Market Trends October 2016
CLICK AND MORTAR
Changing customer expectations are changing the face of retail and driving the future of the industry, according to Chain Store Age. Some retailers are already working to make retail and online teams seamless; others are still stuck in what CSA calls a “silo” with teams competing against each other for sales. CSA says that for long term success organizations need to unify their channel teams and give them common objectives. Today’s customers are much less tolerant than customers were even a decade ago, and now expect everything about their shopping experience to be fast and easy, from the initial product search to the purchase process and final product pick up or delivery. Things like free two-day or same-day delivery and improved online search engines have lowered tolerance for tedious and time consuming in-store experiences. It’s almost as if people expect the store to respond with the speed of the website, which is seldom physically possible. When someone is looking for something on the website, they enter search parameters and their choices immediately appear. When someone can’t find an item in store, they are often stuck trying to hunt down an associate, who may not know how to find what they’re looking for. CSA notes that the deciding factor in a brand’s ability to succeed in today’s evolving retail environment will be their ability to effectively collect and use data and deliver a seamless and positive omnichannel experience for customers.
START-UPS PICK UP STEAM
Business start-up activity has returned to near pre-recession levels, according to USA Today. About 550,000 new businesses were launched each month last year, up from 466,000 in 2013. That’s the highest level since 2009, when many start-ups were driven by necessity. Today 84% of entrepreneurs are motivated by opportunity, up from 74% in 2009. There were 398,000 additional employer businesses that were a year old or younger last year, up 7% from 2014. New entrepreneurs are critical to the economy because they are the ones who are most likely to come up with innovations that boost productivity or create new markets.
OMNICHANNEL RETAIL AFFECTS LOGISTICS
The evolution of omnichannel retail is creating a logistics revolution. Companies are investing more in technology and moving towards having more warehouses closer to customers, which generally means more expensive locations and more inventory overall. Shipping products to individuals rather than pallets or truckloads to stores or distribution centers is costlier and more complicated. It requires new methods of inventory organization plus new software that can fulfill multiple online orders efficiently. Fast electronic data and analytics that turn that data into information people can use to make decisions are critical to success. Georgia Tech has partnered with the National University of Singapore to found the Center for Next Generation Logistics in Singapore that will look at global logistics issues, such as how to move a growing number of goods in congested cities. Some innovations include: driverless trucks, platooning (several trucks which follow each other closely to reduce air friction and save fuel) drones and automated guided vehicles used in warehouses and to unload freight in ports.
DIGITAL NATIVE AUDIENCE
Chain Store Age recently did an in-depth look at the challenges facing retailers today. They pointed out that never again will there be a consumer group that was born before the boom of the internet and online shopping. Today’s new consumers expect “new” and “now” from the retailers they deal with. CSA dubs these folks the DNA generation—Digital Native Audience. Their research showed that openness to innovation can be predicted by age more than sex, ethnicity or income. They refer to people who came of shopping age before the internet revolution as Digital Immigrants. Their research compared the habits and preferences of Digital Natives (DNA) and Digital Immigrants (DI) and discovered:
· 51% of DNAs use mobile for online purchases compared to 15% of DIs.
· 57% of DNAs use mobile self checkout compared to 33% of DIs.
· Mobile Apps influence in store purchases for 27% of DNAs but just 10% of DIs.
· 40% of DNAs are Amazon Prime members compared to 28% of DIs.
GENERATION Z HAS HIGH EXPECTATIONS
Generation Z is the first generation to grow up online. Gen Z, born in 2001 or later, has grown up with social media and the assumption that there is instant access to almost everything digital, from information to music and videos. They are transferring that expectation for instant gratification to other aspects of life. A new report from Fung Global Retail & Technology says that new technology products and services have quickened the pace of life and widely broadened choices; it is inevitable that the result will be a more demanding, image-conscious consumer. Gen Z currently composes 19% of the U.S. population, and will account for 25% in 2020. Exposure to near-infinite choices and access to apparently endless information will make this generation extremely demanding.
HOW MILLENNIALS USE GIFT CARDS
Nearly three out of five millennials purchased retailer-specific gift cards last year; but rather than gifting the cards, they’re keeping them for themselves. Refillable cards were the choice of 53% of 18 to 24-year-olds and 57% of 25 to 34-year-olds. According to the report from Mercator Advisory Group, one factor that is spurring on this trend is the availability of retailer apps that enable users to store retailer-specific gift cards as well as utilize offers available through integrated digital loyalty programs. Mercator says the use of pre-paid cards is a form of budgeting and a departure from generations whose purchases often depended on revolving credit.
THE VOICE OF THE INTERCONNECTED WORLD
Amazon has much bigger plans for the technology behind Echo, their smart speaker whose voice, Alexa, has become a pop culture phenomena. Amazon wants the Alexa Voice Speaker to become an ingredient in devices around the home and beyond, even if they’re not made by Amazon. Amazon isn’t alone; most big technology companies, including Apple, Google and Microsoft, see their intelligent assistants as powerful new ways for users to interact with devices and internet services, just as smartphone touch screens are. Many tech specialists think that people will be O.K. with a single intelligent assistant in their life, but won’t want to bother learning the quirks of two or three of them. That’s creating a tech war during which each company is racing to integrate its assistant into as many devices and services as possible.
Amazon says more than 10,000 developers have registered to integrate Alexa into their products. Ford is reportedly working with Amazon to integrate Alexa into its vehicles so drivers can control smart-home features like lights, thermostats and security systems. And Sonos is working on a way to play music through Sonos speakers using Alexa voice control. LG Electronics is partnering with Amazon on smart home services and says that Alexa will work on LG’s SmartThinkQ Hub, an LG device used to connect with home appliances over the internet via voice recognition technology. Lenovo has also reportedly been discussing the possibility of incorporating Alexa into computers and other devices. And technological home tinkerers are already tweaking Alexa to do everything from setting a timer in the kitchen to changing the default music player or controlling their wi-fi controlled thermostats.
Apple is reportedly stepping up their plans to release a home-automation device that will compete with Amazon’s Echo that has reportedly been in development for two years. Apple’s version would use Siri. Apple’s version would reportedly have the ability to read aloud emails, send messages and tweets, stream music and provide mapping info. There is reportedly an Apple plan in development called “Invisible Hand” which would let users fully control their devices through a Siri command system within three years.
MORE ADULT KIDS LIVING WITH PARENTS
Adults age 18 to 34 are now more likely to be living with their parents than with a spouse or partner, according to a Pew Research Center analysis of U.S. Census data. In addition, 19% of older millennials (ages 25—34) are still living at home. Nearly one-third (32.1%) of millennials lived with their parents in 2014, while 31.6% lived with a spouse or partner. Fourteen percent lived alone, and 22% had another living arrangement, such as living with a roommate or in group housing, such as a college dorm. Housing experts say the trend is driven by struggles to find jobs, student debt and rising college enrollment. And the fact that more kids are living at home longer is prompting more boomers to stay in their single-family homes rather than downsize. A survey by Redfin found that one-fifth of homeowners ages 55 to 64 have adult children living at home.
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