Five interconnected forces are set to disrupt retail, presenting retailers with powerful challenges and opportunities. Economic, demographic, technology, urban and consumer forces are combining to create new markets, transform consumer expectations and reshape the rules of retail.
FutuRetail Commerce Disruptors report from Visa Europe sys to thrive in this volatile environment, retailers will need to adapt, create unique shopping experiences and develop new formats and methods of fulfillment that give shoppers more convenience and choice.
The first force disrupting retail is the shift in economic dynamism away from the developed world to emerging economies. Whatever your take on the causes and consequences of the financial crisis, there is broad agreement that economic growth in much of the Western world will be subdued (or even stagnant) for years to come. In Europe, Eurozone GDP still lags behind its pre-crisis peak and credit conditions remain tight despite
the European Central Bank’s quantitative easing program. There are growing concerns about the region’s long-term economic potential due to low productivity growth, the threat of deflation and the impact of demographic trends (see below). Meanwhile in the United States, still the world’s largest retail market, economic growth has slowed to a crawl and retail sales have stalled.Unemployment may be falling, but anaemic wage growth has made shoppers more cautious about spending money at shop tills.
The second force – retailers now face a more complicated and nuanced demographic landscape than ever before. Globally, households are getting smaller, populations are aging and societies are becoming more ethnically and identity rich. The number of single parent and single person households has grown to historic highs, though retailers still too often rely on outmoded notions of what constitutes a ‘family’ when thinking about their customer bases. Gender roles have changed too, with more brands recognizing the increasing number of men in the aisles and introducing new-gender neutral product categories.
The third force – technology is disrupting retail at an increasing pace as m-commerce surges, more devices become connected to the Internet and exponential advances in computing power enable retailers to understand their shoppers in more detail than ever before.
The fourth force – Cities are taking on a new strategic significance for retailers due to the surge in the global urban population. Today, over half the world’s population live in cities; by 2050, two-thirds will Increased urbanization will bring prosperity to not just millions, but billions of consumers. In the next ten years alone, close to a billion people will join the ranks of the urban consuming class. Even within the same country, however, there will be significant variation in the size of cities and the aspirations of urban shoppers.
The final force disrupting retail is shoppers’ changing relationship with technology. As shoppers are spending more time staring at the screens of their smartphones and carefully curating their social media profiles, purchasing behaviors and expectations are being reshaped in profound ways.
Dealing with the disruption that the confluence of these forces are bringing will be a significant challenge for retailers. Polarization of spending will mean that many retailers will have to refocus their businesses while positioning themselves to appeal to demographic groups that are becoming more diverse and complex. New ways to sell to shoppers are being created by the ubiquity of smartphones, but these same devices are transforming shoppers’ expectations at an incredible pace. Retailers need to understand how each of the forces will impact their businesses, and develop a clear strategic view of how they can thrive in a more turbulent and fast-paced world.
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