We study history so that we can better understand our present and prepare for our future. That is true in almost all facets of life, including business.
Demandware recently partnered with The Economist Intelligence Unit to survey 300 senior retail leaders. The report Finding Retail Growth: A View from the Corner Office, highlights the most significant disruptions facing the industry and provides their strategic and tactical plans to compete, grow, and transform.
But to understand future growth, we must look at the past. Why? The retail industry has grown steadily over the last 50 years, and market share growth within this frame is essentially a zero-sum game, creating high performers and low performers. High performers disrupt the status quo by creating new models, structures or concepts that supplant laggards or legacy players.
(All product and company names and logos are trademarks or registered trademarks of their respective holders.)
Let’s take a look at the past to better understand how high-performing retailers will blaze a clear roadmap to seize opportunities and drive growth in this new era of retail democratization.
1960’s – Department Stores: With the advent of the highway system in the US, Macy’s, Hudson’s and Marshall Fields were the three biggest department stores in both urban and suburban locations in the 60’s. This format flourished and took market share from traditional independent retailers with its convenience, category breadth and accessibility via the newly constructed highway system. At its peak, Hudson’s was large enough to require its own telephone exchange called Capital. It was the nation’s third largest switchboard, exceeded only by the Pentagon and the Bell System itself.
1970’s – Catalogues: The 70’s (and continuing throughout the 80’s) marked the growth of catalog retailers such as L.L.Bean, Land’s End and Orvis. The combination of enhanced distribution (FedEx was founded in 1971), advancements in technology and a 25% increase in women working outside the home contributed to the rise of at-home shopping. Total sales for cataloguers skyrocketed from $2.4 billion in 1967 to $211 billion in 1990. L.L.Bean for example, by the mid-seventies, was sending out more than 1.5 million catalogs and was receiving over 4,000 orders by mail each day. During the holidays, this figure would swell to more than 40,000.
1980’s – Specialty: The 80’s saw the continued rise of The Limited, Payless, Best Buy and other national specialty stores, that grabbed share from regional department stores and full line retailers. Take The Limited as an example. In this decade, its employee ranks swelled from 10,000 to 50,000, while sales quadrupled in as many years to $4 billion in 1988. The differentiation for this category was their specialized assortment, ease in shopping, more frequent merchandise turns by seasons and access to stores (more of them in more locations including malls).
1990’s – Supercenters: In the era of time-starved consumers, the rise of supercenters such as Walmart, Target and Costco supplanted regional mass merchants such as Bradlees, Caldor and Zayre. Walmart, for example, grew revenues from $1 billion in 1980 to an astounding $165 billion in 2000. They expanded from four supercenters in 1990 to 230 in the next five years – becoming category killers in electronics, personal care and apparel.
2000’s – Fast Fashion: The likes of Zara, Uniqlo and Primark appealed to customers with designer wear brought to market quickly and at low prices. They did this with agile supply chains and sophisticated demand forecasting. According to Bain and Company, this enabled these innovative retailers to succeed by typically maintaining a 15% markdown on 15% of their items, unlike the 40% markdown on 60% of items averaged by traditional retailers.
2010’s – Digital & Marketplaces: In the first half of this decade, digital shops and online marketplaces made shopping significantly more convenient for consumers. In 2012, 22% of disposable income was spent online globally – taking share from brick-and-mortar laggards and department stores caught flat-footed by the digital commerce revolution. Marketplace giants such as Amazon, Alibaba and Ebay are now curated destinations that operate and feel like digital specialty boutiques.
We have entered the age of democratization of retail, with seemingly unlimited consumer access and control, which has triggered the next wave of growth for those wiling and able to adapt and change. Retailers can no longer rely on more store locations and larger footprints, or even a simple transactional website, for growth. Rather, retailers must embrace the reality of reaching customers wherever, whenever, however and with whatever they demand. Higher performers will embrace this change to transform and disrupt the traditional retail new models, structures, formats, or concepts models.
Which end of this disruption will you be on?
Photo Courtesy of Joyner Library