Why Retail’s About To Be Hit By The Perfect Storm

In this post, Gartner’s research director Robert Hetu argues there’s not one but four very dark clouds on retail’s horizon…

Forces not unlike wind, rain, thunder and lightning have engulfed the retail world in the perfect storm. The question on everyone’s mind is who will survive the storm and how will it have changed the landscape.

Perfect storm retail exhibits the powerful forces of shifting lifestyles, social upheaval, political instability and technological acceleration. Some forecasters predict it will completely scrub the landscape clean of traditional retailers.

While I am not convinced (surprise) that this is true, its going to be messy.

The Wind: Shifting lifestyles – Younger consumers are less obsessed with things. This is the death of conspicuous consumption that has driven the consumer economy for the last many decades. Partially this is due to the ubiquity of things that many grew up with but there are other factors. Reallocation of funds from accumulation things to experiences is impacting all forms of retail, digital or physical. These things are cyclical but expect this trend to go on for a generation.
The Rain: Social Upheaval – Growing discontent over income inequality and increasing minimum wages, are pressing on retailers. In some ways causing a wider divide between shopping segments that is making retailers react incorrectly to adverse conditions. For traditional retailers, wages are at the top of expenses and as we saw recently can have a direct impact on the bottom line.
The Thunder: Political Instability – Globalisation fuelled the engine for 20 years but today its called into question in some circles as protectionist feelings are rising in politics. The shaky recovery from the great recession is chasing people and businesses as they try to determine where things are heading. Uncertainty around the US presidential election and the EU concerns, as well as the middle east continue to weigh on the consumer industry.
The Lightning: Technological Acceleration – Consumerisation of retail has materialised. Consumers expect excellent and consistent brand experiences when shopping. The acceleration technology is the major challenge as retailers need to constantly innovate and reinvent business processes and deal with existing technologies. Newer entrants are able to disrupt by taking advantage of newer technologies without the baggage of the past. Traditional retailers will require significant investments in technologies with an uncertain future. For example we know that IoT will have a significant consumer impact but the devices, processes, and business models are not at all clear. Unfortunately the bets have to be placed or extinction is the future.

This article is reprinted with permission from Gartner

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