Market Trends July 2016
BIRTH RATE DROPS, DEATH RATE RISES
American births declined and the death rate rose last year in a sign of continuing pressure on the country's population growth and future labor force. Preliminary numbers from the Centers for Disease Control and Prevention show there were 3.98M U.S. births in 2015, down 0.3% from 2014. The CDC also found the mortality rate to be 729.5 deaths per 100K people last year, up from 723.2 the year before.
RETAILERS OF THE FUTURE
According to retail real estate trend watching firm Madison Marquette, the most successful retailers of the future will combine all the advantages technology and the digital/mobile age has to offer with enhanced physical locations that reward customers for shopping with unique goods, interesting architecture, appealing landscaping and convenient parking, along with other conveniences like dining and food options.
INVENTORY MANAGEMENT TRENDS
Retailers are rethinking how they manage inventory, according to a recent feature by the Wall Street Journal. Home Depot has told stores to get comfortable with having just days of inventory instead of weeks of inventory. Walmart and Target are cutting back on the number of products in backrooms and exploring ways to get products to shelves faster. Walmart has widened aisles to make navigation easier and reduce the amount of goods on shelves, and Target and Lowe’s have moved bulky items such as patio furniture into centralized distribution locations instead of keeping them in stores. Inventory is one of retailers’ highest costs, and any reduction in the capital that’s tied up in unsold goods frees up resources that can be used elsewhere. However, destocking comes with risks of its own. Bare shelves are a major annoyance to shoppers who take the time to go into a physical store to shop. When chains first began selling goods online, many of them opened distribution centers dedicated to ecommerce. However, having separate distribution centers for ecommerce and brick and mortar increased the risk of chains having too much inventory. Now many are trying to make stores double as online fulfillment centers, which has created more work for employees and logistics puzzles that need to be solved. Home Depot’s Project Sync is overhauling most of the chain’s supply chain. Among the changes are developing a steadier flow of deliveries from suppliers into THD’s network of 18 sorting centers. Instead of having a supplier send five trucks twice a week, Home Depot now wants to have suppliers send two trucks five days a week. When shipments arrive, the goal is to have workers move them right to lower shelves, eliminating the need to store and retrieve products from upper shelves using ladders and forklifts, some of the most expensive parts of the supply chain.
Amazon Echo’s voice-controlled assistant is a black cylinder called Alexa, introduced last summer. Alexa responds to spoken commands and questions and can do everything from play music to give weather, traffic and news updates. Alexa is carving out a market no one expected—disabled adults and the elderly. Among more than 30,000 reviews of Alexa are many from caregivers for wheelchair-bound relatives who love the control Alexa gives them over their environment and from family members of older adults praising Alexa for her companionship and help. Alexa wasn’t designed for those roles, and experts say that may be why it is so appealing. Only 30% of adults age 71 and over who are online actually own a smartphone, and of those just a tiny fraction use their phone intensively. Currently Alexa costs $179.99 and must be connected to WiFi to function. One function Alexa does not currently have is the ability to dial 911, something that many people have requested, although she will contact a designated Buddy List on request.
TAX REFUNDS SURVEY
More consumers than ever saved their tax refunds, according to the National Retail Federation’s annual Tax Returns Survey. Almost half (49.2%) of respondent planned to save their refund, the highest percentage in the survey’s history. The NRF says that money saved is spending potential down the road. In addition to savings, 34.9% planned to use their refund to pay down debt. Perhaps surprising, 57.3% of 18-to-24 year-olds planned to save their refunds. Analysts say millennials are looking for ways to get ahead.
DIGITAL AGE CONSTRUCTION TRENDS
International experts from construction, real estate and financing discussed the major trends and movements affecting construction at the RICS Summit of the Americas and World Built Environment Forum in Washington, DC. One of the most important was the ability of the industry to harness Big Data, which offers the possibility to completely transform the construction process for companies by analyzing massive amounts of data and designing solutions that solve the problems posed. Participants noted that the biggest barrier was the gap between what the software can do and what the industry is doing with it. They also emphasized how important the human connection was to the process; the challenge is making sure the right data is being analyzed, and not getting lost in the seemingly endless possibilities. Technology futurist Daniel Burrus noted that the construction industry has a wealth of software available, such as Construction Manager and PlanGrid, but they are all very underused, as the industry has been notoriously slow to adopt and utilize technological solutions. Google’s new Project Tango offers self-3D mapping software along with an augmented reality app called Through the Wall that could allow a user to hold up a device inside any room of a building and be able to see where all the pipes and electrics are positioned. And virtual reality is already being used to allow consumers to envision what their new kitchen or bathroom will look like.
A recent survey from Forrester Research shows that 29% of online shoppers say they would be interested in same-day delivery options. Not long ago, two-day delivery was considered a premium offering. Amazon is now offering same-day delivery to several metros, and Prime Now will deliver a range of items in just a couple of hours. Start up competitor Postmates offers free same-day delivery with no fees on purchases of $30 or more from partner merchants. Postmates charges a $9.99 per month fee. Postmates says it’s trying to build a network that lets companies without Amazon’s logistics deliver just about anything to anyone with Amazon-like speed. Analysts say retailers need to decide if it’s important to their business that they offer instant delivery options, because even if they pass along all of the real costs, they will still incur logistics and other “soft” costs if they offer the service.
DRONES BEING USED FOR INVENTORY MANAGEMENT
Walmart is testing drones that they believe will help them manage warehouse inventory more efficiently. Walmart is pleased enough with their Last Mile program tests to announce that drones could be rolled out in the next six to nine months across their distribution centers. WM says drones allow them to check inventory in a day or less, something that used to take a month to do manually. Amazon says that its drone program, Prime Air, will one day deliver packages of up to five pounds in 30 minutes or less.
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