The future of retail: Shopping more at smaller stores

  • Article by: JOHN EWOLDT , Star Tribune
  • Updated: October 27, 2012 - 9:50 PM

A look into retail's future sees more frequent purchases as living patterns and technology evolve.

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Mark Schindele, Target's senior vice president of merchandising and city stores, gives a tour of the downtown Chicago store in July before it opened. The smaller CityTarget concept illustrates what's covered in a new report predicting smaller stores closer to urban centers.

Photo: Chris Ocken, Ocken Photography

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In the next five to eight years, consumers can look forward to disappearing checkouts, shrinking stores and hovering holograms with product information.

Many people will move closer to urban centers, where quick trips to stores, restaurants and services will be more convenient. They'll shop more often, and retailers will need to capitalize on impulse needs.

This view of the future comes from consulting firms Kantar Retail and PwC, whose recent "Retailing 2020" report looks at key factors for retailers and suppliers in an age of technological advancements, globalization and hypercompetition.

The consultants' thoughts, which are followed by retail executives, reflect a widespread view that retailers will need to adjust continually in a time of rapidly changing demographics and technology that will affect how Americans shop for the complete spectrum of consumer products.

"People used to make shopping lists," said Tina Wilcox, CEO and creative director at Black, a retail branding company in Minneapolis. "But now they buy something because they got an e-mail with a coupon attached, or because a retailer has faster checkout lines with handheld point-of-sale devices."

Many trends are an extension of what's happening today. Growth at big-box stores, drugstores and department stores will slow while discounters, warehouse clubs and Internet shopping will increase at a faster rate. Nonstore retail, driven by online, mobile and tablet commerce, will grow the fastest.

But PwC and Kantar argue that retailers will need to continue to adapt to basic changes in how people live. More shoppers will use mass transit, they predict, which affects packaging and delivery.

Packaging is likely to shrink as consumers have smaller homes and less storage, and people will have more items delivered or shipped to them. "It will be similar to Europe, where home delivery is much bigger," said Thomas Johnson, a retail analyst at PwC in Minneapolis.

Just as families became used to a milkman dropping off fresh dairy products decades ago, Americans will have consumables such as coffee or deteregent delivered on a regular basis. "You'll have a subscription for getting your laundry detergent delivered, just as you might get a magazine today," Johnson said.

Overall, shopping will become more frequent, with people picking up goods as needed on a daily basis at nearby stores, instead of weekly stock-up trips to a less convenient location.

Wendy Liebmann, CEO of consulting firm WSL Strategic Retail, said such insights are valuable to companies because they're beyond thinking about the next two or five years. "They need to be thinking about the next 10," Liebmann said.

Online evolution

PwC and Kantar see online retailers partnering with noncompetitive retailers for places where customers can pick up merchandise. For example, Amazon might partner with a convenience store to accept deliveries, which allows for quicker service.

The online ratings and reviews that consumers have grown to depend on will start appearing in stores, too. The ratings, as well as in store ads, could appear in a projected image on the floor, on a fixture or a midair hologram.

When it's time to pay, rows of checkouts will gradually be replaced by salespeople with mobile point-of-sale devices. "Getting rid of the traditional checkout frees up space for more retail products," said Johnson.

Price sensitivity won't go away, but retailers will try to avoid showrooming by bringing in more private label or exclusive merchandise. "Retailers work with national brands to create a flavor, package or bundle that's unique to that store," Johnson said. "They're already selling CDs with exclusive tracks or ties to local sports teams. You'll see a lot more of that."

In all forms of retail, retailers will have to confront ever-widening income extremes with value or premium products, the report predicts.

But they will continue to blur the line with such discounters as Target offering more expensive merchandise as a splurge item or Nordstrom offering a value-priced item, said Akshay Rao, professor of marketing at the University of Minnesota Carlson School of Management.

Social media will continue to be a source for retailers to mine a large and complex amount of data about customers. Some of the information will be generated by elements imbedded into automobiles, smart devices, home goods and medical appliances.

There will be so much information that it's too soon to know how well retailers can harness it, Rao said. "They may have difficulty interpreting it," he said. "We're at the infancy stage now."

John Ewoldt • 612-673-7633

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