The Evolution of Retail Formats

Retail formats continue to evolve. Kantar [1] forecasts that the US retail world is set to change significantly, projecting marked developments in non-store retail formats.

Retailers who wish to stay relevant and be successful will be compelled to look outside the confines of their physical stores, be amenable to change and willing to adapt to suit customer’s expectations.

With serious retail players expected to seamlessly manage a range of different shopping modes which may include different types of brick-and-mortar and nonphysical stores.

Creating a unified consumer omnichannel experience across all shopping formats.

How is Bricks & Mortar Evolving?

We all know that much has been written about the demise of the physical store and whilst there is no doubt that we are in a period of change some state that the “high street isn’t dying – it’s transforming” [2] With approximately 90% [3] of sales still occurring off-line and a recent report by A.T. Kearney revealed “81% of Gen Z respondents surveyed said they prefer to purchase in store” [4].

Pure e-commerce brands also recognize the positive effect a physical store can have on their bottom line with an increasing number opening physical stores.

Kantar [1] predicts, for retailers of the future to be more successful they will need to adapt and open smaller physical units with closer proximity to shoppers.

Enabling retailers to capitalize on consumer impulse or time critical purchases.

Introducing alternative cheaper formats to the traditional physical stores, for example a pop-up or kiosk.

Ecommerce Continues to be an Opportunity.

E-commerce is often heralded as the way forward for retailers and it has without doubt seen remarkable growth in popularity over the last few years. In 2018 consumers spent $517.36 [5] billion online with U.S. retailers. However, when you consider that this amounts to less than 15% [5] of all retail sales there is still plenty of room for growth. Handled well the attraction is clear with the boundless potential of the internet. Drop shipping inventory is also showing rising popularity amongst many retailers

The Amazon Effect

There is no doubt that Amazon is an e-commerce giant, listed as number 3 on Interbrands 2019 list of most valuable global brands.

A staggering 55% [6] of Americans begin their product search on Amazon and its share of the US ecommerce market hit 49% [7] in 2018.

Opinions are divided. More and more brands are recognising the accessibility of Amazon and the positive impact it could have on their bottom line and opt to include Amazon in their retail offering. Other brands take the opposite stance and believe it will be more harmful [8].

What is clear is that retailers need to ensure they focus on product and their customer to ensure they can compete effectively with the Amazon effect.

eBay

eBay is a strong contender in the online retail marketplace. It is estimated that this year eBay’s US sales will reach $35.89 [10] billion. [9] Accounting for 6.1% of all US ecommerce sales. The same report showed current Amazon sellers already choose eBay as their preferred option when expanding to other e-commerce platforms. With eBay rating higher than a personal e-commerce website.

Franchise & Wholesale model

In 2017, there were a total of 745,290 10 franchise establishments across all industries in the United States [9]. The franchise model can offer many benefits to the retail brand owner, for example It can help accelerate entry into markets, especially where there is no local knowledge and increase income and infiltrate brand awareness with new consumers. Creating a wholesale channel can be another option for retail brands to consider and is a way to enter new markets with fewer risks.

Fashion Rental Scheme

The Fashion rental market is set to increase with GlobalData estimating that the U.S. apparel leasing market could reach $4.4 billion by 2028 [11] Whilst the rental model is still in its infancy and generally associated with high end apparel there is an increasing number of affordable brands already testing out the fashion rental market.