Market Trends June 2018
Millennials Hurt by Housing Crunch
In a Trulia survey of US residents, 84% of millennials said they were willing to give up home features in exchange for living in their ideal neighborhood. Thirty-four percent would give up a garage, 32% said they didn’t need a recently updated kitchen and 30% were willing to compromise on square footage. Just 16% said they were not willing to make concessions. A recent Harris Poll showed that 90% of millennials who want to buy a home in the next year have put their plans on hold, compared to 77% of Gen Xers and 61% of baby boomers.
Residential Construction Changing
The interest in modular, component and offsite construction models is being fed by the current shortage of labor, according to attendees at The Urban Land Institute’s standing room only session in Detroit’s Cobo Center designed for architects, developers, planners, builders and materials suppliers. Analysts cautioned that the inability to imagine a future markedly different from the past can eventually lead to being left behind as the industry changes. They noted that the most likely area for opportunity in residential construction is removing whatever does not add value from all phases of the construction process. Disruptive Innovation occurs when innovation creates a new market and value network that eventually displaces the established market leading firms, products and alliances. What they described as complex and controlled chaos rules the industry now, and many players find it difficult to imagine a workable way to automate, streamline and standardize a process that by its nature is dictated by conditions on the ground and in the market that vary widely from site to site.
Skills Shortage Hurting Construction
Job openings are at record highs, creating a shortage of and competition for skilled labor that is creating a tough environment for construction. More than 90% of construction firms report they are having a hard time hiring qualified workers, according to findings from the USG Corporation and US Chamber of Commerce Commercial Construction Index. Of those, nearly half expect the problem to worsen over the next six months. More than half of respondents would like to employ more workers in the next six months if they can find them. Survey results were based on responses from more than 2,700 commercial and institutional contractors.
Amazon Partners with Lennar to Equip Smart Homes
Amazon has partnered with Lennar, one of the country’s largest homebuilders, to integrate Alexa and smart home technology into all the new homes that Lennar builds. The pair began showing off what they call the Amazon Experience Center, a pre-wired, voice-activated smart home in eight locations across the country. Lennar plans to build Amazon’s Alexa voice-assistant technology into the design of all of its houses nationwide from now on. The technology package will come standard and will not add anything to the base cost of the home. Alexa will be able to handle many of the mundane, everyday tasks that people currently do on their own, from finding a movie to watch via Amazon Prime on the Amazon Fire TV that comes with the home to scheduling automatic orders of household goods to locking doors and turning down the thermostat when it’s bedtime. Customers will have the final say about whether or not to use the technology that comes with their home. Analysts have noted that integrating the technology takes the pressure off the consumer to choose, install, support and learn how to use something that sounds simple, but often is not, until you get familiar with it.
Robots for the Home
Amazon’s Alexa could soon be embodied in a camera and microphone-equipped mobile robot that will follow you around the house. It will be the first mass-market home-droid when it goes on sale next year. Robots can be programmed to recognize people and follow them around, answer questions, turn on smart devices and even act as security systems, detecting smoke or filming intruders. Amazon's robot is reportedly codenamed Vesta, after the Roman goddess of the hearth and home, and is being developed by Amazon’s Lab126, the hardware division responsible for Echo smart speakers and Fire TV sticks. One of the challenges is designing a robot that can navigate the ever-changing interior of a home as opposed to traveling through a static environment like a warehouse. Another behavior is teaching robots to interact meaningfully with their humans and understanding that human behavior can vary widely from household to household.
Job Tasks Will Change
A detailed study of the impact of artificial intelligence (AI) by McKinsey found that about one third of the tasks performed in 60% of today’s jobs are likely to be eliminated or altered significantly by coming technologies. So while the jobs will still be there, what people do on a day-to-day basis will change dramatically. To date, robotics and digital technologies have mostly affected routine tasks like spell-check and dangerous and hard jobs, like lifting heavy objects onto a moving assembly line. Integrating robotics into daily life begins with defining the problems humans want new technologies to solve and then ensuring that technologies are designed simultaneously with the work systems which with they will be paired. Companies will need to invest in continuous training so workers can influence use and adapt to technological changes before they are introduced.
New Distribution Strategies
Target is testing a new distribution strategy designed to speed up restocking, cut what Target calls the “replenishment cycle” from days to hours, and reduce inventory, especially at new small-format stores and locations in denser urban areas. The pilot program is now being tested in New Jersey, where the pilot warehouse uses the same pool of inventory to restock stores and fill online orders, a departure from Target’s existing supply chain. The company ships to stores more frequently and in smaller lots tailored more precisely to demand rather than shipping in cases of product. Target is investing $7 billion in store and digital improvements. Nearly 70% of Target’s online volume was handled by stores during the 2017 holiday season. The US retail pharmacy division of Walgreens also uses an integrated supply chain to serve both ecommerce customers and retail stores, where shipments of big
caseloads of products remain the exception. The company says that they have small stores with a lot of slow-moving items, and there is no room to replenish with cases.
AI in the Sky
Sky News used artificial intelligence to identify guests at the wedding of Britain’s Prince Harry and American Meghan Markle in May. AI identified guests and displayed names and details about how they are connected to the royal couple. Sky News announced the live-stream service in partnership with Amazon and several data and engineering firms. The wedding commanded a massive global audience; more than 5,000 members of the media were accredited to cover the event. No heads of state were invited, not even British Prime Minister Theresa May. Instead all of the invitees had a direct relationship with the couple. The celebrity recognition feature could pave the way for its use at other high-profile events and could have other more broad-ranging applications.
Target Uses Augmented Reality to Help Consumers Make Better Choices
Target offers more than 1,000 cosmetic brands and knows that having that much to choose from can intimidate shoppers. So they are introducing Target Beauty Studios, a solution that merges augmented reality, artificial intelligence and real-time facial mapping technology to help make it easier for shoppers to make the choice that’s right for them. Customer will be able to use the technology online, through Target’s mobile app and through dedicated digital screens in stores to virtually “try on” makeup and see how it works for them. Currently, 10 stores are testing the technology, with more expected to add the solution later this year. Separately, Target is also giving shoppers access to their in-store beauty concierge representative via a new text service that delivers real-time advice, from tracking down a specific product to choosing between two shades. By clicking on icons, customers will also be able to chat with a beauty consultant in real time.
Website Personalization Increases
Shoppers are seeing more retailers personalize their web experiences. Walmart is working to build stronger customer connections. Walmart will include a section that highlights top-selling items in a customer’s location, features services like online grocery that are available in the area and offers easy ways for people to purchase items that they have bought frequently both in store and online. Ecommerce CEO Marc Lore says that building emotional ties with shoppers starts with offering emotional content. Amazon has set the standard for recommending products based on what people have bought or searched for, but some smaller online retailers are even further along in customization. At online clothing retailer Stitchfix, customers fill out questionnaires that allow stylists and algorithms to find appropriate fashions. At Wayfair, shoppers who browse a certain category, such as modern furniture, won’t be presented with traditional designs unless they ask for them.
Not So Many Happy Returns
Amazon is the latest retailer to crack down on shoppers they believe are abusing their generous return policies. Amazon joins a growing list of companies using algorithms and services like Appriss Retail, formerly known as The Retail Equation, to track consumers’ shopping and return habits. Some shoppers are being banned and their accounts terminated if their returns are deemed excessive or suspicious. Customers report that they received terse emails letting them know their business was no longer welcome, or in some cases were just kicked off the shopping site. A spokesperson for Amazon said that unfortunately there are rare occasions where someone abuses their service over an extended period of time. In February, L.L. Bean revised their 100% satisfaction guarantee return policy to have a one-year limit; Bean notified customers and told the media that the purpose was to stop some people from using it as a lifetime product replacement program.
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