Retailing Will Never Be the Same Again

¶ … Retailing Will never Be the Same Again

This article first appeared in Forbes in 2009 and discusses the affect of the Internet and the recession on the $4 trillion dollar U.S. retailing business. The article notes that just as the Web has ravaged the newspaper business, the retailing business is also being reshaped by the Web and the economic downturn. This article is very germane to the current economic climate in the retail industry.

The authors note assert that the recent bankruptcies of Circuit City, Linens 'n Things, Mervyns, and others are only an indication of things to come. This "economic and technological tsunami" has worked to force retailers into two groups, discounters who sell national product brands on the basis of price or stores that don't need to discount because they offer uniquely compelling products and shopping experiences. As this phenomenon is trans forming the retail business and as it does a third group, major supplier who do not like either scenario are beginning to open their own stores as Apple and Coach have done.

The emergence of the Web has allowed customers to instantly find the best bargains either online or at a store and thus avoid merchants who charge more. Because of this retailers that cannot compete on price or convenience have to find another way to attract customers, usually with distinctive offerings and engaging customer experiences. Many retailers such as Abercrombie, Aeropostale, PetSmart and Best Buy have begun designing some or all of the products they sell, becoming vertical retailers with integrated design and development. This gives them greater capabilities in market research, product development, product testing, and sourcing than most retailers. However, most of these retailers have do not to own the factories that produce their unique products, acting vertical rather than being vertical. Another strategy retailers employ to attract business is to expand their definition of what a product is. Along with products on a shelf many retailers offer highly profitable fee-generating services that make their products more useful.

I agree with the article's assertion that retailers who fail to evolve swiftly and adapt to the new market place will become "retail wreckage." Discounters must go deeper in certain categories than Wal-Mart or Target and find more convenient locations. Category killers must launch services that help customers use their products and generate big profits. Apparel retailers must tightly hone their target customer sets, produce truly compelling merchandise and provide superior environments for trying them on. Department store chains have the biggest transformation to make. They can't compete on price, and they largely sell other companies' goods. They are neither here nor there. The largest department store chains, such as Sears, must use their clout with suppliers to dramatically increase their number of product exclusives. And they need to create stores within stores that adeptly merchandise the next great products and curb their most important suppliers' desire to build their own shops.