The days of bigger being better are in their final chapters as the last 10-15 years have seen a rapid evolution in the retail store model. Recent data from Nielsen looks at the factors that have had the most powerful effect on the landscape and discuss how retailers can stay ahead of the change.
In a retail age gone by, consumers, retailers, and suppliers all benefited from economies of scale. However, with supply chain process improvements reaching a point where smaller stores can achieve similar or even higher levels of profitability, the paradigm is starting to get turned on its head.
Steve Matthesen, president of Nielsen Retail Vertical stated, “Perhaps the new retail mantra should be ‘Go small or go home,’ as the ‘Bigger is better’ paradigm has been challenged virtually everywhere.”
The process improvements have allowed a growing number of smaller retail chains to expand and claim market share from competitors in many markets.
Along with the changes being driven from behind the scenes, consumers themselves account for a lot of the pressure that has further complicated the retail industry’s revolution. A shifting socio-economic landscape is to blame with a rising middle class, growing urbanisation, and coming of age millennials all shaping consumer preferences.
“Hyper-localisation and specialisation are fuelling today’s retail growth. As lifestyle and consumption habits change, we’re seeing a structural shift where consumers shop and what they buy, and some small formats are driving big growth. Mass-market strategies are also losing relevance as consumers look for unique experiences that meet their personal demands,” said Matthesen.
So how can retailers stay ahead in this rapidly changing landscape? A good starting point is to assess what consumer think about the shopping experience and how well they think their needs are currently being met.
In grocery, 46 percent of respondents around the world say grocery shopping is something they try to spend as little time as possible doing. Communication from retailers is a huge determining factor in the consumer’s feelings towards the store with less than half of respondents believing their main grocery retailer always or mostly communicates with them in a relevant way.
This follows an increasing desire from consumers for personalisation and unique experiences off the back of a growing online shopping scene that can very easily utilise data and manipulate individual experiences.
Following on from the grocery retailer example, it’s important to note that sentiment isn’t the same everywhere. Consumers in Asia-Pacific are the most receptive to communications from their grocery retailer as shown in the graphic below.