Shoptalk 2018: Debunking Retail's 'New Normal'

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We've entered a new era of retail.

The popular narrative suggests that brick-and-mortar is facing a “retail apocalypse,” in the face of aggressive eCommerce growth and shifting consumer habits. Recent headlines paint a picture of looming doom for physical storefronts, as legacy brands like Toys ‘R Us shutter in the face of eCommerce's tough competition.

At Shoptalk 2018, the fate of brick-and-mortar was front and center — and it didn't seem to be going anywhere. Instead, brands have entered into what Shoptalk CEO Anil Aggarwal calls a “new normal —” one shaped by a decade of technological innovation, and disruptive change.

But what does this new normal look like?

“It's about being better at finding and identifying the right consumer, knowing who the customer is, and where you need to be,” Kasey Lobaugh, principal, Deloitte Consulting, said. Lobaugh recently helped author a study that suggests that brick-and-mortar retail is actually thriving — just not in the same way is has before.

“Retail is actually growing faster than the GDP,” Lobaugh said, noting a 3.5 percent growth in overall retail sales in 2017.

To understand the shift, you need to trace the lines of larger economic trends. Over the last five years, rising cost-of-living expenses like healthcare, food, and housing, has taken a disproportionate toll on low-income consumers, leaving them with less disposable income, and less of a willingness to shop online. In turn, physical retailers that offer price-based incentives have seen a 37 percent growth in sales over the last five years.

On the other hand, Lobaugh says, high-income consumers (who earn more than $100K) saw an increase in their spending power, partly due to a healthier stock market and a more stable post-recession economy. In turn, brands that offer “high-end” retail experiences have seen an 81 percent growth in revenue, which seems to fall in line with the emergence of more thoughtful, personalized, marketing interactions. High-income millennial consumers, Lobaugh noted, are also the most dominant spenders on mobile, which skews the perception of the overall eCommerce landscape.

“This has really created a ‘tale of two consumers,'” he said.

Where sales fall flat, and perhaps where the idea of an “apocalypse” stems from, are for brands that fall somewhere in between. Revenues for middle-of-the-road retailers remained at a sluggish two percent, and have slipped into the negative over the past year.

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