DDi - August 2011 - (Page 14)

14 | Shopper Insights The retail forecast is in I nsight and advisory ﬁrm RetailNet Group has published its most recent retail forecast, and it reinforces the need to have a thick skin to withstand the challenges that face retailing as we move into the future: • Employment and credit continue to stagnate and natural disasters pile up on top of everyday challenges. Expect stagnant Real Personal Income overall and even declining Real Personal Income for the lower-income tiers. Banks are still not lending, while revolving credit (credit cards) continues to be constrained both by shopper behavior, bank fees and other changes that reduce the affordability of credit. • Energy prices are likely to remain elevated and generally on an upward trend. Gasoline prices have a particular impact on retail sales, as every incremental dollar put in the tank is less to spend at retail. As dramatically, it also impacts consumer behavior in the number and types of trips to stores. This is also a driver of e-commerce sales penetration into everyday consumables. • Housing prices are still expected to bottom out in 2011. This bottom point has been sliding back in time, as stimulus stretched the slide and, more recently, foreclosure complications have delayed sales. The worst may be over, but the tail of foreclosure defaults might be three years or more to clear. • And government spending is going to be cut back dramatically, hampering businesses dependent on government contracts and reducing public sector employment. However, there are a few optimistic points in the general forecast. First, consumer debt has been reduced, so the household balance sheet has improved. And second, employment growth has not been as fast as desired, but has been on a steady increase since the 2008/2009 recession. So, what does this mean for retailing? RetailNet Group believes that there George Wishart Retail Forecast by Channel Channel Apparel Consumer Electronics Convenience & Express Department Stores Discounter Entertainment Grocery Health & Beauty Home Specialty Hypercenters/Superstores Mass Merchandisers Other Category Pure Play E-Commerce Warehouse Club/Bulk Overall Growth Absolute Share CAGR* of Sales** (2011 to 2015 estimate) 2015 estimate 4.6% 7% 3% 3.8% 6.7% 3.3% 2.9% 3.8% 3.3% 6.6% -12% 3.4% 17.6% 5% 4.2% 5.3% 5.7% 3.3% 6.4% 4.3% 2.7% 17.2% 9.3% 8.8% 17.2% 2.6% 5.2% 5.2% 6.9% will be a continued constraint on consumer price inﬂation due to competitive intensity in the retail sector. In addition, there is the inability of the consumer to absorb price increases without a commensurate decrease in volume, which is obviously undesirable in the under-capacity and competitive manufacturing and retail sectors. The result will therefore be for moderate positive growth in total “Formal Retail” (tax paying and reported) sales. RetailNet Group maintains a conservative growth forecast, which the market has slightly exceeded for 2011, driven more by inﬂation than real growth. Where these retail forecasts get really interesting is when you separate the e-commerce sales from the bricks-and-mortar, store-based sales. “Substitution—from bigger stores to smaller stores, and from any store to online—will be a major force in retailing,” says Dan O’Connor, president and CEO of the RetailNet Group. “And it will accelerate as the next generation of shoppers enters their heavy-consumption lifestage. Today’s stores weren’t designed for tomorrow’s shoppers.” This trend line helps explain why Walmart, Best Buy, Staples and many other retailers are cutting their prototype sizes in favor of smaller store footprints, and at the same time, are accelerating efforts to integrate their stores with e-commerce and digital marketing. However, the results also make one reﬂect on the sensitive nature of retail in a challenging world. Going forward, it will be important to keep your eye on the evolving big-picture issues like consumer spending and consumerconﬁdence levels. We will need to continue to focus on superb merchandising to stimulate that incremental item with each purchase and on providing an excellent shopping experience to entice shoppers to return to the store. And lastly, this may be the time to increase marketing spending. As consumer conﬁdence returns (with a lower debt proﬁle), consumers will be in a better position to spend. You will want these consumers to have your brand equity (retailer or product) top-of-mind as they emerge from their recessionary cocoon. —George Wishart is the president and CEO of Edgewood Industries LLC. He shares his shopper marketing insights with DDI in this regularly appearing column. www.ddionline.com *CAGR: Compound Annual Growth Rate. **Absolute Share of Sales: The actual sales share expected in 2015. Source: RetailNet Group | August 2011 http://www.ddionline.com

Table of Contents for the Digital Edition of DDi - August 2011

DDi - August 2011
Contents
From the Editor
From the Show Director
Newsworthy
Shopper Insights
Visual Perspectives
Editor’s Choice
Design Snapshot
Channel Focus: Green
Express
Visual Trends
Big-impact visualShopping with Paco
Store Windows Showcase
Visual Products
Right Light
In-Store Technology
Product Spotlight
Calendar
Advertisers
Classifieds
Shopping with Paco

DDi - August 2011