Gerling, CEO, EHI Retail Institute:
Online marketing will be added to traditional print-based activities. New business models like click & collect or home delivery have to be implemented in addition to the traditional way of shopping.
Secondly, the heavy public fees for the German transition towards renewable energies will mean additional costs for retailers. They will have to pay hundreds of millions of euros in extra charges in 2013 alone.
Both developments will mean big investments for the retail industry: IT spending will rise dramatically; and retailers will have to spend a huge amount on energy-saving technologies.
The retail industry is facing big changes with major threats and opportunities. The wheel of retailing is moving very fast."
Ibrahim Ibrahim, Managing Director, Portland Design Associates:
“I think the most exciting development will be 3D Printing. It will transform brands’ and retailers’ ability to offer infinite customisation. It will be the catalyst for true localisation and the engine for the re-emergence of ‘craft’. It represents a new industrial revolution.
I believe the most important challenge for the future (in developed economies) is retailers' and manufacturers' response to a potential decline in people's demand for ‘stuff’ and their corresponding frugality and desire to hire and share more things."
Alfred Jungmann, DIE VISION GmbH, strategic communications analysis & consultancy:
"By their very existence and competition retailers and suppliers create tension every year which brings both parties to the very edge of their existence and beyond.
The most important challenge for the future is therefore the decision to use one's common sense regarding the use of raw materials and energy, production, logistics, communication, and particularly as to how one shares profit."
Uwe Klenk, CEO & Founder, UK & Partners, Fmcg & Retail Support:
"THE CUSTOMER IS THE NUMBER 1, ALWAYS!!! I see more and more managers are ignoring and forgetting this in their day to day business."
Ian McGarrigle, Chairman, World Retail Congress:
“The stakes are very high because so many major retailers, such as Tesco, Walmart, Carrefour and Metro, are in the middle of, or just starting out, on major repositioning strategies or change programmes to make them fit for purpose in an omni-channel, consumer-driven world.
It will be fascinating is to see how retailers re-invent the store and how previously dominant formats such as the hypermarket adapt to an era where smaller convenience formats appear to be the way forward.”
Boris Planer, Chief Economist, PlanetRetail:
"One of the great challenges for Europe beyond the current economic crisis is demographic change. Within the next 50 years, the share of pensioners in the EU will almost double to 30 per cent, with drastic consequences for social security contributions in the workforce, as well as for pension levels.
Lower birth rates and average incomes will lead to smaller households living in smaller places and with fewer cars. This means the focus of retail investment will have to shift back from greenfield sites to residential locations. Shrinking shelf space will be a key challenge for suppliers."
Michael Sansolo, industry consultant and contributing editor:
"Exciting is a two-edged sword. It's amazing how a word like exciting can have such a range of meaning. There are many business people who know that the most exciting developments make for the largest headaches.
For instance, internet-based shopping is certainly exciting, but it opens the door to a whole new class of competitive challenges just as discounter, mass merchandisers and others brought exciting and worrisome developments. Exciting means both great opportunity and great challenge.
Against that backdrop I'd argue that the shifting demographics create an exciting development. The post-World War II baby boomers are now retiring and are being replaced as shoppers and employees by their children.
This is a generation of new values, needs, skills and desires. Align your company correctly and you win for years to come. Do it wrong and exciting could be the last words you wish to hear."
Sir Martin Sorrell, Group Chief Executive, WPP:
Luc Vandevelde, Founder/Chairman, Change Capital Partners:
"One of the most fascinating transformations the consumer is experiencing at present is the holistic way of experiencing a brand.
Many observers have predicted the end of the bricks with the arrival of clicks. I rather believe in the convergence of both models as is best illustrated with two brands that are establishing a whole new standard in retailing.
My wife goes to the Nespresso store although she could order the capsules comfortably through her smartphone. She like many others go to the store to live the brand (and perhaps to meet George Clooney?).
I could order virtually all Apple products through the internet and yet I go to the Apple store and I can access free seminars that teach me how to make the most of my Mac and if I purchase anything I can pay any sales assistants roaming around the shop with an iPhone.
Facebook and other social networks show the need for people to be part of a community. Retailers and manufacturers can pick up on that need by creating communities around their brands.
As illustrated with the Apple and Nespresso examples it does take a very different approach to marketing and retailing to succeed and not to forget a great deal of RETAILTAINMENT!"
William S Webb MA, Senior Lecturer - Retail Management, The London College of Fashion:
“The store of the future...is both a window and a gateway to a brand. Like Dr Who’s Tardis it is small on the outside, but big on the inside. It uses physical constructs and new digital technology to maximize both efficiency and experience.”
Julian Wild, partner corporate finance, Rollits LLP:
"The most exciting continuing trend is towards healthier foods, which are now far removed from the original idea of ‘health foods’. Now almost every manufacturer has to think — how can I make my product healthier, while retaining taste and quality?
Reducing fat, saturated fat, sugar and salt is a top priority, and all the major UK multiples have embraced Guideline Daily Amounts and traffic light labelling.
The biggest challenge is the twin global threats of flood and drought, which are causing almost continual commodity fluctuations. Companies which have the technical expertise to change specifications and redevelop products will win out over those who do not."
Clive Woodger, Chairman, SCG London, Strategic Consulting Group:
“Everyone talks about the challenges of social media and the implications for multi-channel strategies, but perhaps an elephant in the room is the growing shortage of trained and experienced managements and staff in developed and so-called developing markets.
This works at all levels — facing the realities of new media, and a consumer-led society creates new market dynamics.
Organisations are now targeted by their previous target audiences and users. This means that those trained in traditional marketing are potentially floundering when coming to terms with a new environment and a new generation weaned on digital technology.
Equally, there is a massive need to train the trainers in order to provide instant, experienced professionals who can resource fast-track roll-outs in new markets.
With 'experts' at all levels and sectors desperately trying to 'adapt, adopt and improve', the old mantra was never so relevant — and 'relevance' must be the vital criteria for everyone!"
Statements collated and edited by Mike Dawson