Seismic Changes Are Happening to Retail
Under-employment, stagnant wages, historically high school debt, credit card debt, large healthcare deductibles, staggering urban rent, first homes, weddings and new babies, is there any wonder why Millennials seek value in their discretionary purchases like apparel, accessories, footwear and home?
This is the overhang from a deep recession, the Affordable Care Act and lackluster recovery. It has given rise to the Amazon-effect, outlets, successful discounters like TJX, fast-fashion, rental, consignment and intense comparison shopping. Who can afford to pay full-price?
Practically every retailer and brand is chasing the most cash-strapped generation in decades, because the Millennial generation, ages 15-33 is now the largest population in the US, finally surpassing the much wealthier Baby Boomers and Generation X.
A quote in the Wall Street Journal on May 12, really caught my attention. “Non-discretionary spending on health, insurance, education, and housing has taken an extra 4% out of personal consumption expenditures in 2015 compared with 2000, according to Craig Johnson, president of consulting firm Customer Growth Partners. That has reduced the discretionary spending available for traditional retailers by $500 billon, more than the combined annual sales of Walmart Stores and Costco Wholesale combined.” No wonder we are seriously over-stored.
Traffic is down at brick and mortar retailers, everyone is trying to explain it, but the reasons are actually quite obvious. There are huge headwinds on spending, so consumers are chasing good deals or staying home.
Online retail, even though it represents less than 10% of all purchases is the fastest growing retail channel. This reflects the ease of comparison shopping, selection and simplicity for insanely time-strapped consumers. It isn’t the best way to browse or make impulse purchases. Who goes on Amazon, just to see what’s new?
Survival Strategies in Tough Times for Consumer Brands
What should apparel, footwear, home and consumer discretionary companies do to combat intense spending headwinds? Here are seven ways to grow in tough times:
Offer brand value. Brands with a consistent, clear identity and experience will rise above the clutter and command higher prices than weak concepts and me-too products. Think Apple, Nike, Under Armour, Kate Spade, Madewell and West Elm.
Be strategically focused on core strengths. It’s necessary to test new things, but focus on your sweet spots, invest in your strengths and best brands. Don’t get romanced with low-value, expensive projects and extensions.
Value great design. Creativity and innovation create demand and pricing power. Big marketing efforts without great products to back them up, won’t fool consumers, who value authenticity.
Look for untapped markets or niche opportunities. For instance, the underserved plus-size markets for women and men, trending activities, hot fitness trends, growing sports, hobbies, etc..
Increase DTC efforts. Many stores will close, decreasing available doors for your apparel, footwear and consumer products. Your direct to consumer efforts online, with company-owned stores, pop-up stores, partnerships, direct mail etc., will help you control your brand message and destiny.
Think beyond Millennials. Brands with cross-generational “lifestyle” appeal will weather the competitive storm better than discretionary fashion brands just targeting Millennials. Baby Boomers have the greatest wealth in the history of the US and are due to inherit even more, even though they also took a hit during the Recession.
Take risks. This is counterintuitive in bad times. Hire experienced and visionary people who can execute a well-balanced strategy of taking creative risks while covering established business.
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The Dix & Pond Blog, by Stephanie Bernier is the blog of Dix & Pond Consulting, a Boston-based, company that consults on business strategy, creative direction, brand experience, trends, product development and merchandising. Clients include retailers, apparel, footwear & consumer companies. CONTACT US TODAY!
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