In my last post, I discussed some recent retail casualties and covered just some of the reasons WHY shopping has to change in the future if retailers of tomorrow are to survive. Today, I’m looking into WHAT I believe that we will see this happening in 2013 and the years to come
If the future of shopping is more online, more globalized and more fun what are the implications for retailers and brands?
Since we are still close to beginning of the New Year here are a few of my predictions about what we will see happing in 2013 as the future becomes reality.
Grocery shopping will move online significantly:
For most manufacturers ‘online’ is still a small share of total sales. Clients in China tell me that the proportion of sales online last year varied from 3% to 12% of total sales. This is similar for retailers. 7% of UK retailer, John Lewis’ sales in 2012 were online and nearly 13% of Debenham’s sales were online. But in all cases the growth in online sale is exponential. Grocery retail has been affected at much lower levels to date – this will begin to change this year.
Here in Asia I make a fairly unscientific prediction that by 2020, 20% of grocery purchases will be online. This is based on my view that roughly 40% of Asia’s FMCG sales will go through the 13 or so million local independent stores by 2020 and the rest will be split between chain retailers (who now hold in the region of 54% of FMCG sales) and online. This year we should expect WalMart’s investment in Yihaodian and Tesco’s launch of an online offer in Thailand and Malaysia to give online shopping a major boost towards this.
Big boxes will go into decline
The days of the hypermarket are numbered, even in markets where online will remain insignificant this year. People want to shop locally as time becomes more limited, this promotes an increasing shift towards local independent stores, convenience stores and supermarkets will see reduced hypermarket market shares. And as online really begins to bite, it will be the big boxes that start to suffer first. Expect major retailers to switch their focus towards smaller store formats to a greater degree this year.
Multi-channel will be the watchword for 2013
To those in the know this will see this statement as being desperately out of date but the idea of browsing in the real world and buying online will really take hold this year. Retailers who embrace this aggressively now via acquisition (note WalMart in China) and re-invention (note Debenhams in UK and Suning in China) will be more likely to grow through the changes in shopping habits.
Expect some major casualties
Some global players, especially in grocery retailing are really grappling with their offer and Carrefour in particular has been struggling with this for some years. It has consistently under-performed its peers in EBIT delivery, is way behind in customer engagement (think loyalty programs and customer service) and in online offers. This year could see a major restructuring of Carrefour’s business especially as it moves into heavier waters in Asia where it’s failed to achieve critical mass and has had to exit key markets. I personally would not be surprised if we were to see another high profile exit this year.
Look out for new business models
There’s been a lot of hype about ‘pop-ups’, ‘virtual reality stores’, ‘magazine stores’ and the importance of show rooming. Many of these have yet to demonstrate that they can make money as well as noise. This year retailers, facing relatively grim trading environments will have to make this pay. Expect to see internet-based retailers creating showroom environments to engage untapped customer bases and expect to see retailers, particularly department stores in more traditional markets like Japan and Australia looking for opportunities to re-invent themselves online. Most interesting though will be the confluence of entertainment and retail, a good example of this is Chefday.com launched recently in New York. We should anticipate more innovations like this in the coming year
Shopping behavior is changing dramatically and retail in general is going through a major shift. 2013 is likely to see acceleration in the rate of change and could prove to be a transformative year. For those businesses planning for the status quo this could lead to unexpected consequences and a need for major re-structuring in advance of 2014. Those who are already acting to engineer shopper solutions that embrace the changes ahead could well be smiling broadly next New Year.
So those are my predictions for 2013, what do you see as most important in your markets? I’d love to hear alternative views