News reports may lead you to think retail's doomsday is here. And yet, Amazon, Under Armour and numerous other niche retailers seem to be doing quite well. Ram Venkatesh looks at the conundrum.
Virtually every news report is about store closings, bankruptcy filings, reorganizations and about possible mergers and acquisitions.
Everyone agrees millennials and technology are the primary culprits. There are over 80 million millennials in America alone which constitute over 25 per cent of the market. Millennials, born between the 1980s and early 2000s accounted for about US$ 2.5 trillion in spending power in the United States of America alone in 2015, according to Youbrand. There are about 2 billion millennials in the world with over 80 per cent living in emerging countries like India, China and Brazil. For global brands and big box retailers, this is a huge market segment that they need to understand to stay in business. While most changes are driven by the millennials, most people including the late baby boomers and Gen-Xers easily fit into this enormous generational market shift that is happening right now.
Retailers seem to understand the complexity of this market segment and are making changes and strides towards omni channel organisations and systems from merchandising to the last mile delivery systems. They have taken strides to integrate social media platforms into their marketing organisations. But yet, is this enough? I doubt it. The challenge is comparable to the story of David vs Goliath. Why does a startup or a small competitor succeed where a big retailer fails? Is it because they understand the consumer and their lifestyles better, or is it because they innovate products faster? Or perhaps they know each other better through prior engagement, and there is trust through familial engagement with peers or on blogs and social media.
To answer this, we need to understand the broader, organically-evolving lifestyle changes driven by the millennials and technology. A great report to understand the heart and mind of millennials is the Millennial Consumer Trends by Elite Daily, which describes itself as the premier online news platform for and by millennials. My own summary and take away from this report is:
1. Millennials are the most racially? Ethnically? Diverse, educated and connected population group we have seen in any generation. The comments and conversations with their peer group and experts on social media are more a driver of a purchase decision than simply a price/value proposition.
2. They buy with their mind and their heart. They do not trust advertising, but if earned, they are brand loyal. Traditional expectations like quality and customer experience remain but they expect brands to engage with them on social media and be authentic.
3. They would like to give inputs and co-create new products. They expect companies to give back to society and be responsible stewards of the environment. They are cost-conscious but will pay more for the right product and the brand that lives their values.
4. Technology is in the middle of it all. They are always connected on multiple devices and on social networks. Technology facilitates authenticity and experience.