Market Trends June 2016
THE WEALTH EFFECT DIMINISHING
Generally people spend more money as the value of their home increases; this is called the Wealth Effect. Back in 2005 households would spend an extra $3.40 for every $100 increase in the value of their home. Near the end of 2015, that amount was cut in half, to just $1.70. That means that home prices would have to rise twice as fast to generate the same effect on consumer spending. The wealth effect for liquid assets such as bank deposits is considerably higher because they are easier to put to use. A recent paper by the Dallas Federal Reserve states that the housing bust that occurred in 2008 may have left long-lasting scars on consumers, who may now be less likely to tap into their home’s equity. However, the paper goes on to says that even without a supercharged boost from rising home prices, the outlook for consumer spending is bright.
FREE SHIPPING TREND FAVORS AMAZON
More than half of the orders in 2015 from 30 of the biggest ecommerce merchants were shipped for “free,” compared to 33% in 2013. In 2012 30% of shoppers started their online search at Amazon; in 2015 44% started there. Amazon shipped more than 1 billion parcels in North America in 2015, 42% more than the next 10 shippers combined. Amazon’s massive scale earns it the most favorable shipping rates, and makes it easier for them to offer free shipping with Amazon Prime.
SMART CITIES OF THE FUTURE
Smart Cities are trending, and it’s expected that the smart city market will value more than $1 trillion this year, and grow more than 14% annually, according to a recent MarketsandMarkets study. Service providers need to reassess all the critical capabilities required for digitalizing services. Providing real time intelligence will be one key to success. Cloud-based solutions can generate new revenue streams. There will be many ways for businesses to benefit from the smart city trend, as all types of services are linked, from finding a parking spot to responding to an emergency to monitoring water and energy usage.
ECOMMERCE STRAINS SUPPLY CHAINS
Supply chains everywhere are struggling to adapt to the rapid response required by ecommerce. Ecommerce accounted for just 7.3% of the nation’s total retail sales in 2015, but that was a 14.6% increase over 2014. Ecommerce demands faster response because sales are much more sensitive to triggers like weather, fashion, current events or social media. The faster data can flow through the supply chain, the more responsive it can be, which is why so many retailers involved in ecommerce are investing heavily in supply chain technology. Real-time data allows for adjustments while goods are in transit and allows retailers to fulfill orders through multiple channels. Cloud-based computing platforms can help eliminate information gaps and keep goods flowing. Target is cracking down on suppliers as part of a multi-billion dollar overhaul designed to speed up their supply chain, and is tightening deadlines for deliveries, and hiking fines for late deliveries. In addition, suppliers could be fined up to $10,000 for inaccuracies in product information. In February Walmart raised their standard for on-time delivery to 95% from 90%. Retailers see getting a tighter grip on deliveries as crucial to keeping shelves stocked, maximizing sales and controlling costs.
MOBILE IS RESHAPING SHOPPING
According to Deloitte Digital’s latest study, digital interactions were expected to influence 64 cents of every dollar spent in retail stores last year, or $2.2 trillion shopping dollars. Another recent study showed smartphones and tablets used before and during influenced 28% of in-store sales in the U.S. These numbers are growing more rapidly than originally expected. Deloitte says that consumers who use digital while they shop convert at a 20% higher rate than those who do not. Because inventory data lives in many different places in the supply chain, it’s critical for retailers to be able to blend and understand the data in real time along all points of the supply chain.
DRONES SERVICE CONSTRUCTION
The construction industry is the leading user of drone technology; the FAA has issued 40% of 4,600 exemptions to infrastructure and construction companies. Florida, California and Texas are the leading states with drone exceptions. The number of drone startups has surged. Drones are typically used to collect data and then feed it to software that analyzes and processes it all on a single platform.
TARGET LOOKS FOR SMART STARTUPS
Target is launching a series of Demo Days aimed at discovering interesting new smart products from startup companies. Target started out looking for smart baby products. Target has been using its San Francisco Innovation Team and Open House concept store in San Francisco as a pipeline to bring in more smart and connected products. Target cited a tiny Bluetooth tracker called Tile that finds everyday items in seconds. They’re also testing a robot to track inventory on store shelves. The robot was built by Silicon Valley startup Robotics. Named Tally, it can roll around the store, scanning products to determine if they have been misplaced, mispriced, or are low in stock.
PRIVATE LABEL GAINS FAVOR
According to a recent study in USA Today, private label brands are popular with consumers, particularly millennials. Market Track Shopper Insight Series reported that 88% of those interviewed said they bought private label brands primarily because of price, 80% would choose private label over the national brand if it were cheaper, and 69% think the quality is the same.
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