The retail industry can feel very fickle due in large part to trends in products, categories and consumer purchasing habits that seem to change at the drop of a hat. This is especially true in certain retail and product categories, for instance the fast fashion category is built on the continuous change of new fashion products while home improvement category is a little less volatile (for now). From another perspective, the impact of these changes and trends is also much more volatile from a retailer perspective due to the speed of change supported by ecommerce and social commerce. Then from a third perspective the millennial generation is also driving the volatility of the market as a result of their changing demands to fit in with their lifestyle.
The large legacy retailers and especially the department store retailers have been caught off balance with the ‘sudden’ change in consumer shopping and purchasing practices. I have seen many papers on the direction of consumer shopping moving towards relationship development and the market share of eCommerce purchasing and growth of omni channel consumer demands has been growing. These large retailers have simply not recognized the changes in culture that have been happening all around them and for many years. Amazon has been developing consumer relationships for years and yet legacy retailer reaction is to lower their prices and allow consumers to pick up their orders in the store. Then these retailers must adjust to the lower profit margin and they reduce costs (staff) in their stores to increase their margins again eliminating one of the key factors in developing consumer relationships!
I think that the key factor in legacy retailer sales falling off the cliff is the increases in the millennial consumers in the marketplace. I think that the millennial consumers have reached a critical mass and their practices in shopping and purchasing are being adopted by the consumer marketplace at large. Millennials are doing what they have always done - develop a way to mash up social networking with eCommerce to develop social commerce that supports their lifestyle. As the number of millennials increase in the market their practices become more mainstream and common to the consumer market in general and these practices are then being adopted by other consumers to support their lifestyle.
Legacy retailers must change their strategy to support flexible and discontinuously changing consumer demands. This will cause a great deal of fallout in the market for the legacy retailers, which we are already seeing. This will be very difficult for these large retailers because it is a paradigm shift of large magnitude and will ultimately change not only their strategy but their corporate culture and relationship with the marketplace and market partners must also change.
And now for the audience participation portion of the show…
ECommerce will have wide ranging impacts on both the retail and manufacturing sectors. How can you focus these abilities to improve the consumer's experience? Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes. In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas. How can you support these continuously changing requirements?